The dangerous final stage of capitalism

Capital extracts more value out of the system than it has put in, by rent for land and housing, interest on credit and debts, and profit from commerce, industry and services (1). These three forms of remuneration should have the same proportion to the capital that generates them, but various risk factors constantly perturb that equilibrium and constant re-evaluations of the corresponding capital are necessary to re-establish it. If, for example, profits drop while interest and rent are unchanged, then the price of shares will go down, whereas the price of bonds and real-estate will rise, until the two movements find a new common balance between capital and its remuneration. Profits fluctuate up and down, rents tend to rise and bonds pay what is written on them. Company profits vary and can be very different from one year, or even one quarter to the next. Rent seems secure, but earthquakes, hurricanes, flooding, fire, a pandemic or economic activity moving elsewhere will halt it, even if the capital is somehow insured. Bonds, especially Treasury ones, seem guaranteed, their value and their yield are there in print, but these numbers represent a currency that can be subjected to unpredictable bouts of high inflation.

Investments are never completely secure, and some are regularly written off as a loss. Nevertheless, financial organisations are accustomed to making profits, except when their constructions fail and they call for help. Lending is profitable if the scale is big enough to cover possible defaults, and if it does not sink into “subprime” adventures. But speculating on stock, bond, currency and commodity markets can be even more beneficial. Here again size is an advantage, as is the hyper-speed of transactions. These are not investments in the strict sense of the term, where a return as dividend, rent or interest is expected. They are just about buying and selling, and gambling on prices going up or down. In fact, the various markets are increasingly perceived as casinos, with the hazards of supply and demand instead of dice, cards or a roulette wheel, and each play lasting a tiny fraction of a second. And just like casinos the house always wins, because traders take a levy on every transaction whatever the outcome. The stock market in particular has become a game, where share prices have little to do with a company's production and financial situation, and just follow speculative trends.

World finance has become a gigantic bubble, debt levels are stratospheric and equity prices are vastly inflated. And even the COVID damper has not had much effect. Monetary creations are counted in trillions, and stock market indexes are still going from record highs to new record highs. Just as greenhouse gas emissions are tipping over into unimaginable climatic disruptions, so the emissions of debt will soon tip over into indescribable financial disruptions. The private property of the means of production, based on profit and debt, has plundered the land and oceans to exhaustion and extinction, and has reduced most of humanity to a slave-like dependency on the next pay cheque. At the same time it has developed weapons powerful enough to destroy whole cities, and even all life on Earth, along with surveillance systems that watch every move, listen to every word and predict every thought. But all that might and control will not save capitalism from financial collapse and meteorological disasters. Though it may preserve a totalitarian hierarchy to the bitter end. Without some truly radical change, humanity is headed for a very nasty short-lived future.

1. See this previous posting:

https://lelezard.blogspot.com/2019/11/capital-accumulation-and-credit.html