Yes, the A.I./Tech bubble has popped, that was fast? A lot quicker to roll over than the EV bubble.
It's all about GDP. 100 years ago wheat and corn drove the economy, then for a long series of decades it was manufacturing, the industrial economy. When that began to collapse we transitioned to the service economy, you've all heard that phrase before. Then around 20 years ago the "Financial economy" began to dominate the nations of most western democracies. This is an economy based on the profits generated by insurance
products, bank
products, stock market
products. I remember years ago walking into my bank and seeing a big billboard. "Ask us about our new products" I was bewildered at the time, Products? It's a bank, it makes loans and manages savings and business accounts, it doesn't produce anything, it just shuffles money. But it was the beginning of a reclassification if you like, where things like home loans were soon to be included in GDP. Without this the nation's GDP would have begun falling and we can't have that. How can you sell 36 Trillion in debt to the world with a faltering economy?
It's why we have these housing bubbles, stock market bubbles, even crypto is in there because a lot of crypto was bought on debt and that added to GDP. At the end of the day GDP is a measure of money creation. How much money is being produced in a given year. How much is being spent on stocks, on insurance products, what is the value of all the new loans, CC Student, auto, home improvements. Unfortunately unlike wheat or machine tools this new economy doesn't actually add anything to the physical economy. Selling a house for twice what you paid doesn't make the nation richer, it actually makes it poorer! And that's why so many people are homeless or struggling with two jobs. Why the seemingly affluent middle class is choking with debts and themselves slipping into poorer straits. Even when financilization seems to be benefiting the physical economy it really isn't, the shale oil boom was a classic example of this. Sure a few thousand jobs were created here and there but the whole thing was built on 800 Billion in borrowed money that will likely never be repaid, and the profits from the plays hardly covered the expenses. Then there is the net wear and tear on the nations roads and rail networks, which were never accounted to this pointless endeavor.
It was a lot like Tesla. A money burner that only turned a profit when the federal government brought in regulations forcing legacy car makers to buy Green Credits off EV makers. Tesla had a pocket full and the earnings from them far exceeded any money made on selling their cars. Even Ford and GM would be long gone if they hadn't employed financialization techniques within their corporations. GM an Ford Credit is where the real profits come from now. Selling cars at near cost to generate more consumer debt which they are the recipients of.
Financialization is
a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes.
...This book explores this increasing financialization – the predominance of the financial sector over the productive sector – in the automotive industry. In particular it is shown that the financial operations of these companies through leasing, insurance, loans, and other financial instruments is now much more profitable than the manufacturing aspects of the business, which was originally the raison d’être for these firms. https://www.researchgate.net/public...ry_Capital_and_Labour_in_Contemporary_Society
What's after the Financial Economy? You don't want to know... Just buy some more beer and watch an episode of Grand Designs, add another deck to your house if you have access to the credit.
