Congratulations, Federal Reserve! But brace yourselves for the frightening truth that has been lurking beneath the surface.
Over the past decade, a truly terrifying economic marvel has unfolded—an astonishing 50% surge in corporate profits.
This dramatic leap, soaring from $2.4 trillion (pre-tax) before the pandemic lockdown to a staggering $3.6 trillion (pre-tax) in the post-lockdown era, may seem like cause for celebration on Wall Street, but it harbors a dark and ominous secret that few dare to discuss.
The source of this financial crescendo is shrouded in mystery, and the question remains—should we be afraid? Very afraid? The interests of corporate America, it appears, have taken a sinister turn, diverging from the well-being of the average citizen, the broader economy, and the nation itself. Take, for instance, the alarming trend of outsourcing and offshoring entire supply chains to China, which has left our domestic industrial base gutted, all in the name of cost-cutting and quality compromise.
As repeatedly warned, the meager savings that trickled down to consumers were nothing compared to the catastrophic collapse in the quality and durability of globally sourced products that now saturate every U.S. retailer’s shelves.
It’s a chilling tale of corporate greed, driven by a quest for ever-higher profits at the expense of product quality and American jobs.
But is this really capitalism at its finest, or something far more sinister?
Corporate PR machines and their handsomely paid analysts and pundits want us to believe this is simply the free market in action—a result of pent-up consumer demand pushing prices higher, with corporations reluctantly passing these costs on to consumers. However, there’s a nightmarish twist to this narrative.
The cost of a $1 item doubles to $2, and corporate America merrily doubles its profit margin from $1 to $2.
The cover story that higher costs forced price hikes is nothing more than a smokescreen for what’s really happening—corporate profiteering and price-gouging on a grand scale. It’s a chilling tale of corporations using their near-monopoly powers to hike prices and lower product quality in a united front of financial and political dominance.
Now, let’s delve deeper into the horrors that the Federal Reserve has unleashed. Its massive interventions in controlling volatility, risk, bond yields, interest rates, and the mortgage market—essentially manipulating the cost of credit-capital—have had terrifying consequences for our economy:
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Economy Distorted to the Brink of Collapse:
The Federal Reserve’s artificial suppression of capital costs has pushed our economy to the brink of distortion. -
Enriching the Elite at the Expense of the Many:
The already wealthy have seen their fortunes grow exponentially, while the bottom 90% have been left to fend for themselves in a sea of economic despair. -
Middle Class Crushed, Debt Serfdom Imposed:
The middle class has been mercilessly crushed, as the majority of the population is now enslaved by debt, struggling to make ends meet.
The Fed’s manipulation of capital costs is nothing short of a financial nightmare. Imagine a scenario where the Fed shoved a Zero Interest Rate Policy (ZIRP) down our throats from 2009 to 2020, while inflation quietly ate away at the value of the dollar. In reality, inflation was never at 0%, so the cost of capital for corporations and financiers was not just low—it was negative, meaning it was less than inflation itself. This terrifying distortion had multiple catastrophic effects.
Consider it akin to a horror story of ecological collapse, where the delicate balance of risk and competition was disrupted. In a healthy ecosystem, these forces maintain diversity, but when keystone predators like starfish or wolves are removed, unchecked species overrun the ecosystem, leading to its eventual destruction.
The same devastation has unfolded in our economy, driven by the Fed’s actions.
Corporations and financiers, handed near-zero-cost capital, embarked on a nightmarish spree of acquiring smaller competitors, engaging in stock buybacks to enrich managers and major shareholders, and leveraging their assets into towering Empires of Debt. These behemoths devoured profits that were out of reach for wage earners and those who couldn’t seize assets before ZIRP inflated the Everything Bubble.
Chillingly, it’s estimated that the majority of the stock market’s rise, from 667 in 2009 to today’s horrifying levels around 4,700, is solely due to corporate buybacks that artificially reduced the number of outstanding shares. This gruesome manipulation inflated revenues and earnings per share, and buybacks, once deemed illegal, are now a grotesque hallmark of corporate greed.
Trillions in near-zero-cost capital flowed into market manipulation, speculation, and the suppression of competition, while productivity, efficiency, and innovation were left to wither away. The end result? An economy devoid of diversity, dominated by monstrous monopolies, cartels, and platforms that churn out low-quality, addictive goods and services, driving down productivity on all fronts.
Profits no longer stemmed from producing higher-quality product
The incentive structure warped into a nightmare of its own. Profits no longer stemmed from producing higher-quality products or delivering superior customer service. Instead, they flowed from manipulating markets with nearly free capital, borrowing against corporate real estate, and funneling gains to shareholders and managers.
This grotesque distortion not only stripped the economy of positive incentives but also skewed the balance between labor and capital in favor of the wealthy. Those who owned assets and income streams could leverage them to borrow vast sums at near-zero interest rates, leaving wage earners struggling to compete. As a result, wealth and income concentrated at the top, while the middle class’s share of the nation’s wealth plummeted.
But the true horror show lay in the relentless encouragement of over-borrowing, fueling the runaway expansion of debt. With interest payments so cheap, why not borrow as much as possible and invest it in high-return ventures and government projects? This nightmarish scenario fueled global carry trades and the runaway growth of both government and private-sector debt, leading to a debt burden that’s now suffocating as interest rates creep back toward historical norms.
We borrowed $3.50 to eke out just $1 in GDP expansion—a $3.50 debt that will haunt us with interest until the end of days.
This never-ending cycle of debt rollovers only deepens the economic abyss.
The Fed’s explanations included bringing demand forward and inflating the wealth effect. Lowering interest rates to near-zero was meant to entice enterprises, agencies, and households to borrow and spend now rather than later, and it inflated asset bubbles, making the already wealthy feel even wealthier. But these twisted policies are revealing their true horrors.
Bringing demand forward eventually devours all available income, over-leverages assets like commercial real estate, and triggers inflation as boundless capital chases scarce goods. As for the wealth effect, it was felt only by the top 10%, who own 90% of all assets and reap 50% of all income. Everyone else found themselves ensnared in a nightmarish spiral of debt—debt servitude, to be precise.
The mainstream narrative may suggest that the Federal Reserve is planning a return to the era of zero interest rates, but the reality is much grimmer. ZIRP is on its deathbed, and higher rates are now the new normal in an economy scarred by the Federal Reserve’s frightful distortions. The consequences are dire, with risk, competition
