The Bluff of Western Capitalism is about to get a Serious Margin-Call

The truism we have all believed is that if you work hard, you will get ahead. Taking Government money would be seen as a sign of weakness, of economic parasitism, and that taking your losses was a sign of maturity. That may work on an individual scale, but because corporations have been given the rights of an individual (Citizens United, I’m looking at you), suddenly it’s become necessary to give every industry the help that seem reserved for just the lower classes. Mom n pop need to take their losses and close up shop, but corporations need taxpayer bailouts to keep business open. Capitalism’s bluff is about to get called; that government has to be there, ready to intervene and inject liquidity in times of crisis. But when decades of economic/political philosophy are invested in reducing government’s power via regulations and oversight, then the result is a grossly underfunded and unprepared government that is ill-equipped to deal with a global crisis like a pandemic.

And yet… it has no choice but to step up and play its role as ‘lender of last resort’, the printing press for that mighty dollar, to effectively throw money at the problem and hope that market forces of incentives, supply/demand, and risk/reward, will yield the solution to our problems. The solutions may be found… but the truth is that none of it should have been needed in the first place if we had had a properly funded and intellectually armed government that could be ready to marshal its powers to fulfill its obligation, per the social contract, to take care of its citizens against foreign threats.

If the coronavirus has taught us anything, it’s that capitalism doesn’t work for everyone if it is hell bent on declawing government’s power to regulate and oversee various industries. Just as the Chinese government looked the other way as the wet markets in Wuhan made profits for the party elites, the American government spent more time focused on deregulation and cutting ‘waste’ in resources that are now vitally needed to help everyone in every industry.

If the airlines were more regulated, they wouldn’t have wasted money in stock buybacks, only to come crawling to government for a loan.

If movie studios and theaters didn’t use every trick in the book to make successful movie franchises look like losses on paper, maybe they’d actually have some cash stowed away to keep their employees paid rather than demand a bailout.

If real estate had learned its lesson from 2008, they wouldn’t have leveraged themselves buying up and flipping as speculators on properties with tenants who are now NOT going to pay rent… which they shouldn’t be paying in the first place at current market levels, then maybe they wouldn’t be in such a cash-poor position they find themselves in.

Common among these is that the constant drive to rid themselves of government intervention are all done in pursuit of the mighty profit. Capitalism requires that they be accountable to their shareholders first rather than their employees (who could also become shareholders but are often denied the opportunity). That system works well when everything is working fine and the profits keep coming every quarter… until a pandemic strikes and suddenly everyone is expecting a bailout from the very same government they spent years draining it of power and devaluing its currency. It was $750 billion in 2008’s initial TARP bailout. It is now trillions, and more on the way, to get out of this one. Maybe the truth is that capitalism doesn’t work for everyone… and that the only way this can work is if those green government-printed permission slips in your wallet have drastically lower purchasing power within the next few years. But everyone at the bottom needs it to buy food and to pay bills first. The ones at the top will need it, and use it, to buy up more hard assets first BEFORE the inflation starts hitting everyone… and the cycle will repeat.

Short answer: the pain is about to get worse before it gets better. And our ‘leaders’ think the rest are too scared to handle the truth. Short the broader market, buy SQQQ, and have some exposure to AI tech and cloud computing. That is all.

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