From Atlas To Capital - Everyone Is Shrugging

Tyler Durden's picture

From Mark Spitznagel, founder and chief investment officer of Universa Investments, a California-based hedge fund, first appearing in Project Syndicate

Capital Shrugged

Capitalism’s greatest strength has been its resiliency – its ability to survive the throes and challenges of crises and business cycles to fuel innovation and economic growth. Today, however, more than four years into a credit crisis, a conspicuous enigma calls this legacy into question.

Despite recent hopes of recovery in the US, including an inventory catch-up in the fourth quarter of 2011, real US GDP growth has remained persistently below trend. Moreover, although seasonally adjusted January employment data have brought the unemployment rate down to 8.3% (while total jobs were actually lost in January), the more realistic rate of “underemployment” remains over 15% and the labor-force participation rate is at a record 30-year low. And the US is clearly not alone in its malaise, with the eurozone fighting a far more urgent sovereign-debt crisis.

So, why is this time different? The answer lies in Ayn Rand’s rhetorical invocation of despair in her 1957 epic Atlas Shrugged: “Who is John Galt?” Simply put, when the state seizes the incentives and drivers of capital investment, owners of capital go on strike.

Rand portrays innovative industrialists as akin to Atlas in Greek mythology, carrying on his back a dystopian world of growing and overbearing collectivist government. The hero, John Galt, calls for them all to shrug, to “stop the motor of the world” by withdrawing from their productive pursuits, rather than promoting a world in which, under the guise of egalitarianism, incentives have been usurped in order to protect the politically connected from economic failure.

Today, Rand’s fictional world has seemingly become a reality – endless bailouts and economic stimulus for the unproductive at the expense of the most productive, and calls for additional taxation on capital investment. The shrug of Rand’s heroic entrepreneurs is to be found today within the tangled ciphers of corporate and government balance sheets.

The US Federal Reserve has added more than $2 trillion to the base money supply since 2008 – an incredible and unprecedented number that is basically a gift to banks intended to cover their deep losses and spur lending and investment. Instead, as banks continue their enormous deleveraging, almost all of their new money remains at the Fed in the form of excess reserves.

Corporations, moreover, are holding the largest amounts of cash, relative to assets and net worth, ever recorded. And yet, despite what pundits claim about strong balance sheets, firms’ debt levels, relative to assets and net worth, also remain near record-high levels.

Hoarded cash is king. The velocity of money (the frequency at which money is spent, or GDP relative to base money) continues to plunge to historic lows. No wonder monetary policy has had so little impact. Capital, the engine of economic growth, sits idle – shrugging everywhere.

Rand, perhaps better than any economic observer, underscored the central role of incentives in driving entrepreneurial innovation and risk-taking. Whittle away at incentives – and at the market’s ability to communicate them through price signals – and you starve the growth engine of its fuel. Alas, central bankers, with their manipulation of interest rates and use of quantitative easing, patently neglect this fact.

Interest rates are more than a mere economic input that determines levels of saving and investment. Rather, as the Austrian economist Ludwig von Mises emphasized, they are a reflection of people’s aggregate time preference – or desire for present versus future satisfaction – not a determinant of it.

Interest rates thus incentivize and convey to entrepreneurs how to allocate capital through time. For example, lower interest rates and cost of capital raise the relative attractiveness of cash flows further in the future, and capital investment increases – the system’s natural homeostatic response to higher savings and lower consumption.

State manipulation of interest rates, however, does not influence time preference, even though it signals such a change. The resulting inconsistency creates distortions: as with any price control, capital receives an incentive to flow to investment that is inconsistent with actual supply and demand.

The Fed is purposefully and insidiously distorting the incentive system – specifically, signals provided by the price of money – resulting in mal-investment (and, when public debt is monetized, inflation). This can continue for a time, rewarding unproductive investments and aspiring oligarch-speculators who presume that the Fed has eliminated risk. But, as Rand reminds us, at some point the jig is up.

Today, after the largest credit expansion in history, that point has clearly been reached. Impassive capital now ignores deceptive market signals, and the liquidation of untenable mal-investment percolates through the system as immutable time preferences prevail.

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tmosley's picture

You, apparently, since you can't distinguish between the two brands of businessmen in the book or in real life.

I only kill chickens and wheat's picture

Wow LTER, I could about give up reading comments here. Calm down and have a beer or diazepam.

StychoKiller's picture

"But you say that money is made by the strong at the expense of the weak?  What strength do you mean?  It is not the strength of guns or muscles.  Wealth is the product of man's capacity to think.  Then is money made by the man who invents a motor at the expense of those who did not invent it?  Is money made by the intelligent at the expense of the fools?  By the able at the expense of the incompetent?  By the ambitious at the expense of the lazy?  Money is made--before it can be looted or mooched--made by the effort of every honest man, each to the extent of his abilityAn honest man is one who knows that he can't consume more than he has produced."

StychoKiller's picture

Still trying to find fish in the treetops...

SilverRhino's picture

Ayn Rand

  • Wrote good prose.  Excellent message
  • Brevity is not in her vocabulary. 
  • Being concise is an unknown concept to her.
4horse's picture

Nietzsche's ninny -the full nincompoop- yet they here have y'all now hurrying to search, showoff and knowingly quote their own alissa rosenbaum . . .

the financial intelligentsia

as if enough aynrands were kruggerands shown in public, enriching what sychophants as are likewise here scavenging maybe some of their dropped hints for some of their dropped nickels'n'dimes


all the while and in their own meantime bitchez so completely self-satisfied with what's otherwise unheard of

For a country to have a great writer is like having another government. That’s why no régime has ever loved great writers, only minor ones.


as if the further parroting of a plagiarist, on an article about being searched. stripped. Imprisonment . . . yeh. might make, like cramer, for another allaround renascent HautKultist, where outright rape'n'robbery is only completely satisfying when you can as well spit-back upon your victim. the raped. the robbed. quoting You

earleflorida's picture

ya wanna know what a true dichotomous misanthropist is --- a split personality Rand and Nietzsche in the same straight jacket 

total self-destruct idiots, period!


Chump's picture

I thought The Fountainhead was kind of lame, honestly, but I got through it.  Atlas Shrugged was epic.  I was reading it when I found ZH and my mind was blown to read the technical analysis of current events while I read a fictional accounting of them.  The Virtue of Selfishness sealed the deal for me.  Capitalism and Freedom was fantastic but fuck Greenspan sideways with a tire iron.

johnberesfordtiptonjr's picture

I assume that you are aware that Alan Greenspan was part of Ayn Rand's "collective?"

She praised Greenspan on many occasions and he was part of her inner circle in New York in the 50's.

I bet that she would still be singing his praises despite his position as Fed Chair.

Perhaps hypocrisy was one of her core “principles.”  

I see that her cult lives on.

krispkritter's picture

Hey Fuckstick...Greenspan was the one who did the 180 in the '60s/'70s...

johnberesfordtiptonjr's picture

You appear to know nothing of Ayn Rand.

For example, I'll bet you think the following-

- she was a "Libertarian"

     she hated them since she believed they stole her ideas

- she was a Reaganite

     she did NOT support Reagan and believed he was merely a crony capitalist

The ultimate paradox is that her ideas are often used TO SUPPORT CRONY CAPITALISM via deregulation, removal of anti-trust actions, the development of "free market" solutions for virtually everything, regulatory capture,  etc.

Invoking Ayn Rand is all part of the scam and I see that that many are drinking the Kool-Aid.

Don't you get it?  

By the way, Greenspan's "flaw in the model" is a reference to his Ayn Rand "laissez-faire market"  thinking.

REP. WAXMAN: In other words, you found that your view of the world, your ideology was not right. It was not working.

MR. GREENSPAN: Precisely. That's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.


Best Regards,



tmosley's picture

You can't have a free market with a central bank.  It is impossible.  It's like trying to dig a hole in loose dry sand.  It just fills right back up.  You have a mixed market at best, and you MUST attribute the failings you encounter to THAT system, and no other.

Chump's picture

Of course I'm aware, did you read Capitalism and Freedom?  The complete about-face that dickhole made as Fed Chairman was reprehensible.

aaxiom's picture

I believe her ability to write as CLEARLY as she did in a SECOND language is nothing short of astounding. I like Rand and find her to be a bit long-winded (in her fiction, NOT in her non-fictional work), but I find I disagree with a few of her ideas.

But, love her or hate her, one must admit that she saw a lot of what's going on today (as did those of the Austrian School). Yes, she -- and others -- thought this would cave a lot sooner, but this is simply a matter of timing. The facts remain: This system of ours is completely unsustainable in the long-term. The definition of what "long-term" means is open to debate, but I'm thinking we don't have very long to wait until things get surreal.

francis_sawyer's picture

I like Rand and find her to be a bit long-winded

Yeah, well LTER puts her to shame in that department...

knightowl77's picture

As an audio book, it makes the miles fly by.....written in the 50's, it sounds like it was written yesterday

rbg81's picture

Ayn Rand definitely had issues.  And while many think she was a prophet, she was just relating what she saw happening from her time in the early Soviet Union.  Unlike generations of "enlightened" Marxist professors, she knew exactly where the road to Collectivism led.

TruthInSunshine's picture

This isn't net cash they speak of, and oh what a misnomer we have floating out in the world (the kind that really bites investors hard).

Gotta love how they keep talking about 'record cash' when every company has been rushing 24/7/365 to issue debt via incredibly low yielding corporate bonds, thanks to the window of opportunity The Bernank's pernicious ZIRP monetary policy and federal reserve voracious sovereign bond buying has offered these corporations.

At last check, which was about 8 months ago, it was my understanding that U.S. publicly traded corporations now have a record amont debt outstanding - I'm going to try to nail down the exact figure.

I'm not quite sure what the net-net of "cash hoarded" is, but it sure would be nice if someone mentioned the aggregate amount of those corporate bonds just sitting out there.

Cdad's picture

Ah...the sterilization of the blazing sunshine brother....

TruthInSunshine's picture

Edit - This was as of sometime in 2011 (I'm not sure if 'syndicated loans' even is all inclusive):

I found some of what I was looking for:

Banks not lending? Corporate borrowing soars in 2011 - ABC News › Money You +1'd this publicly. Undo

Dec 26, 2011 – Consumers may be cutting debt and banks may be tightening up their balance sheets, but borrowing by U.S. corporations is in full swing.

Law of Unintended Consequences: Corporate Borrowing Binge

So far in 2011, syndicated loan volume has increased a whopping 56% compared to 2010, according to Dealogic. The total of $1.76 trillion is the highest single-year sum since the pre-financial crisis days of 2007...



This is yet another unintended consequence of zero percent rates.  Investment grade companies increasing their borrowing by 68% year over year has certainly not led to hiring.  Maybe we can just say that perhaps it stalls the pace of further layoffs, we seem to have gotten good at merely accepting "saved jobs" these days anyhow.


And so the Balance Sheet Recession continues apace for the deleveraging consumer while those with the greatest ability to borrow (and, god forbid, spend) continue to pad their balance sheets with fresh cash.  That they have no need for.

Nicely done.


Here's the problem the sell-siders and even many innocent observers never mention or don't understand:

This trillion plus of 'borrowing' IS NOT CASH. It's debt that has to be rolled over or repaid.

Cdad's picture

Don't worry, brother truth,

Any minute now................................................holding my breath................................the shills over at the BlowHorn [CNBC] are going to get right on that explanation of "cash on the sidelines/debt."  Because they are "jourlanists" over there.  Because they live to "inform" the little guy.  Because there is so much "experience" over at that network, that they cannot help but uncover the truth.  Because COMCASTIC was so stupid as to buy that junk network, that they are very concerned about protecting the "value of the BlowHorn" asset.

AUD's picture

This trillion plus of 'borrowing' IS NOT CASH

Of course not. The $ itself is the obligation of the Fed.

The problem with this article is it was written by an 'investment adviser', talk about (non existent) misallocated capital. These 'financial engineers' are the problem, not the solution.

FrankDrakman's picture

And yet, despite what pundits claim about strong balance sheets, firms’ debt levels, relative to assets and net worth, also remain near record-high levels. 

Did you miss this sentence in the article?

TruthInSunshine's picture

Yes. I did.

Thanks for pointing that out.

I'm not going to tell the author how to write, but if I had written that, I would have emphasized that fact and I would have attached a number to it.

And I am somewhat confidence total corporate debt of U.S. publicly trade companies is well in excess of 2 trillion at this point in time, but I need to find the data.

Id fight Gandhi's picture

Prophet? If anything she was evil.

G-R-U-N-T's picture

Yep, she did indeed rbg81!

francis_sawyer's picture

Unlike generations of "enlightened" Marxist professors, she knew exactly where the road to Collectivism led.

Yeah ~ A PHAT book deal...

HamyWanger's picture

Ayn Rand was certainly a "thinker". Like every other human on Earth who has something called a brain in his skull.

The question can be basically summed up as who is right, and who is wrong. It is not sufficient to be able to write good English and appear intelligent to be right.

And I'm afraid Rand was tragically wrong on a variety of points.

duo's picture

what Rand didn't imagine was ZIRP destroying capital like it has since 2008.  It would require a rewrite of Part II.

Vint Slugs's picture

Altho she didn't anticipate ZIRP, she had the capital destruction down cold.  What do you think was happening when d'Anconia constructed a worthless mine in the Peoples State of Mexico, when he arranged for his laden ore ships to be sunk; when Danneskjold sank ships or seized their cargo?  That was capital destruction on a grand scale, equal in its own way to ZIRP.  No need to have Part II rewritten.

xela2200's picture

Not sure it is the same thing. d'Anconia knew that the Mexican government was going to expropriate the mine and brag to the people about it. Instead, he made a fool of the government. Also, all those who were trying to capitalize (leaches) on the project. Dagny was smart and only used old trains and refused to invest on that line even going against his brother who at the end took credit for the opposite. In short, he destroyed the dumb money in this case government and speculators.

blunderdog's picture

That's stupid.  Changes to words in books can't "destroy capital."  That's exactly what capital IS NOT.

4horse's picture

words. inert  .  .  .

fallen on deaf ears


yet not the publishing, promotion and purveyance of some

and not others  .  .  .  vaporized

as it appears happens to one or anothercooked books

enron l.ron or erehwon depending upon who's A-COUNTING

SALES numbersvotingrollsbookclubs fraudclosures bestsellers


That's stupid.for who to whom the bell tolls whether it's heard/or unheard of  .  .  .


falling in a forestfrom the trees cut for paper-clichesbuzzwordscatchphrases what-goes-around

                         Changes to words in books can't "destroy capital."

wot about "decapitated"  if "meaning" incapacitated. and/or jus "kaput"

ACHTUNGmust be paid

and paid forto whofor whom by whose trendsetters or attentiongettershogs-of-the-limelight


right. now let's try to focuson whowhatwhen where why they try to fuckus


establishing value . . . the very Idea of what's said sensible. acceptable. successful. or instead thought sordid. disordered

and avoided: unmentionable

according to . . . wot.a-crock-aauthority? right? like,quoting chapter'n'verse cause the bible tells me so. juDeo-

no? __then, deadlanguage, do what's to do do but at least use your head


That's exactly what capital IS NOT.

blunderdog's picture

Are you trying to communicate?

4horse's picture

the primacy of 1source

and words unheard

because, a blueprint, the 1read needed: blocked

francis_sawyer's picture

The question can be basically summed up as who is right, and who is wrong. It is not sufficient to be able to write good English and appear intelligent to be right.

And I'm afraid Rand was tragically wrong on a variety of points.

Oh yeah? & I guess that sums it all up (because you said it was so)... I suppose that 50 years later, on an interenet blog (populated mostly by people who are here because they DON'T watch "Dancing With the Stars"), the fact that people are still slicing and dicing her work, & trying to come to conclusions that apply to 'generations removed' of political, financial, & socio-economic comingling means nothing, right?

4horse's picture


I suppose that 50 years later . . .


lit.crit and contextual analysis will indeed be further past passe than already even now, but--  extreme exegesis  --what's read will nonetheless remain much the same: meaning, people reading what's construed as meaning by those with the power to enforce it  .  .  . deploying such past text tactics of publishing which, on an internet blog, have likewise already arisen at bluffho,politico and so-on-and-so-forth, whose recent partners, owners and coopters are-- deconstructed  --no doubt truly enjoying what victorious spoils of political, financial, & socio-economic comingling as, ultimately, means nothing, right?




or, wrong, perhaps again merely insisting upon significance as enlists their books, their movies, their mirrors, of idols, icons and leaders, of such exsanguineous concepts and intent, Ideas, as are all, really, that's fit to print


no difference


seeing as how news  --now, then, whenever/whatever they get around to choosing-- can no longer exist without hermeneutics sliceddiced&nice-enough boobtubery and/or spuntumbled&twisted like a rubikube so as to all the better inform their consumer of such intent as to exactly what is/is not meant and remembered as meaningful while all the better even further obfuscate what a captive audience might indeed do




so __something-always-happening-at-the-zoo, so exciting, living-in-the-city, so hectic yet energetic and full-of-life__ likewise will certain events remain subject to their ongoing socio-cultural exegetics, wherein the most representative articles, essays and texts best expressing such nuances and subtleties of our world around us, and as can only really be addressed by the finest minds, writers and experts as to what's so-new-to-do among us, must of course be the continuing purview of only such influential mavens, quidnuncs and aficianados as so totally know the now


.  .  .  etc.


arbiters elegantiarum, of all importance, and ubiquity, then, everywhere putting what haut cuisine, haut couture and haut kultur as are the food, fashion and fun to be had, de rigeur, all virtually right in front of you and little doubt found on your plate, on your back and on your mind

finding otherwise  .  .  .  offscreen. offline. or offcourse, will of course be less and less of a worry for the young, uninformed or offkilter because --given such killer apps as can now accompany you 24/7 on your latest updated ipad, iphone, imobile-- finding you or connecting to only the most valuable facts, info and fun fun fun, le dernier cri, means absolutely no effort or imaginable exertion on your part will keep you apart from what, remember, is the whole raison d'etre of a laborsaving device in the first place: no muss,no fuss. no sweat: enough! as you further learn to just sitback and relax while nonetheless attached and at all times attuned to our ever-never-ending news, views or music, whatever you choose, and as can always be found over any and all of our brands,gadgets,bandwidth and owned airwaves -the humanosphere- where neo-existence and with no effort expected we give you the earliest bird, the latest alert and the last word



words words words
talkshows. talkradio. talkingheads, now an everyday fixture of jibber, jabber, gabbing and gossip as pays lipservice to such worthy causes and urgent issues as are our talk, talk and alltalk
yet, thought. feeling. expression, what else is there to say and where would we be without them
remembering, words, our greatest gift, linguistics, being the ability to break-down and take-apart the very engine of all our social, cultural and intellectual interaction: never forgetting into-the-bargain that, our most valuable treasure, yet also perhaps like spam, the come-on and junkmail, for instance, what's worthless as well exists and will always find you first  .  .  .

waste. ads. trash. buzz. buswha. babble. marketing. promotion. pornography. propaganda. agenda. garbage, the total tonnage of which, unsolicited, everyday buries significance along with salesmanship and senselessness under its dense oppressive weight

.  .  .  while what's rare, scarcity, and the truly valuable, is easily suppressed and often escapes us, buried, where we have to dig, and dig, and dig down deep and elsewhere if we're ever to find a true find, of value. muscle and mind. body and soul. a whole truth




where, for an instance, we've thought to suppose In 100 years who's gonna care . . .

a century

there, where --keynesian translation--  in the end we're all dead
and, good-bad orprobably indifferent, perhaps finally content to be



FedRes Act



in other words, and none further, 200 years  .  .  .

Id fight Gandhi's picture

She was a Jewish woman who thought she knew everything, her ideals actually inspired the satanic bible.

Schmuck Raker's picture

So, do you approve or disapprove of her?

G-R-U-N-T's picture

"Rand was a brilliant thinker.  Too bad her fiction was boring.

Junks away!!!!!"


Hm...Mr. Hendrix...I, personally, savored every bit of both "The Fountainhead" and "Atlas Shrugged"!

Many infected minds cannot wrap around the objective reality she brought forth in these novels. They do indeed parallel exactly what is going on in America/Europe as welfare statism persists as the self annihilating system it is.

Deficit spending is the hallmark of the welfare state.

"Morally, the promise of an impossible "right" to economic security is an infamous attempt to abrogate the concept of rights. It can and does mean only one thing: a promise to enslave the men who produce, for the benefit of those who don't." If some men are entitled by right to the products of the work of others, it means that those others are deprived of rights and condemned to slave labor." ("Man's Rights" in Capitalism: The Unknown Ideal.) There can be no such thing as the right to enslave, ie, the right to destroy rights." -Ayn Rand

and..."It is true that the welfare statists are not socialists, that they never advocated or intended the socialization of private property, that they want to "preserve" private property-with government control of its use and disposal. But that is the fundamental characteristic of fascism."

Absolutely damn right. She was indeed a brilliant thinker and whom had clarity on perceiving reality.



4horse's picture

indeed a brilliant thinker and whom had [sic] clarity on [sic] perceiving

invisible ink. bleeding, on paper, into demons of delirium, and grammar, if not nachtmahr

ayn the equal, unseen, long stewing au jus not rus, but a borschting of lara's theme meets madame blavatsky

Victor, hugo, zhivago, or who knows who'll ever go again after drinking up that drunken fuckin Drankenstein


one's cup runneth over . . .


begin, HerrDerrMurderingKoolAid, what god hath again wrought:

write right nevermind think rite, one to mirror the other, being erudite must be why she's your favorite

cause, enlightenment, which is always being right, wrongs both of you each in its own trite way on your way --quite Teutonic, one might say-- of what's an individuality yet anyway a perhaps shared ethnic collective which's something seemingly naturally selected for by said type always being right in a showy will to power stolenwhose geneology of morals must perforce rightfully accrue to her,you and yours by virtue of such duality as demands your very own transvaluation of all values


already owning the transvaal --blacks, mines, dynamite, blood diamonds and all


golden. for by now, and so promoted, must everyone rigidly agree and most eerily see NO RULES for yous guys. either of you. neither of you, both here and now seen between scylla and charybdis-- style vs. substance --that you is, so clearly, such clarity, really really perceiving rarity where grunt'n'aynrand and and and whomever had parity on conceiving is raelity beyond ethic . . .  beyond edit . . . beyond help, if even well beyond reading in indeed beingthieving Beyond Good'n'Evil!

catacl1sm's picture

Shrugged, bitchez!

krispkritter's picture

I'm not shrugging...I'm keeping my head down. Seems to be the appropriate thing to do in the era of 'See some evil, hear some evil, spoke some evil, tell someone...'

francis_sawyer's picture

Mainly when I think of "shrugging", the first image that pops into my brain is that banker on the CHANCE card (in Monopoly), that has empty pockets and the card says...


Cdad's picture

Simply put, when the state seizes the incentives
and drivers of capital investment, owners of capital go on strike.

Ya had me in the second paragraph, and no more need be said for the perpetual market nonsense going on just now.  Wall Street is applying the same remedy again and again, marking up stocks and thinking that this will mark up confidence, or restore Wall Street's entirely destroyed credibility.  It won't.

The Greater American Depression will roll on and on, for as I have been saying, also eloquently stated in this piece , capital will not form in this environment.  And so the only capital available will be Bernanke Bucks, and Berananke Bucks will only create bad inflation...which will stunt growth, not create it.

Today's Banana Republic market session was a complete embarrassment.

duo's picture

Simply put:  Work for 40 years, save up $2M, live off of $100K of interest at 5%, and leave the bulk to your kids when you die.

With 0.25% interest rates?  Why bother trying to make money and save it?  Fuck it, I'll go on the dole like everyone else.

It makes NO SENSE to work your ass off to create savings (capital) if all it will get you is 0.25%.

Cdad's picture

...and until such time as Ben Bernanke is removed from the Fed, and the Fed audited and summarily shut down, you can expect nothing but more of the same...a perpetually declining quality of life in America.  There is nothing novel here.  There is nothing surprising.  There is nothing less than the greatest financial crime ever committed, and Ben Bernanke is the criminal syndicate's figure head.

And the people of this nation say...................nothing.

Inthemix96's picture


You want to try living in England mate, you think youve got it bad? You havent got a fucking clown like nick clegg yet.

God help us all

DCFusor's picture

And we just grinned, sittin' on our bag o' seeds.