The Gander That Lays The Fool’s Gold Egg

We all know Aesop’s fable about the goose that laid the golden egg.

The farmer who owned the goose would get a golden egg a day but being a greedy sort wanted all the eggs Right NOW so he cut the goose open…

…and got nothing.

Let me update the tale for today:

Once upon a time the capitalists ran a consumer economy.  They made their money by providing goods and services to consumers.  Those consumers were the employees who provided the actual labor that went into said goods and services.

The system worked well.  The labor force made and provided, the capitalists paid them for doing so, the labor force then turned into consumers who purchased goods and services from the economy at large, and the money flowed back into the hands of the capitalists as increased revenues.

But the capitalists grew greedy.

Now it’s one thing to look for the least expensive means of providing labor and material to go into your goods and services, but at some point actual goods and services need to be provided.

And if your labor force can’t afford said goods and services, well, then the whole system comes crashing down, doesn’t it?

Then in the 1970s the economist Milton Friedman proposed “an entity's greatest responsibility lies in the satisfaction of the shareholders.”

In other words, make money for the capitalists through any means.

Not “make money by providing goods and services in exchange for cash” but just “make money.”

You know, the way Bonnie and Clyde made their money.

Armed with this justification of rapacious selfishness, capitalism has been systematically robbing their work force to line their own pockets.

Productivity and profits have skyrocketed, the minimum wage and middle class salaries have not.

Indeed, capitalism has turned into the ultimate incestuous worm Ourboros by shifting the making of money away from providing goods and services to consumers over to providing protection to capitalists for the making of money.

Now, hedge funds in and of themselves are no nefarious.

Indeed, they can provide useful insurance for businesses.

Using an example provided by reporter John Bloom (better known in his movie host persona as Joe Bob Briggs), say the state of Colorado experiences 45 days of heavy snow a year.

The Colorado ski industry banks on that 45 days to make money.

Conversely, the Colorado trucking industry sees it as 45 days the roads are closed.

Now, as long as both groups can accurately predict how many heavy snow days there will be, they can schedule and budget their businesses around them.

But say it only snows 40 days a year.

The ski industry loses one nineth of their yearly business.

Conversely, let’s say it snows 50 days.

The truckers lose almost a whole week.

What the hedge funds guys do is figure out what are the odds of there being more or less that 45 heavy snow days a year, then arrange a bet between the ski industry and the truckers.

The ski industry there will be only 40 days of snow; if they win their bet, they get 80% of their losses covered by the hedge fund.

The truckers bet there will be 50 days of snow; if they win their bet, they get 80% of their losses covered by the hedge fund.

The hedge fund as the house calculates the over / under odds re 45 days of snow, and offers the bets to the ski industry and truckers.

Done properly, they accurately guess how often Mother Nature will go over / under the typical 45 days and figure out how much they can induce the two sides to bet against each other without actually having to pay out.

On those rare occasions when it’s either 40 or 50 days of heavy snow, great!  The rival businesses have covered that loss and the hedge fund has raked in pure profits on the normal snow fall years.

Nothing wrong with that…

…but then the hedge funds get nervous in case they miscalculate and end up with a couple of bad years in a row so they seek another hedge fund to cover their bets.

In financial parlance, these are called derivatives.

Wanna guess where most of the wealth of the world is located today?

Not in property such as real estate or intellectual property.

Not in precious metals.

Not in resources.

The vast majority of money in the world today is generated in and around derivatives, hedge fund atop hedge fund atop hedge fund, money protecting money, not serving humanity by providing goods and services.

How do capitalists make money?

By slashing expenses.

In my own personal bailiwick, media companies seek to replace most forms of human created content with AI generated content, knowing that 80% of the time humanity is satisfied with amusing mediocrity.

Already they are driving human composers and performers into poverty by churning out hundreds of thousands of copycrap tunes that ape the style of established artists, channeling royalties directly into the coffers of the music labels, not the creators.

They’re about to do the same thing with visual media.

Publishing?  We’ve already got bottom feeder quislings churning out two genre novels a month, knowing every genre has enough dedicated fans who will buy anything of passable quality that contains enough of the tropes they love.

But here’s the snowfall issue for the capitalists: 
What will you do when the day comes that nobody can afford to buy your copycrap anymore while simultaneously there’s so much copycrap none of it has any value?

Y’all might want to have a word with Monsieur Robespierre.

© Buzz Dixon