%%tags : #Omnivore #type/tweets #cat/finance #discipline/economie %% --- Financialization and the real economy === > by [Cory Doctorow](https://twitter.com/doctorow) > ([View Tweet](https://twitter.com/doctorow/status/1466107122131816449))  ## Highlights - The world's economy ground to a halt during the pandemic as millions died, production slowed or stopped altogether, and the resulting supply chain disruptions made many essential products and services impossible to deliver. 1/ ([View Tweet](https://twitter.com/doctorow/status/1466107122131816449)) - And yet, the world's billionaires added $5.5b to their net worth during that time. https://t.co/HddJ8coiNH 2/ ([View Tweet](https://twitter.com/doctorow/status/1466107123872452611)) - Thank "financialization," the subordination of the real economy - the economy that makes and delivers the things we need - to the financial economy, a global high-stakes casino where wanton destruction of businesses and lives can be a path to unimaginable wealth and power. 3/ ([View Tweet](https://twitter.com/doctorow/status/1466107125260767247)) - Financialization has infected every sector of our economy. No matter who you are, there's a casino game for you. But as with every casino, the only way to win is to own the casino, not to play the games. We're all the proverbial suckers at the table. Take the investor class. 4/ ([View Tweet](https://twitter.com/doctorow/status/1466107126154248200)) - They are piling into fintech startups, with 2021's fintech investments cresting $91.5b, more than double the eye-popping 2020 figure. What's "fintech," then? 5/ ([View Tweet](https://twitter.com/doctorow/status/1466107127144067080)) - Writing for @NakedCapitalism, Satyajit Das - an ex-financier turned critic - calls fintech "the untidy agglomeration of finance and technology." https://t.co/cuobJoevRx Das divides fintech into four buckets: i. Payments (e.g. Stripe and Square) 6/ ([View Tweet](https://twitter.com/doctorow/status/1466107128100405259)) - ii. Lending (including the spectacular fraud of 'supply chain finance' epitomized by Greensill Capital) iii. Buy now/pay later (#BNPL) - short term consumer loans iv. Deposit taking (online banking startups) 7/ ([View Tweet](https://twitter.com/doctorow/status/1466107129010573315)) - All follow the same simple formula: "take a function, digitise it, toss in a little jargon - 'financial engineering,' 'technological disruption.' Season generously with mystique; add some high profile spruikers or fawning media endorsements." 8/ ([View Tweet](https://twitter.com/doctorow/status/1466107130025500678)) - Fintech uses some combination of the following eight tactics to transfer money from investors and users to the finance sector: 9/ ([View Tweet](https://twitter.com/doctorow/status/1466107130876997633)) - I. Disguise the true function. For example, supply-chain finance exploits disclosure rules so it can treat debts as accounts payable, disguising unsecured personal finance as a secure business, leading to spectacular losses. https://t.co/4UMbOAXBnJ 10/ ([View Tweet](https://twitter.com/doctorow/status/1466107131736776705)) - II. Mask the true economics. How do you make a 26% APR look reasonable? Both BNPL and supply-chain finance manage it. They pay the seller immediately, at a 4% discount, then the buyer pays them back in installments over two months - 26% per year! 11/ ([View Tweet](https://twitter.com/doctorow/status/1466107132747599878)) - Yes, this is borne by sellers, not buyers, but of course, sellers then charge more to cover it, so cash buyers end up subsidizing BNPL users. 12/ ([View Tweet](https://twitter.com/doctorow/status/1466107133670432771)) - III. Find an attractive demographic. Supply-chain finance and peer-to-peer lending prey on weaker borrowers who lack the economic power to demand better deals. 13/ ([View Tweet](https://twitter.com/doctorow/status/1466107134538563591)) - BNPL uses high-minded talk of "democratizing capital" to extract huge returns from young and financially illiterate clients. 14/ ([View Tweet](https://twitter.com/doctorow/status/1466107135352352769)) - IV. Exploit and expand regulatory blind-spots. Fintech boosters have convinced regulators that they need "regulatory sandboxes" to "innovate in." These are free-for-all zones that allow companies to act as banks...without being regulated like them. 15/ ([View Tweet](https://twitter.com/doctorow/status/1466107136094658569)) - V. Increase risk. To bring fresh suckers to the table, you need to make increasingly risky bets with sky-high returns. 16/ ([View Tweet](https://twitter.com/doctorow/status/1466107136920932353)) - Ignore profitability, and make up your own benchmarks to dazzle investors with, based on how much you're *losing*, and insist that this is the price of growth, which will eventually produce profits. 17/ ([View Tweet](https://twitter.com/doctorow/status/1466107137730523138)) - VI. Obscure risks. Use "soft credit checks." Lend money to your shareholders. Borrow against non-existent future revenues. Use short-term funding mechanisms (like supply-chain finance) for long-term capital expenditures. 18/ ([View Tweet](https://twitter.com/doctorow/status/1466107138833539072)) - Engage in large, "related party" transactions, where two closely related entities trade money back and forth. 19/ ([View Tweet](https://twitter.com/doctorow/status/1466107139827679242)) - VII. Target frightened, technologically ignorant investors. Find people who made money in non-digital realms and use FOMO to convince them that they're going to miss the next big thing because they don't understand how their phones work. 20/ ([View Tweet](https://twitter.com/doctorow/status/1466107140729360384)) - Banking automation is a boring, low-return business, but call it "fintech" and suckers will beat a path to your door. 21/ ([View Tweet](https://twitter.com/doctorow/status/1466107141652205580)) - VIII. Use investor cash to fund short-term growth. Sell products at a loss. Pay for celebrity endorsements. Fake your automation, simply paying an army of low-waged workers to do repetitive tasks that you can't figure out how to computerize, but pretend it's "AI." 22/ ([View Tweet](https://twitter.com/doctorow/status/1466107142587531271)) - And of course, spend a fortune on marketing: https://t.co/vbFSex9BDg 23/ ([View Tweet](https://twitter.com/doctorow/status/1466107143501799427)) - That's financialization for traditional investors, but like I said, the casino's got a game for every player. @smdiehl is consistently the best-informed critic of bitcoin and blockchain, and his essay, "The Token Disconnect," is a must-read: https://t.co/OSXNTAW06o 24/ ([View Tweet](https://twitter.com/doctorow/status/1466107144546226178)) - Cryptocurrencies aren't currencies. They suck as stores of value, units of account, and units of exchange. Imagine if your house was denominated in bitcoin instead of USD: a two-emoji Elon Musk tweet could cause your home to lose 80% of its value. https://t.co/PDW3ecwAmM 25/ ([View Tweet](https://twitter.com/doctorow/status/1466107145531887635)) - "This is a dystopia." If tokens aren't money, what are they? For venture capitalists, cryptos are a change to "arbitrage securities regulation" - that is, to do finance without being subject to financial rules, especially rules about whose money they're allowed to spend. 26/ ([View Tweet](https://twitter.com/doctorow/status/1466107146588852235)) - The median return on a given VC investment is zero. Securities regs limit who can invest with VCs, because the amount of knowledge you need to distinguish good VC investments from doomed scams is formidable, setting up a lot of everyday people to lose their life's savings. 27/ ([View Tweet](https://twitter.com/doctorow/status/1466107147515842568)) - But tokens let VCs bypass those rules: "an asset class that you can buy from your portfolio companies that looks like a security, swims like a security, and quacks like a security, but is *not regulated as a security.* In fact it’s not regulated at all." 28/ ([View Tweet](https://twitter.com/doctorow/status/1466107148442685448)) - This is the true meaning of "financial engineering" and "financial innovation" - a way to do an end-run around investor protection rules. 29/ ([View Tweet](https://twitter.com/doctorow/status/1466107149516345344)) - It's a way to let sophisticated investors unload their bad bets on the public without filing an S-1 or even producing a prospectus detailing a business model. Tokens - unlike shares - can be liquidated at any time, including the moment just before the company craters. 30/ ([View Tweet](https://twitter.com/doctorow/status/1466107150510481410)) - If fintech is the high-roller section of the casino, tokens are the regular tables, where everyday people can get fleeced. 31/ ([View Tweet](https://twitter.com/doctorow/status/1466107151349428235)) - But anyone who's been to Vegas knows that the games aren't limited to high-roller tables and regular games - casinos give over vast amounts of real-estate to nickel slots and other chances for working stiffs to enrich billionaire casino-owners. 32/ ([View Tweet](https://twitter.com/doctorow/status/1466107152112750600)) - Financialization's nickel-slot is the MLM, lately reinvented as a Gen-Z, influencer-driven powerhouse that uses the same old providential horseshit (poor people are poor because of their "mindsets" - change your mindset, manifest a fortune and grow rich). 33/ ([View Tweet](https://twitter.com/doctorow/status/1466107153031303171)) - Writing in @TheAtlantic, @kait_tiffany offers a fascinating dissection of The BreakawayMovement, a sales-cult that markets scientifically incoherent "functional water" filters with a mystical blend of "ethical consumption," IG filters, and vibes. https://t.co/d3Cu09y9z4 34/ ([View Tweet](https://twitter.com/doctorow/status/1466107665273159682)) - If "functional water" sounds like a stupid thing to build a fortune on, don't worry. It's incidental to Breakaway's business - the point isn't to sell people magic water filters, it's to recruit people to recruit people to recruit people to sell magic water filters...maybe. 35/ ([View Tweet](https://twitter.com/doctorow/status/1466108360298676229)) - Breakaway, like other contemporary MLM cults, prey primarily on young women, urging them to commodify the social support network - family and friends - that they depend on, eschewing mutual aid for predatory transactionalism. 36/ ([View Tweet](https://twitter.com/doctorow/status/1466108362332917761)) - Other examples include Lularue, Doterra, Beachbody, It Works, etc). But as Tiffany writes, young women are wising up ahead of the wealthier, "more sophisticated" people who are sinking money into tokens and NFTs and fintech investments. 37/ ([View Tweet](https://twitter.com/doctorow/status/1466108363956129793)) - Reddit's r/antiMLM has grown from 1,000 members in 2017 to 740,000 today. There's a whole new anti-MLM influencer movement, who use their social power to warn their followers away from these scams. 38/ ([View Tweet](https://twitter.com/doctorow/status/1466108365726126080)) - And of course, there's @linakhanFTC, whom @SSellingNews - a trade rag for MLM - called a "progressive millennial" (like that's a bad thing?!). https://t.co/TWQKHtAcPV 39/ ([View Tweet](https://twitter.com/doctorow/status/1466108367391256582)) - MLM con-artists are privately fretting that they've run out of suckers. People are wising up. This week, @Microsoft announced that it would integrate a predatory Buy Now/Pay Later app into its Edge browser, only to face a user uprising: https://t.co/X1PQ5ur9B2 40/ ([View Tweet](https://twitter.com/doctorow/status/1466108369459163140)) - The real economy may have been swallowed by the financial economy, but reality has a well-known anti-finance bias. You can't eat financial products, or live in them, or heat your home with them. 41/ ([View Tweet](https://twitter.com/doctorow/status/1466108371719712769)) - Well, not unless you're harnessing exhaust heat from an environmentally devastating Bitcoin-mining rig: https://t.co/6LC0q43apT Real people need the real economy. Every bubble eventually pops. 42/ ([View Tweet](https://twitter.com/doctorow/status/1466108373204541440)) - We are currently living through "the bezzle," which JK Galbraith defined as, "the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it." 43/ ([View Tweet](https://twitter.com/doctorow/status/1466108375331004422)) - Young women are wising up. The rest of us will eventually follow. While I'm waiting, I'm gonna read Das's latest book, A Banquet of Consequences RELOADED, updating his 2015 book on "How we got into the mess we’re in, and why we need to act now": https://t.co/vDqeQCXgno eof/ ([View Tweet](https://twitter.com/doctorow/status/1466108378376130564))