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John Rubino: Things We Should Understand: The Aristocracy Is Eating the Peasants

Guest post by John Rubino from his substack:

Most people (especially most Americans) still seem to view the events of the past half-century as more or less random. Booms and busts erupting out of nowhere, impoverishing all but a handful of lucky elites. Political crises that end up dividing rather than uniting. Wars that cost fortunes and resolve nothing. Everything is bad, and nothing is related to anything else.

But of course that’s not true. Each of the above events serves the same purpose: to enrich a modern aristocracy at the expense of everyone else. And the endgame is looking even worse.

To see the scam play out, let’s go back to 1995. Two decades previously, in 1971, the US and by extension the world had ditched sound, gold-backed money in favor of “fiat” currencies that their governments, via their central banks, could create in infinite quantities out of thin air. The result was spiking inflation and exchange rate chaos in the 1970s and soaring government deficits in the 1980s.

By the 1990s it had become clear to the people running major governments and big corporations that unsound money would lead to unsustainable debt, which in turn would destabilize the financial world and bring about a hyperinflationary depression followed by a French Revolution-style reckoning for those responsible.

That generation’s elites were thus left with two choices: Return to the gold standard and avoid monetary collapse — but at the cost of giving up the ability to create money at will. Or use their fictitious currencies to steal as much real wealth as possible from the peasants and let future elites deal with the eventual collapse.

They, as the sociopaths we now know them to be, chose the second strategy. Here’s how they pulled it off:

The Greenspan put. In the second half of the 1990s there occurred a series of mini crises that in retrospect seem almost beneath notice, but at the time were big enough to provide a pretext for intervention. Russia, Mexico, Asian emerging countries and a hedge fund named Long Term capital Management all defaulted or otherwise threatened to cost major US banks painful amounts of money. In each case the Federal Reserve’s Alan Greenspan, along with the US Treasury, bailed out the threatened banks with cash or loan guarantees.

This made clear to Wall Street and its favored customers that any risk, no matter how outrageous, would pay off one way or another. If a bet worked, there would be fees and capital gains. If a bet failed – as in the 1990s mini crises – the Fed would step in and make its friends whole. And so the “Greenspan put” — named for a financial instrument that traders use to protect against losses – came to dominate the financial world for the next twenty years.

The dot-com bubble and 9/11. With the banks now free to finance virtually anything, they chose in the second half of the 1990s to inflate a tech stock bubble in which pretty much any business with a “.com” its name or mission statement could get near-infinite funding. This “dot-com bubble” expanded beyond anything the US equity markets had ever seen, and then burst spectacularly in 2000.

A year later came the attack on the World Trade Center (which for the sake of a streamlined narrative we’ll assume was an actual terrorist event, not a false flag), which shook an already shaken national psyche to its core.

The aristocracy responded by cutting interest rates to record lows while expanding military spending dramatically. This was a two-fer, enriching the banks by making lending more profitable and the military contractors by ramping up orders for weaponry. The winners happily funneled some of their windfall into the reelection campaigns of pro-war, pro-easy-money politicians. The gap between rich and non-rich widened to a record.

The mortgage bubble. In the md-2000s, the previously mentioned record low interest rates inflated another bubble, this time in housing. Keeping with their favorite strategy of lending to anyone with a pulse, raking in massive fees, and dumping the risks onto unsuspecting investors, Wall Street banks made fortunes writing and securitizing subprime mortgages (see The Big Short for an entertaining look at that brief moment of financial and cultural insanity). Then house prices rose to unaffordable heights and the mortgage market imploded, the economy tanked, and the banks tipped into insolvency.  To which the government responded with a multi-trillion-dollar bailout, allowing the banks, with absolutely in-your-face hubris, to pay their top people record year-end bonuses in 2009. Meanwhile, the Fed introduced the magical policy of quantitative easing (QE), through which it created trillions of new dollars and used them to push interest rates across the yield curve to record low levels.

[Side note: How exactly do low interest rates impoverish normal people and enrich the already wealthy? First, low interest rates make it hard for normal people who are trying to build a nest egg or survive in retirement with bank CDs and money market funds. As rates go down, these instruments pay less until, as in the last few years, they pay next to nothing. At the same time, low interest rates make financial assets like stocks, bonds and leveraged real estate — most of which are owned by the richest 10% of the population — more valuable. So … in a low interest rate environment the rich get richer and the non-rich fall behind. Just as the aristocracy intends.]

The everything bubble. QE turned out to be a hugely effective tool for shifting wealth from the bottom of society to the top. Starting in 2009, wages stagnated while corporate profits and stock, bond and real estate prices all soared. This was the “everything bubble,” where big tech, cryptocurrency, government bonds, SPACs, leveraged loans, and NFTs all attracted insane amounts of funding.  The party raged for a solid decade, until 2019, and the number of billionaires soared.

The pandemic. Then the scam took an even more sinister turn. (Hint: have you noticed who was left out of the previous feasts? That’s right, Big Pharma.)

By 2020, everything was wildly overvalued, and a huge bust was clearly in the cards. But before that could happen a virus, developed with US funding by a Chinese lab, “escaped” and caused a global pandemic. The world’s governments responded by locking down their economies (devasting small businesses while enriching e-commerce giants like Google and Amazon) and coercing their citizens into taking multiple doses of experimental vaccines, thus funneling literally hundreds of billions of dollars to Pfizer, Modena, J&J, et al. So Big Pharma finally got its turn at the trough.

The Ukraine war. Throughout the past few decades, the US has been starting and/or joining wars in countries with no obvious national security value. Why? Because war uses up weapons that must be replaced and scares those not at war into arming themselves to avoid being the Empire’s next victim. All of which makes the military industrial complex vastly richer. But none of those previous wars compares to what the US is doing in Ukraine. Apparently having decided that Russia needs to be destroyed at literally any cost, Washington has pumped over $100 billion of “aid” into its new Ukrainian proxy army, most of which is immediately recycled through General Dynamics, Raytheon, et al. Which then, of course, fund the campaigns of pro-war politicians from both parties. Have I mentioned that the political class is growing vastly richer along with the aristocrats that own them?

What’s next?
When viewed this way (that is, accurately) the reality of the scam is hard to dismiss. So the only question is what they’ll try next. Among the leading candidates:

To be continued…

Guest post by John Rubino from his substack.

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