Wednesday, September 28, 2016


Over the past few years I've explained what a mess our economy has become since we learned how to create more and more money out of virtually nothing. In many ways, we're living in Rumplestiltskin's make believe world, where straw can be turned into gold, to the tune of $1.2 quadrillion. Check this out ...

Rumplestiltskin, as we know, is a child's fairy tale. What many of us don't know is that Rumplestiltskin is an exaggerated caricature of the ancient alchemists, who searched over the centuries for the Philosopher's Stone, a mysterious substance which the ancients believed had the power to turn base metals into gold. 

Creating money out of virtually nothing was a slow process in America during the 20th century, and started almost immediately after World War II (a story for another day). Unfortunately, it's clear the vast majority of America (humanity?) has no idea how we've been able to create more and more money (hint: we're printing it, in cyberspace). 

This is why over the years, and in my book, I tried to show how our modern economy creates money out of thin air. Specifically, over three years ago I tried to explain how simple 'futures markets' for goods like cattle and wheat morphed into highly unstable futures markets for financial services, like interest rates and insurance (which I posted on here, here, and here).  

The incredible part is how financial markets have exploded so that the value of the underlying goods - like cattle and wheat - is now dwarfed by the wealth affiliated with the financial contracts that "derive" their actual value from goods created. 

Why is this development important to understand? Because our financial system has exploded to the point that the goal is no longer to create things - like cattle and wheat - as much as it is to extract profits and wealth from the financial contracts that fund real commerce. 

In real simple terms, think about what Wells Fargo did. It's wealth extraction through fee and service contracts, but at a whole new level. 

In fact, the size of the world's overgrown financial services markets - about $1.2 quadrillion - dwarfs the size of America's actual economy - about $18 trillion - as this YouTube clip makes clear ... 

Here's the point you should understand if you watched the entire YouTube clip: We're sitting on a financial bubble.

- Mark

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