Mark Spitznagel On Confusing Means With Ends

Tyler Durden's picture

Authored by Mark Spitznagel, Founder of Universa Investments, originally appearing in Forbes

The Role Of Capital Has Politicians Confused

The nonchalance with which politicians on both sides of the aisle discuss ever higher taxes as the solution to our endless budgetary ills is emblematic of a widespread and consequential misunderstanding of capital. Indeed, those who claim that higher taxes bring prosperity miss the point entirely. That is, they mistake means for ends.

You see, capital is not ends; capital is means. Capital is not what humans strive for, the triumphant reward of our material aims. Rather, it is what we strive with, the intermediate tool by which we attain those aims. It is the means of higher output per unit of input (bringing our species from its hand-to-mouth past to the present), whereby, when paired with more inputs - among which is labor - we get greater economic profit and real GDP growth.

But these means are typically far removed from their ends, both temporally (production takes time) and economically (production is costly); they are exceedingly indirect (or, as the Austrian economist Eugen von Behm-Bawerk said, they are "round-about"). The entrepreneur must navigate a circuitous path, and those who think it benign to hand their capital over to bureaucrats miss this path altogether; they see only the lucky pot of gold at the end. They fixate on the inanimate stuff of capital and overlook the human imagination, patience and effort to anticipate consumer desires and bring together the many factors of production to eventually satisfy them.

It is a tautology of corporate finance that growth in profits comes from the recursive reinvestment and compounding of past profits. For instance, GDP growth is a result of (in addition to population growth) the income reinvestment rate in the economy multiplied by the rate of return on that reinvestment (or the aggregate ROIC in the economy). So when taxes skim from the reinvestable-capital stock each year, they thus skim a proportional share from subsequent economic growth. (And, no, governments do not replace private ROIC with their own public ROIC.)

Politicians are certainly not alone in their profound misunderstanding of the process of capital and production (while the high-tax impresario himself, Warren Buffett, understands the compounding tax impact so well that he dis-ingenuously structures his investments to evade them). This misconception is often at the core of much bad thinking among economists and investors alike (two groups that should know better).

Consider most economists' treatment of capital as a homogeneous blob fabricated by central bankers out of credit. They ignore that means, by necessity, are scarce (they are foregone consumption) and must be economized to attain the most desired ends. Circumventing that fact, as history has repeatedly shown (for instance, in past periods of economic growth despite high taxes), leads only to artificial booms canceled out by subsequent credit collapses.

In investing, ours is the age of immediate and direct ends. We have become a capitalism of momentum-based hedge Fund punters, quarterly earnings growth and the cash-out IPO dream: and it is the age of pundits pushing an incomprehensible world, such that meandering aims seem to trump the commitment of entrepreneurial long-range designs.

Amid all of this messy thinking we miss the simple truth behind our material wealth: It has been achieved through the accumulation, by us and inherited from our forefathers, of a stock of highly configured and embedded tools that make human effort more effective and things possible that never were before. And we turn our backs on this truth when we turn more and more of these tools over to government bureaucrats.

Profits are but an intermediate end of capital investment. Its ultimate end, in fact, is the material progression of our civilization. How easily we lose sight of this, at our and our progeny's peril. We all want more economic growth, but we ignore the means to get there: the onerous choices and commitments made along the round-about path to those ends. We even confuse the means with the ends.


[ZH: As we have described before, Mark succinctly describes not just the misunderstanding of capital but its unintended flows as it is misallocated due to forced capital injection by central banks into an environment that is far from normal or stable...]

Since it is now quite clear that despite calling for even endless-er QE, the uberdovish Chicago Fed, and by implication the entire FOMC, is still clueless about the two most critical processes of modern fiat-based economics, namely bubble formation, and its counterpart, bubble bursting, we decided to give them a helping hand, and to explain just how these two fundamental events occur, with flow charts so simple, even an Economics PhD can get it.

Bubble Formation: start at the bottom left...

Bubble Bursting: ...and end with a 'debt crisis' and a 'rush for the exits'

Rinse and Repeat - Simple. QED

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Sudden Debt's picture

All we need is a Rug and a Broom.
And all problems are and will be fixed.

seabiscuit's picture

You, sir, sound like an enema of the state.

camaro68ss's picture

your full of S***, state run obamacare enema for you. Once complete, off to FEMA camp FREEDOM

The Alarmist's picture

Picture this on a national scale:  "I can't be broke ... I still have the full faith and credit of 300+m workers ready, willing and able to make good on my promises."  

Frankie Carbone's picture

No worries mate. Unless he redraws those graphs with construction paper and crayons and has Barney narrate it, the average Joe isn't going to grasp it.

Idiocy has assured our demise.

When the evildoers are intelligent, and the voting masses dumber than a bag of hammers, the advantage of the former over the later is insurrmountable.

Raynja's picture

somedays i feel like dagny

bobthehorse's picture

It all comes down to the middle class.

The American powers-that-be through the golden goose under the bus.

Without a vibrant middle class, we can't grow the tax base.

Labor got screwed in favor of capital.

the misanthrope's picture

FYI it is 'threw' not 'through'. And growing the tax base is what is screwing the middle class.

The taxes are the bus. Who is this "we" you speak of? All for the state, yes?

michael_engineer's picture

" So when taxes skim from the reinvestable-capital stock each year, they thus skim a proportional share from subsequent economic growth."

Sounds like this author is setting up a straw man such to be able to try to blame taxes for a lack of growth or even "contraction" when resource depletion will likely force an end of growth irregardless of taxes.

The Alarmist's picture

Nah, we're just going to blame you for not working hard enough, not paying your fair share, and using too much of our precious resources at prices subsidized by the rest of us.  

michael_engineer's picture

And I blame people like a software executives family that I know that even though they live in a Street of Dreams home worth millions with a 6 car garage and where the woman is one level below VP in the top ten of the Fortune 500 club with an exceptional ability to pay committed tax fraud with total disregard to the good people of the county and state that they defrauded out of necessary funds to pay teachers and firemen and police officers. Pretty heartless huh?

NidStyles's picture

More like he's pointing out that the government is causing most of the issues, which is true.

falak pema's picture

until we take the gist of this article seriously we will not work our way out of this conundrum : means n ends.

Capital is a means for human civilization; it is not a means for capitalists to control the course of events to make more money.

There has to be a focus on the social agenda or else we lose sight of the end; capital efficiency to create more distributed wealth; MORE DISTRIBUTED WEALTH; NOT JUST MATERIAL BUT ALSO CULTURAL.

We've lost that focus by just going for short term profit maximisation. Now WS just blows bubbles. 

Balance between economic efficiency and social efficiency has to  be the focus. 

suteibu's picture

Corporate owners and managers used to live in the same larger communities as the workers which made connections between the social and the economic.  Few would destroy their own community for profit.  Now those companies are controlled from remote locations and little concern is given for the resource base in the community.  Labor becomes strictly a measured resource like fuel and the community is no different than a rare earth strip mine.  The corporate idea of "giving back" mostly involves contributing to foundation-based, agenda-driven programs and spending money on public relations.

NidStyles's picture

One of these days you will understand rational arguments.

steelhead23's picture

This piece is loaded with unqualified assertions based on ideology.

 "Amid all of this messy thinking we miss the simple truth behind our material wealth: It has been achieved through the accumulation, by us and inherited from our forefathers, of a stock of highly configured and embedded tools that make human effort more effective and things possible that never were before. And we turn our backs on this truth when we turn more and more of these tools over to government bureaucrats."

Bull.  What exactly do government bureaucrats do with these tools of civilization that renders them useless?  How's this for a comeback - by instituting private rights in intellectual property governments have stifled the creative energy of innovation.  Wake up ZHers, this is anti-government propaganda - and oh, since the U.S.'s government is obstensibly of, by, and for the PEOPLE, being anti-government is the functional equivalent of being for slavery.

Bohm Squad's picture

Don't do drugs, kids.  ^^^^^

gould's fisker's picture

". . . and oh, since the U.S.'s government is obstensibly of, by, and for the PEOPLE, being anti-government is the functional equivalent of being for slavery."

Well, since you put it that way, and if it actually works as simply as that, all I can say is "Heil, baby, where do I get my jackboots?"


kchrisc's picture


Though I appreciate your views, I seem to be in the dark as to where to acquire the knowledge behind them for myself. I must ask that you please inform me and the rest as to who and what we need to read to bring us up to speed on your views.

I have read Keynes and Krugman and found them to be just apologists, "court intellectuals," of the government and establishment. I thought that I was on to something with Mises, Rothbard, Boite, Bastiat, etc. but your comment has made me realize that I may be on the wrong track.

I am now doubting T. Jefferson, B. Franklin, etc. of the Founding Fathers, but what did they know?!

Please forward that reading list in a reply here so I can get started enlightening myself.    hujel

steelhead23's picture

I am happy to announce that there is at least one other ZHer who believes in democracy.  Perhaps my intellectual property quip is obtuse - here's another.  Who exactly, provided the capital for the development of the micro-chip?  Anyone?  NASA, a wholly-owned subsidiary of the U.S. Government.  And OBTW, wasn't it government bureaucrats who developed the internet?  I would agree that private capital has been a creator of the tools of civilization - I would disagree that it is the ONLY creator.  My earlier point is that the exclusivity created through the granting of intellectual property rights reduces rather than increases innovation.  Witness the great patent and copyright wars wending through the courts.   How freaking productive is that?

Nels's picture

The transistor was invented by AT&T, the microchip by Fairchild.  Nasa provided a market for the early high cost items, but it was private capital that provided money for the cheap non-milspec stuff you and I use.

Some of the basic inventive work for the internet was done by Darpa.  But it was private capital that built todays broadband network.

How productive is fighting patent wars?  About as productive as catching, trying and jailing thieves.

And the tax money spent by NASA, it came from the private sector, and was overwhelmingly supported by the general population.  Ok, a lot of that support was driven by propaganda, but the idea that there is some divide between the evil private company and the angelic government is downright silly.  Some things are reasonable to do as a group, most things are not.  Mostly, government tends to look like the folks in charge of the New Orleans levees, or the porn-watchers at the SEC.

Democracy sucks, read your Greek history.  It elects fools and demons, and sometimes a good man or two but it's not to be depended on.  Freedom works, vote with your own damn dollars on what research boondoggle to support, not mine.

BigJim's picture

Most people take 'democracy' to mean that the government can impose whatever laws the majority (or largest voting minority) want. When you ask them, ok, does that mean the government can imprison homosexuals if the majority of the people want it? they might start thinking perhaps there should be limits to what the government can impose on its people, no matter what the majority of them want. At that point, democracy becomes what Karl Popper described as a mechanism for removing the governing class without bloodshed.

This was what the US was supposed to be - a democratic republic, not a democracy.

Anusocracy's picture

A couple of spiffy things and it only costs 40% of GDP per year.


As a bonus, you get the deaths of 400,000,000 people in the 20th century.

Whatta deal!

BigJim's picture

exactly.. and those 'spiffy things' necessarily all came at unknown cost to private-sector innovation as the taxes/inflation used to pay for them sucked capital away from private investment.

But no, Statists can never quite grasp Bastiat's principle  of Seen vs Unseen.

Random_Robert's picture

Ask any random person anywhere on Earth the difference between money and capital, and I'll bet you 10 Trillion Zimbabwe-bucks that they haven't got a clue.


If YOU know (and understand) the difference, then congratulations - you might survive what it coming. 


If you don't, then enjoy feasting on those Benny-bucks, and other forms of credit, when the cost of an iPad makes even THEM too expensive to eat...


Joe moneybags's picture

I read the above article, and am more confused than I was before.

Is gold "captial"?  The author's arguments infer that it would not be considered so. 

Random_Robert's picture

Gold is fungible (some would go so far as to say that Gold is supremely fungible over any other known substance),  therefore, Gold can be (and some argue always will be) convertible (via the liquidation process) into working capital.

During some historical periods, this liquidation process has been easy (I'll trade you a dram of Gold for a shovel and an ox), while during other periods (as now), the process involves the extra step of exchanging your Gold for paper currency (aka banknotes) in order to "activate" your working capital

Gold is unique- It is savings, it is wealth, and it is (periodically) liquid money circulating through an economy.

Gold is simply the ultimate measure of the stored value of human labor over time; and LABOR (or effort) is the supreme form of human capital.







BigJim's picture

'fungible' just means that one gram of 24k gold is the same as any other gram of 24k gold; unlike, say, diamonds, which may be a great store of wealth but are not fungible - two one carat diamonds can vary wildly in value.

Gold has proven to be a decent store of wealth throughout history because people value possessing it and it's scarce, and takes a lot of work to unearth/refine. That doesn't mean it will always be valuable, of course, but if I had to choose between caching $1650 in FRNs or a Kruggerrand for 20 years, I know which I woud choose :-)

Bohm Squad's picture

'Bout time Eugen got a shout-out!

davidsmith's picture

Please stop publishing these "enlightening" articles.  I feel as if I'm being lectured to by Mrs. Bates in "Psycho."

falak pema's picture

just as long as you don't end up in the shower or the staircase. 

ljag's picture


Just couldn't resist.....boy scouts want to INCLUDE gays. Ok no problemo. You female gays will supervise the BOY scouts and vice versa for the male gays"...problem solved!!

Crimedog's picture

Agree with most everything Spitznagel said.  He's a smart, well-reasoned guy.  The problem I have with this article is that he never mentions the tax rate that would be acceptable/optimal - he just says that higher taxes reduce the stock of capital, which is long-run detrimental to economic growth.  That's fine, but then what level is optimal?  Lowering taxes means cutting spending, which no politician (Republican or Democrat) actually wants to do, and depending on what tax level is deemed acceptable, it could mean cutting A LOT of spending.  So what I really want to hear is a pragmatic approach to cutting spending in the right areas so that we can lower our taxes in a deficit-neutral manner. Lay it out there.  

the misanthrope's picture

There is no acceptable / optimal rate. Fuck, it's not a mathematical equation. The taxes are theft.

These are not numbers, they are individuals. Who has a right to the fruits of my labour other than me?

How about a monetary standard, individual freedom and personal responsibility? When i purchase or use something I will pay / be charged for it.

BigJim's picture

Think about what government is. What differentiates government from everything else? It is force, it is compulsion. It is intrinsically evil... its only possible justification is in preventing/punishing greater evil. I like Ibn Khaldun's 14th C summation : government is "an institution which prevents injustice other than such as it commits itself."

With this is in mind, it seems to me it becomes clearer what legitimate functions government can undertake - the prevention of predation greater than what it will necessarily have to commit itself to meet its outgoings. So, policing, genuine national defence, a court system.

I would add that monopolistic access to natural resource - land, oil, freshwater,minerals, etc - is best handled by government, through some form of competitive tender, so that taxation on productivity and value-add can be kept to a minimum. There's absolutely no reason why some carpenter should pay more of his wages in various taxes to pay for the running of society than someone who inherited shares in a mining concern located on land stolen from indigenous tribes.

You want the State to protect your monopoly to some portion of the Earth's resources? Well, you can pay for that privilege, in proportion to how much other people would like to exploit those resources themselves.

DavidPierre's picture


The harder they push...

...the worse things must really be.

We have lived through a 30+ year credit bubble which has already popped. With a gaping hole in the side of it, TPTB decided that they would "patch" the existing balloon bubble rather than replace the balloon entirely with a better and more stable material (money). They patched and they patched and have blown unlimited amounts of "air" (fresh credit and currency) in an effort to keep the system afloat.

All the while, "markets" have by necessity been rigged. Stocks, interest rates, commodities, everything...and the financial and economic reports also by necessity have been falsified to fall in line with fantasy like asset values.

Which brings us to today where the Gold and Silver prices have been locked in a box and mauled for the last 2 months. Since 1995 or even earlier (at least since the 1960's) the prices of Gold and Silver have been manipulated downward, but, NEVER for such an extended period of time OR with as much force as has been applied during the current operation.

This should tell you something!

Why? Why now?

What has changed that absolutely no "freedom" of price has been allowed?

First, Germany surely did not all of a sudden wake up one morning thinking..."let's repatriate our Gold". No, they had behind the scenes discussions with the Fed which probably lasted for many months before they announced. Then of course the U.S. has the debt ceiling, sequestration and fiscal cliff fiascoes to deal with, they have been "kicked" but this cannot go on to eternity. Also, and interesting from a timing standpoint the worlds' oldest bank had a major derivative hiccup last week which may just be the tip to an iceberg valued over $1 quadrillion.

"Things" must really be bad and FAR worse behind the financial scenes than we see or are being told.

The falsehoods and reporting lies and the amounts of manipulations have reached new highs just as any "liar" must lie more and the lies get bigger to cover the original "white lie".

We must be very close to something of epic proportions breaking loose.

There are too many inconsistencies with what we are being told versus what is readily seeable and discernible using your own common sense. Please keep in mind that we know for a fact that many (including the U.S.) sovereign nations, their treasuries and central banks are in financial dire straits, yet many who own Gold related assets are "scared".


The answer is exactly the same as to "why?" has the full court press been put on with regards to bogus reporting and perfect market action. This whole thing will blow up, "those in charge" know this as well as you and I do. Their efforts to hide the truth have become 24/7, all day every day because reality and the managed "perception" have never been further apart. All of that said, you mustn't lose sight of the very reasons you decided to own precious metals in the first place. You were either fearful of out of control inflation or deflation, you were scared that your currency would be debased out from under you or you were afraid of the entire system coming down.

If you bought Gold and Silver because they seemed like a "cool" investment that was doing "good", please sell it all and go away. If you own the metals because of the above, relax! It is now more obvious than at any other point in time how this will play out. You were right and will be proven so when all is said and done!

...but the problem is..."they" are telling you and "showing" you that you are not right.

This is the only tool left when it comes to the metals, short the hell out of it! Do with paper. Do it with any Gold you can get your hands on! Do you wonder why COMEX open interest numbers have not collapsed this time around?  Because the amount of shorting has been relentless and the longs have not run for the hills as in the past.

I don't even understand why anyone would "stand long" on the COMEX because even the exchange itself reports that if all the contracts stood for delivery, the majority would go unfilled!

A really stupid game where "the price" is determined and used to scare the hell out of you.

Please do some reflecting as to "why" you own metals in the first place and then understand "why" the push to show you that you're wrong has never been stronger than it is now.

Your fear is their only tool, don't be their "tool"!

zerotohero's picture

Very well put - and everyday I worry about the way this will destroy so many lives - it is truly going to be horrible.

401-Kulak's picture

"They fixate on the inanimate stuff of capital and overlook the human imagination, patience and effort to anticipate consumer desires and bring together the many factors of production to eventually satisfy them."

The wrong part is in bold.  It is the "many factors"  that is the crux of the problem meaning that there is a whole culture of skills and behaviors needed to accumulate wealth.  Some have called it a "work ethic" and this is what we have lost. 

We now have a "partayyyyyy ethic" and this precludes the accumulation of wealth.

Slightly Insane's picture

There is many forms of capital.  The one that is most often referred to is the "money" capital, or that which is used as "front money" to purchase materials, machines (i.e. that which allows making something).  Then there is the "human capital" .... and this is also what is being taxed.  "Human capital" is being destroyed or confiscated by regulations, fees, permits, and any other rules which prevent "one" from exercising decisions, and limiting competition.  On a small scale this could be demonstrated with a pair of young kids operating a "lemonade stand".

In many locales, operation of a "lemonade stand" by kids is in direct violation of law.  They are required to be of a minimum age (so they can be deemed responsible and able to be sued), they have to pay, and attend food safety training (which is pretty much basic stuff .... food heated above 145 deg. F, the various bad bugs, where they originate, ect.. and training in sanitation, even if they only want to serve lemonade), then they have to get a licensed "food inspector" from the municipality to verify they've got all the b.s. that qualifies the establishment as "safe for food".  Then you've got "codes' that require so many "toilets", parking, ecetera.  Then you've got the whole "sales tax" thing, and "insurance".  The list is nearly endless.  Why would anyone ever want to work again.  The regulators are "destroying" the human capital.  Once it's gone, all your left with is zombies and regulators.

Bring back the "old days", and send the regulators packing.  We don't need their communism.  Let it go back to an educated "public" ..... I'ld rather take my chances, then have to pay $7 for a glass of lemonade.

conspicio's picture

Gotta love the Spitznagel. Austrian school, a Paulbot, pilot, pit trader. Wholly underexposed against the Keynesians and I wish he wrote more. MORE SPITZNAGEL.

steve from virginia's picture



Um ... what's the point?


Are business analysts all this stupid?


It is a tautology of corporate finance that growth in profits comes from the recursive reinvestment and compounding of past profits. For instance, GDP growth is a result of (in addition to population growth) the income reinvestment rate in the economy multiplied by the rate of return on that reinvestment (or the aggregate ROIC in the economy).


That tautology is a complete fraud and the greatest myth of all time ... at least since the 'Santa Claus' myth.


All profits are borrowed, 'growth' is nothing more than inflation. The rate of return is always negative, this is simple physics, known to a high-school student but forgotten by analysts.


All capital is taken from the Earth at increasing cost then it is burned up for nothing, what we comfort ourselves with is more and more lies dolled up as tautologies.


Much more of our Pyrrhic 'capitalism' will be the end of us all.

BigJim's picture

Yes, Steve, that's why mankind is so much poorer now than, say, 20,000 years ago... all those centuriers of negative rates of return.

Capital is essentially derived from human effort, it's not some intrinsic bounty of the Earth. All that coal and iron and gold and timber is useless unless humans put the effort into harvesting/mining/refining/managing/transporting it.

How are 'all profits borrowed'? In free-market capitalim, profits are essentally interest on capital successfully deployed to add value to various inputs. Don't add value, don't get profit.

Christ you write some dumb shit.

Radical Marijuana's picture

O.K. ... here goes nothing ...

Production is inside the concepts of subtraction and robbery.

The approach of this article overlooks the FUNDAMENTAL ROLE OF MILITARISM.

Real history has been about developing the ability to rob, and to kill those who get in the way of being able to rob more. Nature originally provides the abundance. Taking from that environment is what human beings did, through the processes of subtraction and robbery. Nature originally provides the production. People were a tiny, tiny, tiny aspect of that production. What was important was the ability of different groups of people to be able to stake a claim, and enforce that claim, regarding some aspect of the natural abundance of their environment.

Nature was the original source of life, which has innate political problems inherent to that nature. Living things can reproduce, and their reproductions can reproduce. Living things can always make more living things, as long as they can find sources of material and energy in their environment to feed themselves, and those that they reproduce. Thus, it always naturally happens that there are more and more potential living things, consuming their surrounding natural abundance, until there is no longer enough to sustain that exponential growth. Nature then allows the evolution of ecologies, which balance out the relative rates of the abilities of different entropic pumps to continue, through energy being conserved in non-linear functions.

That is to say, there is a much bigger evolutionary ecology context to political economy. The REAL human ecology was based on the development of militarism, which made War King. That continued to develop to generate the current political economy, which made Fraud King.

Politicians are not so much confused or misunderstanding, as they are puppets actually working for the Fraud Kings, whose job it is to provide the pool of professional liars and immaculate hypocrites, required to maintain the currently established state religion of the monetary system, in ways that the masses of muppets would understand, and continue to believe in, more or less. Of course, believing in that bullshit was always backed up by violence, because the Fraud Kings emerged on top of the social systems that the War Kings already had made previously.

The "means vs. ends" debate should begin with axioms about subtraction and robbery. Human societies are organized systems of lies, operating organized systems of robbery, that TAKE energy and matter from their environment, which includes TAKING those from other human beings.

We have a fundamentally fraudulent financial accounting system BECAUSE it evolved from militarism, where victory was based on being the best at deceits. Money is backed by murder. Debt controls depend on death controls. Human beings are entropic pumps, toroidal vortices, in competition with others of similar kinds. Those who were the best at deceits and destruction prevailed by being able to stake claims over their environment, and back those up. The idea that human labour power is the source of production is but an infinitesimal fragment of the overall situation that actually exists! While that is partially true, that view is such a reduced piece of the whole as to be misleading to understand that system as a whole.

Intelligence is the internalization of natural selection. That was the "human capital" in terms of the DNA that could build a brain, that could learn language, and how to use tools. Crucial to that process was the selection pressures from conflict and competition, (which includes dynamic equilibria of relative cooperation of survival units, within that overall context.) Thus, the evolution of Neolithic civilization, though organized social pyramid systems. Namely, War Kings becoming Fraud Kings.

Our politicians, and the vast majority of people, have been selected to become the slaves of the Fraud Kings. We went from primitive forms of slavery, to more sophisticated forms of slavery, through the history of war, becoming the platform to develop a globalized political economy.

Economic bubble formation, as Matt Taibbi described it:

The Great American Bubble Machine

is the triumph of fraud, becoming too excessive, which then finally pops that bubble.

However, in order to actually understand that, one has to understand that the whole system is based on organized lies, operating organized robbery, and that the failure to evolve a better dynamic equilibrium of those factors then enables the triumphant Fraud Kings to become too successful, which then results in their systems of excessive success collapsing.

I basically agreed with the article above, EXCEPT I would expand it considerably, in the ways that I have suggested. The most crucial form of "capital" has been the paradoxical develop of the tools, and social technologies, to control people, through lies, backed by violence. That IS the basic human reality. The only genuine solutions are possibly evolving better dynamic equilibria between the dominant organized crime gangs (which we call countries, corporations and churches, etc..)

The "artificial booms canceled out by subsequent credit collapses" are the result of the Fraud Kings becoming too successful. That is primarily able to happen because the politicians are their puppets, while the masses of muppets are too effectively brainwashed to believe in the bullshit state religion, (which is our current monetary system.)

We should be looking at political economy, inside human ecology, as energy systems. Instead, we have old-fashioned religions and ideologies, which are based on the past of the biggest bullies being able to promote their bullshit social stories, and forcing everyone else to agree with their frauds, or else become discredited and destroyed.

The politicians only appear to be confused and misunderstanding because they are working for the slave masters, inside of a sophisticated slavery system, in which almost all the people are the survivors, who have survived by adapting to more or less accept their social situation as slaves (debt slaves, backed by death controls.)

Too much triumphant financial frauds drive their own comeuppance. Since most of the puppet politicians and muppet masses have their world views based on believing in bullshit, they are prevented from organizing more effective resistance. Therefore, over and over again, the Fraud Kings are able to carry off one scam, after another, by blowing another bubble, which pops, and then yet another economic bubble, over and over.

Of course, we can not stop the toroidal vortices of such bubbles. THEY ARE US! However, it is theoretically possible to evolve a better human ecology, and political economy. Indeed, due to the progress in science and technology, it is actually quite imperative that we should do that! However, that necessarily means better murder systems, operating better money systems, or better death controls operating better debt controls, BECAUSE, that is the way that those real human systems actually EXIST! Better balanced rates of social slavery, or better balanced rates of social robbery, are the better ways forward. That requires a better understanding of the structure of human societies, as organized systems of lies, by more of the people who participate within those systems.

... Oh well, like I started off saying, there went nothing ...

NidStyles's picture

It can't be called Capitalism if there are no mechanisms allowing for Capital formations. Capitalism is defined as the express existence of these Capital formations. What exists in the US is not Capitalism.

Hohum's picture

No, Mr. Spitznagel, you're way off base.  It's the net energy that does the work that creates the growth.  Give the tax cuts to those who can increase net energy.  The rest of us are just jerking off.

NidStyles's picture

You really do not know what Capital is do you?

Hohum's picture


I suppose you're talking to me.  Well, I am sure you have the definition verbatim in your head, but let me try.


Capital in laissez faire capitalism is accumulated by saving.  That's great.  Business accumulates saving through profits.  Now I am pretty sure you don't ask yourself how those profits were obtained (you probably don't know what "externalities" means).  But no matter.  


The real question is what's done with the profits.  If they're in the vortex of using profits for more leverage for more profits (like financial firms), BFD.  They're not creating wealth.  I allow that a capitalist business can do great things, but most don't, even for themselves.  They're relying on the debt addled consumer to push profits higher.  Hence, most of us are jerking off.


NidStyles's picture

I reject your concept, as it is directly the result of the Montaigne Fallacy.


Inflation is the cause of what you describe.