Our Bullshit Economy is Doomed.

We are completely, bowleggedly, phillips-head screwed.

Austin G Mackell
Published in
5 min readFeb 16, 2021


Heard about the guy who fell off a skyscraper? On his way down past each floor, he kept saying to reassure himself: So far so good… so far so good… ― La Haine

The headline popped onto my screen unasked for, in a notification from Google news: Stock Market Hits New Highs on Stimulus Hopes.

Morons, I thought. They still don’t get it. They still think that the stock market (or bitcoin, or housing) is high despite the weakness of the real economy. If it’s doing so well now despite the contraction, imagine how good it will do when Main Street comes roaring back to life?

But Wall Street is high because of the weakness of the real economy. If the virus recedes, and if the real economy starts to actually thrive (two big ifs) then the fed — in line with inflation targeting — will have to increase interest rates. New loans will slow, and those who have borrowed to invest need to start increasing their repayments. Suddenly the bear will roar and the cheap-debt fuelled orgy of greed will come to a screeching terrified halt.

Of course some of the companies will benefit from the stimulus induced increase in main-street spending. That will allow them to pay higher dividends, theoretically allowing their shareholders to cover these repayments. But everything would have to line up just right. The minimum wage/tip workers who get re-employed by restaurants would all have to go out and buy Teslas, or at least the restaurant owners would, assuming Tesla is even able to meet that increased demand, to justify that stock’s rocketing price. Maybe. And maybe Amazon sales will increase, with the shift to online retail proving permanent. But what about Signal Advance? The health care company whose stock price increased by over six thousand percentage points after Elon Musk tweeted about an encrypted chat app of the same name? What about Bitcoin? Will it suddenly start paying dividends?

The core attraction of these investments has never been returns, but equity growth. And the thing about equity is you can’t actually spend it, or use it to repay the bank. You have to sell to do that. And that’s fine, so long as there are fresh buyers, but if QE and low interest rates disappear, those buyers won’t be there. And just like that *poof*, all those gains are gone.

Or worse, they aren’t, because interest rates stay low, because the real economy continues to operate under capacity, and the “K shaped recovery” continues, meaning the rich get richer while the middle class stagnates and the underclass precariat grows. Then the correction will end up being of an entirely different, political, rather than economic nature, which could be far more terrifying indeed.

The way things are set up now, it’s Wall Street vs Main Street, and it has been for a while. The combination of austerity thinking and inflation targeting by central banks, introduced in the 80s and 90s respectively, dislocated the already tenuous relationship between the stock market and the real economy.

It works like this: The government pulls back on spending and suppresses wage growth, despite growing productivity, so the economy veers towards a deflationary spiral. In steps the central bank, lowering rates and buying excess debt out of the economy and voila, inflation stays in positive territory. Stocks rise on the back of leveraged investments, cash-poor middle class households convince themselves that they are actually brick-and-mortar millionaires. They let the credit card rip (or borrow against their equity to spend), and for a time, it is good. But larger and larger sections of the population — those who never had a chance to acquire assets- are left further and further behind.

If the government steps in on the fiscal side of things, to boost the spending power of those left behind (and help the middle class with those credit card repayments) then we’ll see real inflationary pressure, and rates -according to the technocratic religion of Independent Central Banks — will go back up, spelling doom for asset markets.

How did we get to this dangerous impasse?

This is to do with the fundamental role of banking and money in the economy. Something mainstream economists, politicians, media and investors studiously ignore.

When interest rates go up, money flows faster out of the economy back into the financial sector, new money needs to flow the other way, in the form of new loans. Our bullshit economy is dependent on ever increasing levels of debt, on an ever greater fool willing to take on that debt.

When the music stops, someone is going to be left holding the bag. The longer that takes, the bigger the bag will be. The more “ma-and-pa” investors get in on the action through gamestonks or smartphone based crypto trading apps, or over-priced investment properties, the bigger their share of the stinky excrement will be.

So if a Biden administration does proceed with the promises made to the Bernie faction of the democratic party, they will be undermining not just their wall street backers but the upper end of the suburban middle class, a core voting block they just won over from the Republicans.

Either way, unless our leaders embrace radical new thinking, the pain is coming.

It might be possible to square the circle and avoid that pain, balancing a slow deflation of asset prices with an increase in incomes and spending, but that would require a government that actually understood the problem. That would, in turn, require a lot of high status people to admit they were wrong and adopt new ideas. And it seems unlikely that will happen until after things go from fraught to catastrophic. Until then it will be a case of “so far so good… so far so good…”

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Austin G Mackell

I sell mirrors in the city of the blind. www.writeinstone.com