The Economy

That is just not as lucrative in the environment of malinvestment masquerading as economic growth that we are in. When debt is essentially driving asset values higher, not actual consumer demand-driven growth, there is absolutely no incentive to invest. In fact, what central banks have been doing is stifling to investment. When they price fix interest rates and do large-scale asset purchases, what they are doing is rewarding debtors at the expense of savers. Savings are what funds healthy investment. They have choked off that kind of investment in this country over the last few decades by killing savings to build a massive debt bubble.

Take us out of the private equity conversation. ... to what happened during the era of quantitative easing; companies borrowing a shit ton of money and rather than doing capital expenditures with that money, buying back their stock to push the price up, which made the company's owners richer.

The reason for this was simply that nobody is going to build a new factory or try to grow a business through investment when the demand for what that new factory is going to produce isn't going to be realized. Outside of some technology companies that have grown, that has been the reality facing roughly 90 percent of businesses. It's what private equity has fed on. You had all of this liquidity being injected into the economy through the monetary shenanigins being filtered through our banking system. ... and it was essentially being funelled into the pockets of people who had capital already. ... to use it to drive up asset prices of things they could invest in even higher so they could get richer. ... Companies that were essentially a business plan, and were burning through cash and losing money, were getting more and more valuable against all reason. That is because real growth is a function of supply meeting demand, not the fantasy that supply creates demand. And the beneficiaries of that "stimulus" know that, even if some PhD's trying to design things they don't even understand don't.

Meanwhile, the vast majority of people in this country have been stagnating and have been either struggling to make ends meet or have been becoming more and more dependent on government welfare programs, which have taken over more of our economy. Those people were unable provide the incremental demand to buy all the goods and services that the investment you are talking about would have produced. Which is why you get logical outcomes from the phony "stimulus" we are talking about. ... malinvestment on the back of a lot of financial engineering that not only widens the wealth disparity but hurts us economically in the long run because you are drawing capital away from potentially productive uses for wasteful uses.

As an aside. ... For about 10 years, they were buying up debt to the tune of trillions of dollars, distorting our debt markets in order to suppress interest rates. It was supposedly stimulative. ... but because of the mechanism of how it was being deployed (essentially making the rich richer), the monetary inflation was showing up way more in asset price bubbles than in consumer prices. That mix changed a lot during the pandemic, because they not only went full-out reckless in monetizing debt, at the same time our lawmakers in their clueless wisdom started helicopter dropping money all over the economy, so some reached the pockets of Joe Q. Sixpack. And that was whey you saw consumer price inflation take off on the back of that liquidity tsunami. That did boost demand and you saw companies, for example, start hiring like mad to meet that uptick in demand. But it is proving fleeting. Many have been laying off those workers and even shutting down plants. The unfortunate thing is that now you have the competing force of a debt bomb slowly detonating causing some tremors in the economy, which is going to undo that brief demand sugar high. But we are being left with that sticky consumer price inflation. i.e. -- we are going to walk out of this with stagflation.

I really wish we would stop trying to engineer things and let price discovery -- people making decisions for themselves -- guide things. We are so much worse off for the insanity that people have given into.

 

I dunno. "Good business sense," isn't really what I think of. I constantly use words like malinvestment, misallocation, unproductive use of capital, etc.