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When Conventional Success Is No Longer Possible, Degrowth And The Black Market Beckon

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

"Phantom economies tend to give rise to gray and black markets in proportion to the deviance of the phantom economy from reality."

College graduates around the world are discovering that getting a university diploma no longer guarantees the conventional success story of a secure job and a life of ever-rising consumption. Doing all the things that the Status Quo said would lead to success no longer yields success, for the simple reason that the Status Quo is failing on a structural/systemic level.

The system is rigged to protect the Status Quo mafia from competition. As noted in The Mafia State of Mind (February 6, 2014), the Status Quo is a set of overlapping monopolies/extortion rackets. The system needs a trickle of new technocrats and apparatchiks to manage the rackets, but there is no place for the tens of millions of college graduates who are flooding into the job market every year around the world.

New conventional enterprises face essentially impossible barriers: sky-high rents, absurdly lengthy and costly permitting processes, onerous fees and reporting requirements, and a host of other barriers reputedly imposed to "protect the public" but whose real purpose is to eliminate small-enterprise competition to corporate dominance.

Which organizations have the cash flow, financing, legal expertise and political influence to meet all the requirements and pay the insanely overpriced leases? Global corporations and the state--two sides of the same kleptocratic coin.

The high costs of launching and operating a legitimate Status Quo business serves two other primary purposes: maintaining high returns on capital for crony-capitalist financiers and funding the state's enormous cadre of functionaries at above-market-rate salaries, benefits and pensions. Recall that median personal income in the U.S. is about $40,000 for full-time workers, and compensation above $82,500 annually puts one in thetop 10% of all wage earners.
 

The California Public Policy Center has just posted its own searchable site of state and local employee wages and pension benefits,TransparentCalifornia.com. Some of the results were rather revealing – and should be shocking to taxpayers: There are 31,527 retired public workers in the "$100,000 pension club" and 582 who are receiving pensions of at least $200,000 a year. Including wages and benefits, there are 227,059 state and local workers earning total compensation of at least $100,000 a year.

Some may argue that these large figures apply to a relatively small portion of public employees, and that the average public employee receives modest compensation. However, a CPPC analysis revealed that even average compensation is startlingly high. Average compensation for full-time state employees was $93,851 for public safety employees and $68,282 for all other employees. Adding benefits boosted these totals to $129,388 and $90,402, respectively. The figures for city and county employees were even higher.
Source: Public sector's growing $100K club

Two forces are disrupting this cozy interlocking mafia of financiers, corporate cartels and state functionaries: the End of (Middle-Class) Work and the rise of the peer-to-peer, self-organizing business models such as AirBnB, car-sharing, ride-sharing, farmers markets, etc.

Russ in Redding: The Human Face of The End of Work (September 2, 2011)

America's Social Recession: Five Years and Counting (August 28, 2013)

The Ten Best Employers To Work For (Peak Employment) (March 28, 2013)

The Python That Ate Your Job (December 11, 2013)

The high costs of legitimate business (needed to keep rentier/financial profits and state functionary pay/pensions high) are effectively destroying middle-class jobs and pay scales: the only organization that can afford to pay high salaries and benefits, regardless of costs or the business climate, is the state.

Even the financial sector and global corporations can only pay middle-class salaries for technocrats and managers in what are effectively quasi-state agencies (sickcare, workers compensation insurance, the defense industry, etc.)

So what are the tens of millions of college graduates supposed to do for a livelihood if there are only a few slots open in the moated mafias of financiers, corporate cartels and the state? To answer, let's start with this obvious statement: that which cannot be paid will not be paid.

All the infrastructure of consumption depends on tens of millions of college graduates making enough money to pay high taxes, service their student loans, buy homes, autos, particle-board furniture, electronic gadgets, dozens of pairs of shoes, etc. etc. etc. If they can't make enough money to buy and own all that stuff, then they won't be buying and owning all that stuff.

And if they can't earn a living within the Status Quo mafia, they will do so outside the mafia in the gray and black markets.

This destruction of consumption is supposed to be a disaster, but it's only a disaster for the moated mafias of financiers, corporate cartels and the state that depend on tens of millions of workers voluntarily becoming debt serfs and tax donkeys. If young workers cannot make their student loan payments, those loans become worthless. As the old saying has it, You can't get blood from a stone.(Alternatively: You can't get blood from a turnip.)

If young workers can't make enough to buy autos, homes, etc., the market for those goods and services implodes. And if all the financial/debt churn generated by consumption goes away, so do the fees and taxes the state depends on to pay its armies of functionaries.

Rather than a disaster, this wholesale loss of middle-class incomes and aspirations is enormously liberating. Instead of the yoke of debt-based ownership, young people are finding sharing to be better than owning: one shared car can provide transport for 10 people. Ten people no longer need to own 10 cars to get around.

One way to grasp how deeply the mafia state of mind has taken hold is to ask: how many middlemen have to be paid to produce/buy a good or service? In Greece, liberation starts by eliminating the middleman, which of course includes the voraciously corrupt state: After Crisis, Greeks Work to Promote ‘Social’ Economy.

The state is naturally in full freakout mode, as self-organizing sharing/no-middleman enterprises are outside the debt-serf/tax donkey system that funds the state. In response, the state is frantically trying to impose the same fee structure that has crushed conventional small businesses on the sharing/no-middleman organizations.

The problem for the state is that its success in imposing exorbitant fees and taxes will simply drive low-income people scratching out a minimal living in the gray market to other networks that do not even have a corporate structure to tax. To wit: "The more you tighten your grip, the more systems will slip through your fingers."

If making a living in the gray market becomes untenable, then people will be forced into the black market, which is whatever trade can be done outside the reach of the state. As noted previously, that which cannot be paid will not be paid.

As correspondent Peter D. recently observed: "Phantom economies tend to give rise to gray and black markets in proportion to the deviance of the phantom economy from reality." If we believe that phantom economies of moated fiefdoms, mafias and cartels are "reality," then the rise of liberating degrowth networks is distressing and confusing.

But if we look past the propaganda and see the debt-serf/tax donkey system for what it really is, a predatory system of oppression and exploitation, then we can see how degrowth, de-consumption, de-debt, etc. is liberating.

TEDx Tokyo: The "De" Generation (8 minutes) (de-ownership, de-materialism, de-corporatism)

Degrowth, Anti-Consumerism and Peak Consumption (May 9, 2013)

 

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Fri, 02/07/2014 - 13:26 | 4412217 mayhem_korner
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Very 4th Turning-esque.  The next generation is expected to be the liberating, entrepreneurial one that reinvigorates the world from its ashes.

Fri, 02/07/2014 - 13:45 | 4412298 BandGap
BandGap's picture

And with "free" healthcare they are unencumbered by the stresses that once faced past generations.

Very 4th Turning-esque - this is the generation primed to be the fodder for war. They will create, and be part of, the ashes. As will most of us should this all come about. It is the survivors (much like post WW2 GIs) that will also be the builders of the new society.

Interesting times. Europe again coming into focus at the place for World War.

Fri, 02/07/2014 - 13:58 | 4412369 AmericasCicero
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F that, im not going to run and fight for the state ruled by the morons who couldnt figure out how to operate a civilization.  Youll get a civil war before the millenials hop on a plane to europe or asia.

Fri, 02/07/2014 - 14:01 | 4412379 WarriorClass
WarriorClass's picture

 

The depravity and hypocrisy of the Parasite Class knows no bounds.

http://americandictators.blogspot.com/2014/02/mike-vanderboegh-exposes-m...

 

 

Fri, 02/07/2014 - 14:11 | 4412434 Doña K
Doña K's picture

What comes to mind are two real cases of high taxes and burdensome regulations and permis etc.

The first one from a socialist European country was about a small businessman who calculated that by the time he gets all the permits and hires a few employees who can not fire unless fraud is involved and after paying taxes and filing tonnes of paperwork, it was easier and more profitable to be a shylock lending money with colateral. 

The other from the US where two busineesman hired each other's wife (not showing up for work of course) and let them go after six months, in which case they collected unemployment benefits for another six months, then rehired them and rinse and repeat.

 

Fri, 02/07/2014 - 14:53 | 4412638 object_orient
object_orient's picture

That unemployment scam is a good idea. But I bet you know about it because they got busted for fraud, right? Oh well, back to the drawing board.

Fri, 02/07/2014 - 14:05 | 4412371 akak
akak's picture

 

The next generation is expected to be the liberating, entrepreneurial one that reinvigorates the world from its ashes.

But when are they going to find the time to do all that when they are already fully occupied with their texting and tweets and twats and various other e-gadget obsessions?

It's hard to imagine anyone being entrepeneurial who can't even be bothered to pick their head up for one moment from the screen of their latest trendy e-gadget to notice those into whom they are constantly bumping while out in public.

Fri, 02/07/2014 - 14:23 | 4412486 zuuma
zuuma's picture

"But when are they going to find the time to do all that when they are already fully occupied with their texting and tweets and twats and various other e-gadget obsessions?"

hahaha! Show me an individual (or group!) fully occupied with their TWAT, and I'll show you a gaggle of interested bystanders.

The 4th turning will have to be postponed for a few minutes, I think.

Fri, 02/07/2014 - 14:23 | 4412495 akak
akak's picture

 

hahaha! Show me an individual (or group!) fully occupied with their TWAT, and I'll show you a gaggle of interested bystanders.

Well, there was that Paris Hilton chick ....

Fri, 02/07/2014 - 14:26 | 4412506 Doña K
Doña K's picture

Similar story. I park my car in lowest  basement level. One day, on another basement level, there were three black Bentleys and a few escort cars. Outside of the building were two motorcycle police and three chase police cars. The Bentleys and the other cars were guarded by 8-10 bodyguards.

Apparently some big wig was visiting in my building. When I went out later on, all the bodyguards were on their cell phones texting. They did not even look at me driving by, my grandma could have dissarmed these guys 

It's not only the kids doing it. Obama is doing it as well.

Fri, 02/07/2014 - 14:50 | 4412615 Miffed Microbio...
Miffed Microbiologist's picture

Akak,

I know your quite biased on the subject but actually sometimes these things are quite fun. I was sitting in a coffee shop a few days ago and got this text " randy, home soon, have chores done and be dressed for practice." I text ed back " sorry you got my phone by mistake, I'm not randy" a few seconds later " NOT AMUSED, do as your told!" I tossed the phone in my purse deciding to ignore the idiot. A few seconds later... ANSWER ME NOW!

Well, I lost it. I text back. " Sorry mom, have my dick in hot cheerleader. Going 4 number 3 but taking a bit long. Take ur time getting home". I toss my phone in my purse thinking " how'd you like that dipshit!" Until I realized what I had just done.

Dear Randy with the uber micromanaging mom, sorry for that. I hope you escape with your cajones still intake at some point in your life.

Miffed;-)

Fri, 02/07/2014 - 14:57 | 4412660 akak
akak's picture

OK, Miffed, I literally laughed out loud at that one!

It reminds me of the time, around ten years ago, when some local stores were sellling low-cost Phillipino prepaid calling cards whose access number was almost identical to my home phone number.  So invariably, given the time difference, I started receiving calls at home at 2:00 AM or 4:00 AM from people trying to call the Phillipines.  After about a week and 20 or 30 of these calls, I was so sick of them that I started playing games with the clueless callers, answering the phone with lines such as "Welcome to the Ferdinand Marcos Memorial Institute --- press "One" to order from the Imelda Marcos Shoe Collection, press "Two" to assassinate Cory Aquino and all of her progeny, press "Three" to ...."

Fri, 02/07/2014 - 17:11 | 4413120 mayhem_korner
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The next generation is expected to be the liberating, entrepreneurial one that reinvigorates the world from its ashes.

 

That's essentially what the book, The Fourth Turning, says.  I was just pointing out the similarity between the book and what this article suggests.  Perhaps your reading ability needs to evolve. 

Fri, 02/07/2014 - 17:54 | 4413258 aerojet
aerojet's picture

That's just bullshit and you know it.  Every older generation thinks the incoming one is lazy and stupid.  They aren't.

Fri, 02/07/2014 - 18:41 | 4413469 akak
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Every older generation thinks the incoming one is lazy and stupid.

And for the last few generations, at least in the USA, that has demonstrably been the truth.

Fri, 02/07/2014 - 13:28 | 4412219 fijisailor
fijisailor's picture

The Indian gov can tell you about this with their attempted control of gold.

Fri, 02/07/2014 - 13:42 | 4412221 HyBrasilian
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Black Market? That reminds me, I need to ask fonestar what the going rate is, [in bitcoins], to have your balls scratched.

Fri, 02/07/2014 - 13:32 | 4412248 NOTaREALmerican
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The "black market"...

Which is why the economy is actually doing much better in appearance than the offical numbers show.

Unfortunately,  as the US moves closer to the Greek/Italian/Mediterarian model of society, the people with the ability to "negotiate" will prosper more.

What I always liked about the old American society model was that introverts could live well.    That's situation might be ending now.

Fri, 02/07/2014 - 14:08 | 4412423 Nick Jihad
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I occassionally come across an academic study where they try to measure what the bottom 20% spend, versus measuring what they earn. There is a remarkably large gap, which you'd think would get someone's attention, but in PC academia, you don't prosper by doing research that shows that not every "poor" person is really poor.

Fri, 02/07/2014 - 13:34 | 4412249 Tall Tom
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Free Enterprise will reign no matter how much Governments attempt to quash them. It is evidential that this has happened from the beginning of time. Liberty and Freedom will prevail through Oppression and Tyranny.

 

The reason is because Liberty and Freedom promote Life while Tyranny and Oppression promotes Death.

 

Choose wisely and choose Life.

Fri, 02/07/2014 - 13:36 | 4412258 NOTaREALmerican
NOTaREALmerican's picture

Re:  Free Enterprise will reign no matter how much Governments attempt to quash them.

Of course.   But who's kids get to fly in the private jet bling and run the world?

Fri, 02/07/2014 - 13:36 | 4412261 mofreedom
mofreedom's picture

And choose your friends wisely.  Hell, our kids might even rat us out.

No Tryanny!!!

Fri, 02/07/2014 - 14:24 | 4412497 angel_of_joy
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So true ! However, on the bright side such "friends" are prone to all sorts of deadly accidents.

Not sure about kids though...

Fri, 02/07/2014 - 13:47 | 4412308 dontgoforit
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Bradman!

Fri, 02/07/2014 - 17:56 | 4413263 aerojet
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That would not be the lesson in Russia.  The lesson is that central planning eventually destroys the economy and the smoking ruin that is left is ungovernable but never recovers.  It's a one way trip that plays out over centuries.  There may be small bright spots, but overall, what's dead is dead and not coming back.  The black market mafias are far worse than the governmental variety.

Fri, 02/07/2014 - 13:49 | 4412314 TORNasunder
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Always enjoy Smith's articles. Well written, concise, and usually thought provoking.

I concur about the grey/black market rising as the lack of jobs in controlled markets decrease. Which is exactly why TPTB want a 100% digitized currency. And explains why they want to get rid of gold, ie. gold moving West to East. Grey/Black markets will be much less effective without a recognized and readily available medium of exchange.

Fri, 02/07/2014 - 14:11 | 4412428 TrumpXVI
TrumpXVI's picture

TPTB cannot control it, try as they might.  And, yes, it's baked into the cake w/a collapsing economy.  The U.S. over the previous century had a smaller grey/black market than many other countries because it had a strong economy that offered very good opportunity for most people along with some sense that things were more or less "fair".  As all of that circles the toilet bowl, an alternative economy is a foregone deal.

And the government cannot stamp out alternative currencies because so many things can be used as currency.  The dope trade is using "Tide" laundry detergent as one alternative, last I heard.  

CHS is correct that "the people" ultimately do hold some of the cards here....and they will play them if for no other reason than that they are going to have no practical choice....no real bravery will be necessary.

Fri, 02/07/2014 - 14:27 | 4412507 TORNasunder
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I concur but you made my point. Trading with coins and dollars is much easier than bottles of Tide. TPTB want to control all transactions so they will eliminate/outlaw all paper currency and coinage. So then you'll have 2 groups of people, those within the system and those without. Those without will trade with whatever they can/have.

Barter will become prevalent due to no other choices. But one of the primary reasons 'money' was invented was due to the inherent drawbacks of barter. TPTB want to make grey/black market activity as difficult as possible. Join the system or die basically.

Gold and Silver coins at this time will be extremely valuable... plan accordingly.

Fri, 02/07/2014 - 13:47 | 4412315 Randoom Thought
Randoom Thought's picture

Yes, decentralization is much more stable than centralization. The more things are divided, the fewer things that can take down the entire system.

Fri, 02/07/2014 - 13:58 | 4412353 NOTaREALmerican
NOTaREALmerican's picture

But, the smart-n-savvy people know that they can get richer by looting fewer hugh entities than many smaller ones.

The reason the smart-n-savvy people create bullshit for the "conservative" and "liberal" dumbasses to consolidate power is to increase the looting.

The "liberals" and "conservatives" never want smaller.    They just want the OTHER guy's favorite Big-Gov Big-Corp scam smaller.

Fri, 02/07/2014 - 13:56 | 4412346 Henry Chinaski
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Self interest rules.  People are like water.  They always seek their own level and cannot be compressed.  Squeeze here it comes out there...

Fri, 02/07/2014 - 14:02 | 4412378 Urban Redneck
Urban Redneck's picture

Why the FUCK should a college diploma EVER guarantee "the conventional success story of a secure job and a life of ever-rising consumption"...

Guarantees are only issued by or in concert with monopolies and cartels...

Capitalism DEMANDS failure by those who can't succeed.

Seems to me someone with a college diploma looking for a "guarantee" either 1) missed something rather large while overpaying for their edumacation, or 2) THEY WANT TO JOIN THE DARK SIDE...

Fri, 02/07/2014 - 14:18 | 4412468 Nick Jihad
Nick Jihad's picture

Cargo-cult logic is everywhere.  Middle/upper class people have more diplomas => more diplomas will create more middle/upper class people. And people will watch the Wizard of Oz, and laugh when the wizard says ".. with no brains than you have, but they have one thing you haven't got - a diploma!".

Fri, 02/07/2014 - 14:32 | 4412529 NOTaREALmerican
NOTaREALmerican's picture

Re:  Middle/upper class people have more diplomas => more diplomas will create more middle/upper class people.

It's not JUST deploma's tho.   Middle/upper class people are also trying to keep their kids from hooking up with the trash-class. 

Universities are about exposure to success.    The most successful people are those with the most duplicity.    That's why people from Harvard want their kids to go to Harvard (of course, their own duplicity creates an alternate bullshit story about what the reason is, but that's the purpose OF duplicity: to create bullshit to justify immoral activity).

Mon, 02/10/2014 - 02:50 | 4419111 The Comedian
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"Most major universities are either entirely or substantially branches of the CIA." - The Campaigner , April 1974

Mon, 02/10/2014 - 02:49 | 4419112 The Comedian
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"Most major universities are either entirely or substantially branches of the CIA." - The Campaigner , April 1974

Fri, 02/07/2014 - 14:34 | 4412508 El Vaquero
El Vaquero's picture

 

Cargo-cult logic is everywhere.  Middle/upper class people have more diplomas => more diplomas will create more middle/upper class people. And people will watch the Wizard of Oz, and laugh when the wizard says ".. with no brains than you have, but they have one thing you haven't got - a diploma!".

I think "cargo cult" is a good description in many ways, but I think it also goes deeper than that.  It used to be that a higher education would give you some skills that were useful that you could apply to a trade that required very specialized skills.  Now, there is the belief that you need to be credentialed to be competent.  Credentials do not guarantee competence nor are all non-credentialed people incompetent.  That's not to say that a degree in the hard sciences doesn't mean that a person doesn't know more about hard science than a high school dropout, but it is saying that people want credentials for the sake of credentials.  It gets even worse when people are going in for degrees such as gender studies when there is no real demand for people credentialed in gender studies. 

 

But, yeah, cargo cult sums it up. 

 

EDIT: Was intended to be a direct reply to Nick Jihad's post.

Fri, 02/07/2014 - 14:40 | 4412559 angel_of_joy
angel_of_joy's picture

It's less and less "education" and more and more indoctrination. The commies would do the same to their kids, but at least you were not supposed to pay for it. Free "education" from craddle to grave. These guys are worse than commies...

Fri, 02/07/2014 - 14:43 | 4412583 Rising Sun
Rising Sun's picture

black market is a mainstay in Europe - with little or no tax enforcement - lots of tax rules however.

 

welcome to Europe

 

thanks for taking the USA here Barry, you fucking shitbagger!!!!

Fri, 02/07/2014 - 15:07 | 4412697 LawsofPhysics
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I have been long black markets and sharecropping for quite some time.  Nice to see folks finally catching on.

Fri, 02/07/2014 - 16:11 | 4412926 PGR88
PGR88's picture

Don't fear the black-market.  To operate in it successfuly, you have to be a "people person" - but otherwise, you can do quite well.  Just look at the wealthy of China and Russia.   Most people will lose, but some will win - so might as well be you.

Besides - you won't have a choice.

Fri, 02/07/2014 - 16:21 | 4412971 kchrisc
kchrisc's picture

Isn't the American Revolution proof that violence does solve some things?!

Time to solve things again.

Fri, 02/07/2014 - 16:42 | 4413030 Offthebeach
Offthebeach's picture

Black Market=Freedom Market

Fri, 02/07/2014 - 17:51 | 4413255 scrappy
Fri, 02/07/2014 - 18:05 | 4413299 Poor Grogman
Poor Grogman's picture

When the paperwork takes longer than the actual work.

It's time to get back to basics, and go grey.

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