RedWizard

I mean, he has a Political Science degree. He's clearly well-read. I think his perspective is warped by his proximity to the Democrats, and I think that's intentional on their part. When you look at how often they embrace progressives and then smother them into the fold, dull their teeth, and blunt their edges, while retaining their radical language, it's a clear pattern and tactic they adhere to. The entire western-leftist project is predicated on stifling revolutionary sentiment, building frameworks of critique that are unactionable, or whose actions steer you back into the neoliberal system. The Democrats, to me, appear to be doing exactly that. They are the final dam holding back leftist progress in this country. They are the revolutionary lightning rod, grounding revolutionary sentiment into the earth and preventing it from doing any actual damage. The Democrats need someone like Hasan as an unwitting Shepherd, leading the flock back into the fence. If they stopped allowing him to engage with candidates, what would be left for Hasan to do? If the Democrats purged current and former DSA members from their ranks, and bared future DSA members from their ranks, what would be left for the DSA to do?

I was so proud of our large son for signing up for the Flotilla, and he goes and says this.

you are welcome to use this as the icon:

this rules!

I appreciate it! It's the kind of thing that of you don't use it you'll forget it.

Damn we doing forum sigs now like its 2005 or something?

What's your relationship to the child?

Wait this is about that feature that cuts the ICE engine when you come to a complete stop and starts it again when you push the gas?

They'll move to redbook out of spite and to flex how Chinamaxxed they are.

One could make the argument that this post is merely a ripple off the larger splash that was made when it popped off on Twitter and Reddit. Given the climate, mood, and solidarity being shown in that video, I'd wonder if the kid who recorded and posted the video might have more to worry about.

Hank: It feels like the greatest trick the devil ever pulled was tying everything to the stock market. Let's have everyone's retirements and the entire economy be based on 10% of wealthy people feeling like they can spend. If asset prices drop substantially, people get conservative, and that becomes a reinforcing loop.

"The antithesis, use-value and value; the contradictions that private labour is bound to manifest itself as direct social labour... all these antitheses and contradictions, which are immanent in commodities, assert themselves, and develop their modes of motion, in the antithetical phases of the metamorphosis of a commodity. These modes therefore imply the possibility, and no more than the possibility, of crises. The conversion of this mere possibility into a reality is the result of a long series of relations, that, from our present standpoint of simple circulation, have as yet no existence." (Capital, Vol. I, p. 77)

Kyla: That's a big worry. A lot of people's wealth doesn't come from labor income anymore; it comes from owning stocks or a home. The Federal Reserve's wealth breakdown shows that for the top 10%, most of their wealth is from things they own, not from a job. The "wealth effect" is important for maintaining the economy. If the stock market corrects, there's a concern people would stop spending, causing a big contraction.

"The circulation of the commodity-capital includes the circulation of surplus-value, hence also the purchases and sales by which the capitalist effect their individual consumption, the consumption of surplus-value." (Capital, Vol. II, p. 216)

If the "wealth" (the money-form of surplus-value) disappears, the capitalist's ability to consume, and thus the demand for articles of consumption, contracts.

The thing that they miss, for those playing along at home, is that they confuse "real wealth" with "Fictitious Capital". The "wealth" bound by the stock market is not real, material wealth (factories, food, machinery). It is what Marx would call "fictitious capital", claims on future surplus value.

"Of what is called accumulated wealth, by far the greater part is only nominal, consisting not of any real things, ships, houses, cottons, improvements on land, but of mere demands on the future annual productive powers of society..." (Capital, Vol. II, p. 198, quoting William Thompson)

For only a moment in his rant does Hank mention that maybe some things shouldn't be handled by a market, and that is almost an admission that markets are not a well functioning device for all things. Yet, even though he can acknowledge this reality, he can't seem to see the greater disorder within the mode of production. Production itself is not organized to meet social needs, but, it must be organized around something!

"The entire process of reproduction may be in a flourishing condition, and yet a large part of the commodities may have entered into consumption only apparently, while in reality they may still remain unsold in the hands of dealers... Now one stream of commodities follows another, and finally it is discovered that the previous streams had been absorbed only apparently by consumption... Then a crisis breaks out. It becomes visible not in the direct decrease of consumer demand, the demand for individual consumption, but in the decrease of exchanges of capital for capital, of the reproductive process of capital." (Capital, Vol. II, p. 43)

Like everything with Marx, things are standing on their head. It is not primarily a crisis of consumer demand, but a crisis of capital exchanging with capital. It begins when the reproduction process is interrupted, which then affects everything else, including the "feelings" of the wealthy.

Hank says the loop happens because "people get conservative." Kyla mentions the "concern people would stop spending." Marx would argue this is backwards. It is not collective psychology that drives the crisis, but the objective laws of capital that impose themselves on people's consciousness. The "conservative" feeling is the subjective reflection of the objective impossibility to sell. The capitalist doesn't feel like not spending; they cannot spend because the money has not returned. As Marx explains, the basic circuit:

"M-C ... P ... C'-M'... The realisation of the commodity's price, or of its ideal value-form, is therefore at the same time the realisation of the ideal use-value of money; the conversion of a commodity into money, is the simultaneous conversion of money into a commodity." (Capital, Vol. I, p. 74)

If the final sale (C'-M') fails, the capitalist cannot convert money into a new commodity (M-C) to continue production. The "feeling" of being conservative is just the surface manifestation of this objective rupture in the metabolic process of capital.

And we should remember here. AI is at the end of this process, not the beginning of this process. AI is the product, the commodity being sold. The data centers, racks, cooling systems, power plants, microchips, transistors, you name it, every little detail that goes into spinning up new data centers is where the M-C P C'-M' is. M-C is building the components for the Datacenters, P is the production process of building the data centers C'-M' is the production of the AI systems, the training, and the web services and tools provided to consumers, and the rents they charge for you to use it.

There is a second wave of this crisis though, which they have not even broached, which is, what happens when you finally build all these data centers? What happens when you've spent all this money and converted it in to fixed capital, displaced all this variable capital, and created nothing in return? We know that these models are not as useful as their makers claim they are, that they are not as useful or create the kind of productivity gains they say they do. This situation isn't like having a lot full of cars you didn't sell. Cars, at least, have some kind of function as they exist, even if they sit in the lot. Data centers though? These are highly specialized number crunching warehouses.

"A machine which does not serve the purposes of labour, is useless. In addition, it falls a prey to the destructive influence of natural forces. Iron rusts and wood rots. Yarn with which we neither weave nor knit, is cotton wasted." (Capital, Vol. I, p. 130)

So who can say. We might be able to pick their rotting bloated carcass clean of memory chips in the near future.

"As someone really involved in running a couple of small organizations I WISH I COULD JUST CALL UP MY REPRESENTATIVES AND EXPLOIT THE LEVERS OF THE STATE TO MY OWN BENEFIT"

DnD show

Um, Actually, It's a modified version of Kid's On Bikes.

Send for the boy! I do require to feast on the legs of chicken, fried in the style of Kentucky!

Hank: Would you add that people feel Donald Trump will keep the economy rolling, whatever the cost, as one of these pillars?

Kyla: He'll keep the stock market rolling, whatever the cost. And that's not always reliant on the economy doing well. Yes, absolutely. I think people in finance are relying on him being ruthless to keep the stock market up. But I think they're getting sick of the tariff stuff. Trump always chickens out. He announces major tariffs, the market sells off, and he backs down. I don't know how much more power he has with that stance, especially internationally. If the EU doesn't want to buy US Treasuries, we're in trouble. They own a lot of them, and that's how we fund our national spending.

Hank: Are the tax breaks a part of this? Are rich people able to spend more because they have more from tax breaks?

Kyla: Yeah. They're pretty successful at bending the tax law to their will already. But yes, fewer taxes means more to spend.

Hank: As a high earner, I see that money from my investments doesn't get taxed a lot. I've asked progressive billionaires, "Why do I pay lower taxes on money I don't work for?" They say, "The risk." But labor is a risk, too! Choosing a company to work for is a risk. Companies go out of business, they can lay you off. There's risk everywhere. I don't understand why capital gains should be taxed at a lower rate. Am I being incentivized to stop creating value and just look at Robinhood all day?

Kyla: Yes, you are. There was a good article in the FT that said we have become a place of shareholder rights over civic rights. The taxation system encapsulates that. It doesn't incentivize the right things, especially with all the financial nihilism and people not trusting that a job will do them any good, so they just go and sports gamble and do prediction markets.

Hank: Every lane you go down has a sad note these days. But I have a lot of hope. Where does your hope come from?

Kyla: I've been traveling the country for my book, and I meet people in all these cities who are working really hard on these problems. How do you make a better world? A lot of that happens at the local level. We focus on federal problems because they're so big, but what people are doing in local communities is very important. You just have to believe in those people right now and that they'll pull us through.

Hank: Speaking from a place of privilege, I do think it's much more interesting to be out here making value than moving dollars around. For those with more money, if there are ways for you to be in the mix, be in the mix. And if there are ways for your money to be in the mix, not just sitting in accounts propping up an overvalued stock market, try to get it out there doing good. Pick a number, and get the rest of it out there. There's so much good that can be done.

There are lessons to learn from the robber barons, like Carnegie with his libraries. Henry Ford knew that if he had happy workers, he'd have a happy company and a more successful product. They thought about the relationship between employer and employee, and rich person and community, a lot differently. They saw the connections and what they could do to build that up, which made everyone better off in the end. There are a lot of people with enough money to start a little business doing something interesting, but they can make more money investing in a REIT or private equity. So they outsource the work, stress, and ethics of running a company to someone who will be ruthless. But boy...

Kyla: It's interesting. There was a Supreme Court case in 1919, Henry Ford vs. Dodge Brothers, that ruled a company's first interest should be to shareholders rather than to customers and the community. I think that's where everything went wrong. It's important to think beyond the shareholder. There are many stakeholders that are not shareholders.

Hank: Kyla, you're an economist, a writer, and you do great work making sense of markets and power in our economy. Check out her book, In This Economy. Thank you for talking through this with me.

Kyla: Thank you.

[Hank & Kyla Scanlon Interview]

Hank: Everybody, this is Kyla Scanlon.

Kyla: I think you've essentially covered what a lot of the major financial outlets have been talking about. Even in the first week of February, Ken Griffin of Citadel came out and essentially said what you were saying: "I'm really worried that the economy is bending a knee to the Trump family. They've really enriched themselves." So the fact that somebody of that stature is saying it seems like some level of oligarchy is going on. You're correct in your statement.

Hank: The weak case seems pretty clear: the Trump administration desperately wants the economy, or at least the stock market, to keep chugging along. The highest spenders and wealthiest individuals will continue to spend, and that will keep a portion of the economy going. I don't have confidence Trump could make the stock market go up, but I've seen him make it go down. And when that happens, he's like, "Never mind, three points of stock market loss is way too much for me."

But the part about the biggest companies potentially benefiting—is there a sense that they'll be fine because they've made it clear they'll bend the knee and be rewarded?

Kyla: I think some of them are struggling. Intel's stock went up on the news of a big deal with the administration but has since suffered. So it's not a guarantee of smooth sailing. But Trump has made it a very easy environment for AI companies to succeed. And that's such a big percentage of the economy—like 40% of GDP growth last year, 75% of S&P 500's earnings. The stock market growth is driven by it.

I think there is an assumption that if you're a technology company and you get along with the Trump administration, you'll be free from some regulation. That's why all the big tech leaders were at the inauguration. It's why Jeff Bezos did that whole thing for millions and then turned around and fired 30% of the Washington Post staff. There's this idea that if you get in the correct way, you'll be safe. And I think that's the only people they can really promise it to. Manufacturing has suffered under Trump because of tariffs. So it's really only tech, and that's kind of okay in their eyes because tech is such a big part of the economy.

Hank: Is it a big part of the economy or a big part of the stock market?

Kyla: It's a big part of GDP growth, so it's a big part of what the economy is based on. It's where a lot of financing is going. Data center bonds are a huge part of the bond market, and AI companies are taking on a ton of debt, which is usually a red flag. So it's a big part of the economy in terms of growth, but not in terms of jobs. Most jobs are being added in healthcare and social services, which don't get the same investment. Those are lower-margin because you have to pay people, and as salaries go up, that costs money. The tech industry, even before AI, was tremendously different in the number of jobs created per dollar. AI is another level of that.

Hank: I have this sense that there's a lot of money out there. Apple has a lot, Warren Buffett is sitting on a big pile of cash. For a while, everyone had to get into AI. But now you're saying AI companies are taking on debt. That tells me they can't just sell shares for super high prices anymore; they've turned to the debt market. Their valuations are pretty inflated.

Kyla: They've already gotten about as high as it can go. The question I keep noodling on is why the economy is still going hot. Not just the stock market, but the mall was full of people shopping. It's very hard to tell because the internet story is always the scariest one. We're dependent on government data and analysts to figure out if things are okay.

I've been studying the disconnect between consumer sentiment and economic data for a long time. People say they feel bad, but they go out and spend. Retail spending is up, people are using credit cards actively. Right now, the economy is substantially weakening, but the US has a lot of access to credit. People can use credit cards or "buy now, pay later" services like Klarna. A lot of the spending and growth is also from higher-income consumers. The top 10% wealthiest drive over half of consumer spending. That keeps the economy afloat and ties into your asset price theory. Everybody's assets—homes, tech stocks—have exploded in value over the past few years, so people are wealthy because of that and can spend. That provides a floor to the economy right now.

Hank: It feels like the greatest trick the devil ever pulled was tying everything to the stock market. Let's have everyone's retirements and the entire economy be based on 10% of wealthy people feeling like they can spend. If asset prices drop substantially, people get conservative, and that becomes a reinforcing loop.

Kyla: That's a big worry. A lot of people's wealth doesn't come from labor income anymore; it comes from owning stocks or a home. The Federal Reserve's wealth breakdown shows that for the top 10%, most of their wealth is from things they own, not from a job. The "wealth effect" is important for maintaining the economy. If the stock market corrects, there's a concern people would stop spending, causing a big contraction.

There's something called a K-shaped economy. For lower-income consumers, it's already happening. They're living paycheck to paycheck, their wages haven't grown as much, they don't own the same assets. They're already kind of in a recession. Wealthier consumers are more insulated because of the hot asset prices.

Hank: It doesn't seem rational to me. If you pick micro examples like the meme stock phenomenon or Tesla, it seems like it's not about the value or the product, it's about everyone thinking the price is going to go up because people will buy more. There's a huge amount of value tied up in that, and it seems very Ponzi-like. You have to buy it because it's going to go up, and it's going to go up because you have to buy it.

Kyla: Have you heard of reflexivity? It's a concept George Soros coined. It's that idea that people believe something will happen, so they buy whatever they think will go up, which causes the stock price to go up. It's the bubble mentality. Bubbles can last a long time.

Hank: I want to know when it's going to pop so I can buy puts or options!

Kyla: Well, then you get into Keynes: "Markets can stay irrational longer than you can stay solvent."

Hank: I should tattoo that on my eyelids.

Kyla: Because there's so much access to trading, everyone can participate in a bubble. Crypto has proven itself to be a bubble in some aspects. There are things like "Fartcoin." These things happen, and everybody piles in. Trumpcoin is another example, which ended up being a way for people to pay him bribes.

Hank: I have a theory we forgot why corruption is bad because we were too focused on the fact that it's bad. We lost touch with the "why." Corruption is bad because it is stealing from everyone else, from everyone not involved in the corruption. And that leads to a corrosion of trust in all institutions.

Kyla: If you think about what's backing the US dollar, it's full faith and credit in the American institution.

Hank: I really don't want that to be the Achilles heel. It seemed impervious until 10 years ago. Now it feels like there are arrows from every direction, and maybe the shields aren't as strong as we thought.

Kyla: James Madison called them "auxiliary institutions"—the Supreme Court, Congress—as a way to prevent a strong man from taking over. The founders knew something like this could happen one day and designed institutions to stop it. But objectively, the institutions seem quite complacent now.

Hank: To finish up, if you could give me the three leading reasons why the economy appears to be chugging along just fine right now, what would they be?

Kyla:

The Wealth Effect: Asset prices have skyrocketed. A lot of people have benefited from the stock market boom. This ties into housing, too. Boomers have an extraordinary amount of wealth.
The AI Trade: This is providing a floor to the market and therefore a floor to the economy. Data center spending and services spending are creating a lot of economic power.
Availability of Credit: People have access to new credit tools like "buy now, pay later" and credit cards. Some people are getting overextended—we're seeing that in auto loans—but it's frothing things up.

Hank: Those don't seem like particularly solid pillars.

Kyla: No. Ideally, people would buy a house with their labor income. Ideally, the 401k system wouldn't be so tied to inflating the stock market, and we'd have investment diversification outside of AI. I worry about how many resources we're funneling into one thing. And these big companies have the money to spend. Google is like, "Oh, finally, something to spend money on!" Startups will have a hard time competing in that environment. The more money they spend, the more valuable their companies are. It's all about money. But there's drama with circular financing—OpenAI and Nvidia aren't getting along, and Oracle was weirdly tweeting "everything's fine" out of nowhere, which was a red flag.

[continued...]

I understand some people might be thinking, "Rich people and corporations give to political things to get sway. Welcome to America." But the case I'm making isn't just that people spend money for political capital. It's that very large companies, responsible for the majority of the S&P 500, are definitely engaging in this. They were sitting behind Donald Trump at the inauguration. They bought those seats. They're doing high-visibility, high-dollar shows of loyalty and support that are super cheap compared to competing on price or doing R&D. They know the Trump administration has set up an environment where policy outcomes are uncertain, discretionary, and very consequential. They can have a huge impact on your business—whether or not something actually gets enforced. How do we decide? It's not clear. It's different for different companies.

If you're a huge incumbent company, you live in that world. All you need is a shared understanding of the incentives. You need to believe the president rewards loyalty, punishes disloyalty, and wants power. Once you believe those things, you can relatively cheaply demonstrate your loyalty. Suddenly, we have a lot of really big companies in a world with more opportunities, less risk, and fewer threats. That is an economy drifting toward an oligarchy.

I'm somewhat famously not as critical of capitalism as you might expect. But I also understand that capitalists have no ideological allegiance to capitalism. They're trying to make more money. A good capitalist will happily become an oligarch, because if the other choice is having your competitor become the oligarch, that's a terrible decision. You can drift toward this oligarchy without a big suitcase full of cash. It's about the consolidation of power. It's about very large companies knowing they can't cross the president and that they must demonstrate, through some kind of donation, that they are not going to be one of the critics.

The world of finance matters specifically here. Open Secrets did good reporting describing the securities and investment industry as a top donor category to Trump-aligned interests. Financial advisers donated way more to Trump than to Harris. If you're in finance and you think the game is that political power protects asset prices, then supporting that political power just becomes risk management. This phenomenon can, in the short term, keep markets buoyed while the underlying economy is being damaged. The big companies responsible for assets are still flying high, so the people who own those assets can sell some stock and go on a big vacation. All that money is still being spent. But part of the reason is that these big companies know they can purchase stability, opportunity, and freedom from risk. And the people in the finance industry understand this is happening. Compared to the antagonistic stance the Biden administration had toward big businesses, to some this might just seem like a business-friendly environment.

So this is the stronger claim: there is a stabilizing force on the economy through this mechanism. Big incumbents, who are the majority of the economy and thus the majority of asset prices and the wealth that drives spending, believe they can get protection as long as they demonstrate loyalty to Trump. That reduces downside risk for big firms. Big firms dominate the index, so the index stays strong. Assets keep higher earners spending, which props up average spending, which props up everyone's earnings, which then props up the index. Tariffs, unpredictability, everything can suck for small businesses and the lower and middle class, but the market can still float up there because it's betting that the winners—who take up so much of the economy—will be protected.

I assume we all understand that short-term market stability does not mean long-term good outcomes. The cost of this, as we've seen in many countries, is brutal. Any economy where "impress the dictator" beats "build a better product" is not a competitive economy. It's not one that generates a lot of good stuff. It stops serving consumers. It becomes purely extractive, all about rent-seeking. It takes a while to see the effect of innovation slowing, of upstarts not being able to break in, of capital and talent being wasted on influence rather than creation. But eventually, that place becomes not dynamic. It becomes less resilient, less capable of real growth.

There's a reason corruption is bad. It's not just a morality thing; it's bad for a society. We seem to have forgotten the reasons why we don't like things. It's not just, "Well, when my guy does it, it's kind of okay." Bad things are bad for a reason. They hurt systems. They stop things from working. Corruption is the biggest kind of theft. It is about giving the powerful the power to extract rent from the powerless, which is what everyone says is the terrible thing about capitalism. But that's not a symptom of a well-functioning market. In a good market, you move to someone who is less extractive.

I think this is worth taking seriously. I'm not the first person to identify that we're sliding into an oligarchy, but the fact that it might help explain this weird phenomenon—where we have new economic frictions but the economy is still doing well—I haven't seen anybody say that. Even the weak version, the "back off" button, is enough to distort incentives. The strong version, however far along that spectrum we are, is how you build a country where the market is not a competition to serve people, but a competition to serve power in order to suck resources out of people. A lot of people think that's normal—"as long as you can do it, do it; that's what capitalism is." No, it's not. That's oligarchy. You could do that in a communist system or a capitalist system. And what you find in that system is that it sucks. Places where this happens do not have a thriving middle class.

But now I feel like I'm talking out of my ass. So I'd like to talk to an economist who thinks a lot about this weird and messy time. I'm going to edit this up, send it to Kyla Scanlon, and hopefully have a conversation.

[post rant interview below]