Authored by Be Water,
The 2008 Crisis Never Ended
Do you wish to know [when] that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that [commerce is conducted], not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice—[then] you may know [that day has arrived]…
—Francisco d’Anconia
No Country For Young Men
For most of America, the headlines trumpeting a “strong economy” and “stocks at record highs” land like a cruel joke. Michael W. Green‘s recent series My Life Is A Lie attempted to quantify the economic devastation felt by the majority of the country these many years. This carnage has been sanctified by our technocrats—an Aztec priesthood invoking sacred economic statistics as celestial omens to justify the ritual sacrifice of society on the altars of GDP and the S&P 500.
Green, an investment industry insider, gave voice to the Forgotten Man:
Predictably, the priesthood declared heresy. Economists, journalists, thought leaders, think tanks, and other fellow travelers circled the wagons, tearing apart Green’s numbers, splitting hairs, and nitpicking his methodology.
That is a grave mistake.
Fiddling While Rome Burns
How can you expect a man who’s warm to understand a man who’s cold?
—One Day in the Life of Ivan Denisovich, Alexander Solzhenitsyn
This sort of wonkish debate—whether the poverty line is $30k or $140k, whether CPI is 2% or 4%—exemplifies the scientism enabling our national dissolution: the religious belief that the statistical map is more real than the economic territory. Perhaps such effete technocratic sophistry could be tolerated—even indulged—were the body politic unified. But it is a fatal conceit in such a Balkanized powder keg of a nation.
Into this highly combustible environment, Green’s essays landed like an errant spark. If nothing else, Green forced a long-overdue reckoning with a reality that the credentialed class has steadfastly refused to acknowledge: that they themselves have spent decades drowning the American Dream in a flood of ruinous policy, even as they now insist that the water level is perfectly fine and that Americans are simply bad swimmers.
Such an acknowledgment, however, would be tantamount to confessing that their entire worldview—the long Postwar Consensus—rests on a meticulously constructed lie. That the intellectual facade of modern finance and economics, the modern monetary system and central banking, fiscal and monetary policy, financialization, globalism—all of it—has strip-mined the nation and fracked the American bedrock, leaving behind a slag heap of poverty, misery, and rage in place of the prosperity it promised.
That their own lives have been a lie.
From Picket Fences To Shoebox Micro-Apartments
The party told you to reject the evidence of your eyes and ears. It was their final, most essential command.
—Winston Smith
Whether Green’s numbers withstand academic scrutiny is altogether beside the point. His essays struck such a visceral nerve because Green—as someone with institutional investment credentials—put numbers to what millions have experienced firsthand for decades. And he did so at precisely the moment when their long-simmering rage is boiling over.
And then the Minnesota headlines broke.
If Green’s essays were a stray spark drifting toward the powder keg, these revelations of fraud represented a blazing torch hurled straight at it. Billions have been bled from the American middle class—those who can barely afford their own children—to bankroll the imaginary children of fraudsters.
But the scale of the plunder extends far beyond one state:
The populace’s rage, therefore, springs from a well far deeper than Green’s economic statistics—or any one else’s, for that matter—could ever fully plumb. Understanding this fury—and its implications for both our civilization and our portfolios—requires returning to an existential question we posed five years ago: how did we devolve from the society depicted in the New Yorker’s 1957 Christmas cover (left) to that depicted in its 2020 Christmas cover (right)?
Source: The New Yorker
These two contrasting images—set six decades apart—bear witness to a birthright betrayal so absolute that it defies measurement. The transformation seems inconceivable: in the course of a single lifetime, how did the most prosperous civilization in history come to cannibalize its children’s futures?
Asked differently, how could prior generations buy houses, raise families, and afford healthcare on a single income—and then retire—while younger generations drown in debt, face bleak job prospects, are cursed to rent forever, risk financial ruin from hospital visits, and accumulate pets rather than rear children?
Why do so many feel worse off than even a decade ago, despite record asset prices and strong GDP growth? And why has this malignancy metastasized simultaneously throughout the Western world—the US, Europe, Canada, Australia?
The answers won’t be found in economic textbooks, models, and policy papers that led us here in the first place. Nor will they emerge from the clerisy who authored them:
But answer these questions, and the chaos of our age suddenly resolves into clarity: not only the financial stress, but the seething rage erupting across Western nations worldwide. The collapse not merely of institutional trust, but of societal trust writ large. The rise of populism and politically motivated violence. The pervasive sense that the very fabric of civilization—if not reality itself—is being torn apart at the seams. The gnawing feeling shared by ordinary people that they are struggling to survive a precarious interlude before some major cataclysm strikes.
Mr. Market’s Schizophrenic Break Of 2020
The madness of the 2020-2021 COVID era was apocalyptic—literally a lifting of the veil: governments induced a global economic coma yet asset prices—the economy’s vital signs—registered euphoric highs.
It seemed as though the monitors of a comatose patient were indicating the peak condition of an Olympic athlete—a stark depiction of what Green is currently trying to quantify.
Meme stocks, fake currencies, and bankrupt companies—in fact, all assets—were soaring even as the economy remained stagnant.
This era was dubbed Mr. Market’s Schizophrenic Break, with the absurdity epitomized by David Portnoy (aka “Davey Day Trader”) randomly selecting stocks from a scrabble bag on Twitter and CNBC—a tactic that surprisingly yielded results!
Source: @stoolpresidente
Source: @EnronChairman
The Financial Matrix
During the peak of the COVID market frenzy, Portnoy realized the surreal nature of the situation:
The good news is I know it’s rigged. The government is [saying] don’t worry we’re just gonna create a trillion-billion-zillion dollars. It’s fantasy land. It’s Schrute Bucks [fake money from a popular TV show]. It’s the worst coronavirus day in a while and the government is saying don’t worry about it cause we’re gonna print a quadrillion dollars and the market sky rockets. The stock market is disconnected from reality. The whole thing is a pyramid scheme. We’re living in the Matrix.
Portnoy wasn’t just rambling; he had inadvertently exposed the central economic enigma of our time, one that had somehow eluded the educated elite: the data and graphs flashing across Bloomberg terminals had completely detached from the realities of daily life.
In this topsy-turvy Bizarro World, bankruptcy was seen as positive, joke currencies held significant value, and picking stocks from a Scrabble bag was considered a wise investment strategy.
With the intuition of a reckless gambler, Portnoy had stumbled upon a profound truth: financial reality had been replaced by a complex, video game-like simulation—the Financial Matrix. This isolated realm operated by its own rules, completely indifferent to the real world it was meant to represent.
The COVID craze of 2020-2021 epitomized the reductio ad absurdum toward which the post-War policy consensus had been hurtling—the culmination of years of dysfunction that had escalated to such ludicrous extremes that it became impossible to ignore, even for amateurs like Portnoy and his “degen” followers.
While Portnoy accurately identified the symptoms, he failed to diagnose the underlying illness. Five years ago this month—amidst the peak of the COVID market frenzy—we embarked on a mission to uncover the cancer at the core of the global financial system, to comprehend how virtual reality had supplanted actuality, and to evaluate the implications for investment.
The outcome was The Sorcerer’s Apprentice & The Man Who Broke The Markets. In Sorcerer, we traced the paths of spread—monetary, memetic, algorithmic—that had infiltrated the global financial system, outlining how this cancer would ultimately disrupt markets, economies, and societies worldwide.
We initially shared Sorcerer privately in January 2021. However, as the maladies we identified then have only worsened since, we felt compelled to enhance and update the work for a broader audience. This growing urgency also explains why Green’s recent series strikes a chord so deeply now. The economic cancer we diagnosed in late 2020—festering invisibly for decades, emerging sporadically, such as in 2008—finally became impossible to ignore when the COVID response eroded economic reality itself in 2020-2021, and then in 2022 triggered the worst inflation in fifty years.
The Day Is Come
The COVID years—and beyond—signify the realization of Francisco d’Anconia’s prophecy. He urged us to monitor the money—to interpret it as a gauge of a society’s integrity. He cautioned of the day when ‘money flows to those who traffic, not in goods, but in favors’ and when ‘individuals amass wealth through corruption and influence rather than labor.’
Take a look around. That day is not approaching; it is already here. Green’s essays and recent news stories have crystallized the nagging suspicion that has plagued the American psyche since at least the 2008 Crisis: that for years, the hardworking American has been taxed and inflated into servitude—compelled to fund their own dispossession and the destruction of their way of life. Americans have been reduced to mere energy sources whose vitality fuels the Financial Matrix.
It is slowly dawning on the populace that the “robust economy” and “record-breaking stock market” are mere illusions conjured by the Financial Matrix—illusory metrics generated by and for the simulation. Meanwhile, in the ‘desert of the real,’ the productive have been treated as adversaries, and “those who traffic in favors” preside over a Witches’ Sabbath where swindlers parade as wise men and vice masquerades as virtue:
Baal, or the World In Masquerade
Here, dishonesty is rewarded and integrity is a sacrifice—the laws no longer shield you against them, but shield them against you: “for my allies, everything; for my adversaries, the law.”
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