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#financialisation

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Doc Edward Morbius ⭕​<p><strong>OPEC, Petrodollars, and the 1980s Homeless Crisis</strong> (2017)</p><blockquote><p>...What assets do, if those holding them have any say in the matter, is <em>appreciate</em>. After all, why not? You've already <em>got</em> the thing, all you need is for it to <em>increase in value</em>. One classic mechanism for which is to <em>constrain the supply</em>. And there are lots of ways to do that with housing: big lots, big houses, construction and zoning laws, lousy infrastructure (crime, schools, transportation). So that the limited supply that <em>is</em> attractive <em>keeps getting bid up</em>. That's one of the big changes. And it was happening <em>like gangbusters</em> in the 1970s and 1980s especially, and since.</p><p>At the same time, a bunch of the upward-mobility-escalator stuff starts disappearing. Especially factory jobs, that let high-school (or less!) educated people, and especially males, earn a solid, high-income, and really fucking reliable income....</p></blockquote><p>A thinking-out-loud piece I'd written back on G+ (hence the IA link), on how homelessness kicked off bigtimes in the US in the late 1970s / early 1980s, perhaps as housing became financialised due to A Combination Of Many Things.</p><p>Stumbled across this looking for other things (as one does) and thought it might be of interest to others.</p><p><a href="https://web.archive.org/web/20190115035057/https://plus.google.com/104092656004159577193/posts/eDscpi6Kg7L" rel="nofollow noopener noreferrer" translate="no" target="_blank"><span class="invisible">https://</span><span class="ellipsis">web.archive.org/web/2019011503</span><span class="invisible">5057/https://plus.google.com/104092656004159577193/posts/eDscpi6Kg7L</span></a></p><p>HN discussion: <a href="https://news.ycombinator.com/item?id=43294222" rel="nofollow noopener noreferrer" translate="no" target="_blank"><span class="invisible">https://</span><span class="ellipsis">news.ycombinator.com/item?id=4</span><span class="invisible">3294222</span></a></p><p><a href="https://toot.cat/tags/housing" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>housing</span></a> <a href="https://toot.cat/tags/homelessness" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>homelessness</span></a> <a href="https://toot.cat/tags/financialisation" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>financialisation</span></a> <a href="https://toot.cat/tags/finaicialization" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>finaicialization</span></a> <a href="https://toot.cat/tags/opec" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>opec</span></a> <a href="https://toot.cat/tags/petrodollars" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>petrodollars</span></a> <a href="https://toot.cat/tags/AssetInflation" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>AssetInflation</span></a></p>
Chuck Darwin<p>Another aspect of debt, <br>considered as an information technology, <br>is that if affects the information environment of the borrower. </p><p>If you are managing a company which has borrowed money, <br>making your payments becomes one of the survival conditions for that company. </p><p>At low levels of debt, generating short term cash flow is one priority among others, <br>but for a highly indebted company it becomes a signal which swamps all others. </p><p>You might want to change the world, but if you don’t meet the coupon payments, you’ll never get the chance to see if your other strategic priorities would have worked.</p><p>Consequently, a company with lots of debt cannot help but have a bias toward the short term. </p><p>Which might be considered problematic, <br>as the last few decades in the Western capitalist world have seen the rise of an industry <br>(leveraged buyouts, or “private equity”) </p><p>which has made it part of its fundamental operating strategy to load companies up with debt. </p><p>Considered in this light, debt is a technology of control as well as of information <br>– it’s a means of exerting discipline on management teams who might otherwise be tempted to follow priorities other than short-term financial returns.</p><p>This is, as far as I can tell, the real meaning behind the populist critiques of “<a href="https://c.im/tags/financialisation" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>financialisation</span></a>” in the economy. </p><p>There’s really nothing particularly bad about the growth of the financial sector, <br>even to the extent that it’s outstripped the growth of the “real” economy. </p><p>Quite simple mathematics ought to be enough to convince us that as the economy grows, <br>the number of links and relationships between producers, consumers and investors will grow at a faster rate, <br>and so you’d expect the parts of the economy in which decision making and information processing take place to grow faster than the “real” economy. </p><p>It’s the same logic by which the brains of primates take up proportionally more energy than those of rodents; </p><p>finance is part of the real economy, just like the cerebellum is a real organ.</p><p>What’s bad about “financialisation” is neither more nor less than the over-use of debt. </p><p>Modern corporations do often behave badly, <br>and they make systematically worse decisions than they used to, <br>this isn’t a delusion of age. </p><p>They do this partly because they have outsourced key functions <br>(cutting themselves off from important sources of information), </p><p>and partly because their priorities are warped by the need to generate short term cash flow. </p><p>Both of these problems can in large part be traced back to the private equity industry, <br>working either as a direct driver of excess leverage, <br>or as a constant threat which makes managers behave as if they were already subject to its discipline.</p><p><a href="https://c.im/tags/Management" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Management</span></a> <a href="https://c.im/tags/science" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>science</span></a> and <a href="https://c.im/tags/cybernetic" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>cybernetic</span></a> <a href="https://c.im/tags/history" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>history</span></a> is all about things which began as solutions, <br>💥then turned into problems because the world changed. </p><p>Once upon a time, back in the 1970s, <br>private equity and LBOs were the solution to a problem of lazy, sclerotic incumbent management teams, <br>self-dealing and failing to make tough decisions. </p><p>But it’s now the 2020s, and private equity may itself be the biggest problem in our global information processing system. </p><p>The way that corporate history progresses is that we try to keep up with the ever-increasing complexity of the world, <br>♦️and then when this is no longer possible, we have a crisis and reorganise. </p><p>We’ve had the crisis <br>– or perhaps we are still going through it <br>– and now it’s time to think about how to reorganise.</p><p> <a href="https://c.im/tags/debt" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>debt</span></a> <a href="https://c.im/tags/information" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>information</span></a> <a href="https://c.im/tags/technology" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>technology</span></a> <a href="https://c.im/tags/criminogenic" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>criminogenic</span></a> <a href="https://c.im/tags/organisation" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>organisation</span></a> <a href="https://c.im/tags/Stafford" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Stafford</span></a> <a href="https://c.im/tags/Beer" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Beer</span></a> <a href="https://c.im/tags/Barry" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Barry</span></a> <a href="https://c.im/tags/Clemson" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Clemson</span></a> <a href="https://c.im/tags/accountability" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>accountability</span></a> <a href="https://c.im/tags/sink" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>sink</span></a> <a href="https://c.im/tags/Boeing" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Boeing</span></a> <a href="https://c.im/tags/737MAX" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>737MAX</span></a> <a href="https://c.im/tags/Boeing" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Boeing</span></a> <a href="https://c.im/tags/merger" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>merger</span></a> <a href="https://c.im/tags/McDonnell" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>McDonnell</span></a> <a href="https://c.im/tags/Douglas" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Douglas</span></a> <a href="https://c.im/tags/engineering" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>engineering</span></a> <a href="https://c.im/tags/culture" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>culture</span></a> <a href="https://c.im/tags/cost" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>cost</span></a> <a href="https://c.im/tags/control" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>control</span></a> <a href="https://c.im/tags/Ricardian" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Ricardian</span></a> <a href="https://c.im/tags/Fallacy" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Fallacy</span></a> <a href="https://c.im/tags/hard" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>hard</span></a> <a href="https://c.im/tags/data" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>data</span></a> <a href="https://c.im/tags/culture" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>culture</span></a> <a href="https://c.im/tags/best" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>best</span></a> <a href="https://c.im/tags/practice" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>practice</span></a></p>
Emeritus Prof Christopher May<p>A new Boston Consulting report on <a href="https://zirk.us/tags/infrastructure" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>infrastructure</span></a> costs has found that while UK build costs for infrastructure are around the same as the US, they are well above comparable projects in <a href="https://zirk.us/tags/Europe" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Europe</span></a> (but interestingly less expensive than <a href="https://zirk.us/tags/Australia" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>Australia</span></a>).</p><p>Is there something about the <a href="https://zirk.us/tags/business" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>business</span></a> model (or type of <a href="https://zirk.us/tags/capitalism" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>capitalism</span></a>) in these three countries that makes such project more expensive than in Europe?</p><p>Three terms come to mind:<br><a href="https://zirk.us/tags/financialisation" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>financialisation</span></a> <br><a href="https://zirk.us/tags/rentiercapitalism" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>rentiercapitalism</span></a>, &amp;<br><a href="https://zirk.us/tags/neoliberalism" class="mention hashtag" rel="nofollow noopener noreferrer" target="_blank">#<span>neoliberalism</span></a> (not a term I like)</p>