Wall Street, China, Shale Oil … The Lie Goes On and On

Daniel Cohen’s last book, “The World Is Limited, The Desire Is Infinite,” stirred up debate. Among the most emblematic passages, readers remembered, “Growth is the new modern religion […], it is the elixir that alleviates conflicts, the vow to infinite Progress.”

The author prompts readers to reflect upon the establishment of a fairer society, opposed to a richer world.

Nevertheless, the debate on growth has already imploded, dynamited from inside by the financial system and the media who are “on a leash,” – the ones in charge of hammering home the mantra of a single world view.

Indeed, the six-year “rebound” era we have experienced has only enriched the 1 percent (those most well off). They have channeled 91 percent of the compounded wealth. Inside this hyper-privileged group, it is the 0.01 percent of the top of the pyramid that has a hold on 50 percent of the hundreds of billions that the 1 percent enjoy.

These people now have the financial means of winning all the elections and of purchasing all the media that do not eulogize central banks and the economic system, a system that has become more unfair now than in any time since the beginning of the industrial revolution.

The “trickle down” theory, a masquerade used to legitimize the personal gain of the wealthiest, appears today for what it really is: one of the biggest frauds of the 21st century. The more the wealthiest people prosper, the more impoverished the lower class — and even worse, the middle class — has become since 2009.

In fact, 91 percent of humanity has never personally seen the sacrosanct post-Lehman growth!

Most people know it exists somewhere (maybe across the road) because the newspapers say so, but these people would be unable to make an inventory of what is actually in better shape since 2008.

In the U.S., everything has worsened, except for Wall Street and the Pentagon, and its chief supplier, Silicon Valley. For the ordinary American citizen, the last few years can be summed up by a boom in education, health, welfare costs, and furthermore, the loss of job security and job fragmentation.

For Wall Street, it means the tripling of stock market asset prices, and the return of initial public offerings valued in the billions.

Miracles and Beyond Reality IPOs.

Investors are left with companies whose stock market values ranging from $1 billion to several billion dollars have no turnover, and sometimes lack even a workable patent. (“You simpleton … if we raise money, it is exactly to finance the next miraculous invention!”)

Wall Street is fine with the idea that a “company” that pays a few employees and/or a research team makes an IPO with a value superior to that of a centennial firm which employs tens of thousands of people. We purchase a promise of the future, maybe the next Netflix or Tesla!

The theoreticians behind the Bill Gates “miracle story” [act] as if the hundreds of sound companies and their millions of employees did not have research teams nor the ambition to exploit new patents that would make them wealthier!

Six years ago, the “new revolution” which dragged the U.S. out of recession, was the shale industry; a revolution entirely financed on credit, the survival of which depends on a barrel price firmly anchored above $100.

The $100 per barrel oil standard was presented for a long time as a threshold, a launching pad from which oil prices would go up to $150 per barrel and then $200. China’s greed for energy was famously considered to be limitless.

Indeed, in China, where there is one car for every 18 people, the doubling of its vehicle fleet in 10 years guaranteed (crude) oil prices would skyrocket to uncharted heights.

In reality, the shale oil industry was only successful in the U.S. thanks to free and abundant money. Financial actors followed hedonistic market profitability forecasts considered to be quasi-certitudes, and now Wall Street has discovered they are all wrong.

Wall Street also discovered that the Chinese growth rate is not around seven percent, but most likely around 3.5 percent. In its favor, China pushes itself in a kind of activism that has all the characteristics of a headlong rush. Yet, since 2009, China has been the most active country in terms of monetary and fiscal stimulus. The more China injects money, the more it subjects its economy to a series of electroshocks; the more its gross domestic product shrinks, the more the assets of oligarchs (the nouveau riche and the hucksters) flow out of China.

The monopolization by the elite and the non-redistribution of wealth in China toward the middle class constitutes one of the most caustic arguments against the trickle-down theory. But here we are talking of a communist country where corruption creates havoc.

Let’s Save Face … As Long As Possible

Since 2013, it has become all the more obvious now in the Western world that quantitative easing, in lieu of irrigating the real economy, generates “the mechanism-creating bubble,” almost exclusively benefiting the 1 percent.

The great usurers explain to us that they have persevered, since it was the sole possible strategy and claiming the “infamous” principle that there was no alternative.

In order to accurately understand the intent of this statement, one should add, “There is no alternative in the eyes of the markets.”

The market did not even bother to keep up appearances by letting the money of the central bank to percolate a little in the real economy. They just concocted a scheme giving a semblance of credibility to the trickle down rhetoric.

Following the actions of the central banks, the ordinary saver, who bears the actual bottom-line risk from the states’ refinancing and the systemic credit establishments, is also deprived of realizing any kind of yield in return for zero growth (in Europe and now Japan) and the increasingly precarious state of the labor market.

The cynics have been aware of it for a long time. If they sell now, and that is only the beginning, it is simply because the lie surrounding the benefits of qualitative easing does not hold anymore. It is a worn out lie.

The myth of the central banks’ infallibility (that they are willing hostages of the markets) has been reduced to ashes by the Chinese market crash and the Brazilian/Canadian/Australian/Malaysian/Italian/Finnish/etc. recession.

Which new lie, which new urban legend, will be cooked up for the citizens and savers next?

We predict that there will be words justifying a QE4* in the U.S., a larger QE in Europe, and a no-limit QE in Japan, which will have only one goal: to allow insiders to transfer maximum risk and potential loss to insurance companies and ordinary citizens for as long as possible.

There are four famous precedents for this in the last 25 years: the Japanese share market in 1990, the debts from emerging countries in 1998, the dot.com experience in 2001, and the subprime situation in 2008. In 2015, it will be very different, since the four separate vectors that created the aforementioned individual crashes are finally united!

*Editor’s Note: A quantitative easing or QE refers to a bond-buying program that added about $3.7 trillion to the Federal Reserve’s now-$4.5 trillion balance sheet since late 2008. There have been three rounds of QE meant to help boost the stock market.