 Cheers, Meghlo, very good grape, BC and AD, before corona and after distancing. My name is Stilsa Dakhnin and I would forever be the author of Malignan self-love, Narcissism Revisitors. Today we are going to discuss a certain aspect of the pandemic, its economics and how this economics fits into the rising tide of narcissism worldwide and how narcissism brought about in an obscure, indirect way both a pandemic and its economic consequences. So stay tuned, it's going to be a bumpy ride. The pandemic constitutes amounts to a ginormous transfer of wealth from the poor to the rich. Yes, you heard me correctly, a wealth transfer from the poor to the rich. Consider asset prices, real estate, stocks, bonds, that's where rich people's money is in these assets and they, mysteriously, are very stable. The rich get to keep the wages and the benefits that they would have normally paid out to their poor compatriots, this money stays in rich pockets. Moreover, most tax revenues and government stimulus funds, bailout funds, the 2.2 trillion plus half a trillion, almost $3 trillion, studies show that anywhere between 90 and 95%, that's 90 to 95%, end up with big corporations and the already affluent, income inequality already unprecedented in history, will skyrocket. The pandemic will also bring about the death of entrepreneurship, entrepreneurship was the poor man's way out of poverty. It was the main transmission mechanism of social upward mobility, moving from one socioeconomic stratum in which you were born, to a higher socioeconomic stratum. Social mobility is all but dead in the United States, has been since the 1980s, together with wage stagnation, wages haven't grown in well over four decades. Your children will earn less than you did. That's the first time again in history, self-employment and entrepreneurship are decimated by the pandemic. After the pandemic, people will be risk averse, entrepreneurship is very risky, self-employment is a gamble on yourself, it's a risk, people will be risk averse. The financing of entrepreneurship and self-employment will dry up, there will be no money in the system, it will be demonetized, it will be blood-dry. And above all, big business will take over dying small businesses, there will be a process of consolidation, like the famous movie, Big, Bigger, Biggest. In the future, the majority, the bulk of the private sector will have evaporated and the scene, the landscape will be dominated by two, three major actors, Duopolis in every sector, these mega actors will take over smaller actors, consider for example Amazon, it's likely to take over the majority of bookstores, independent bookstores throughout the world, not only in the United States. And so how will people survive? They will enter the gig economy, they will become temp contractors, temporary contractors, they will drive over vehicles, they will rent out their apartments or rooms in their apartments via Airbnb, the gig economy, they will do temp jobs. And the vast majority of people, probably 99%, will have to work two or three jobs in two or three shifts just to make ends meet and they will fail. And they will sink deeper into debt. Their savings haven't been exhausted by the pandemic. So this is the dismal dystopian future awaiting all of us, economically speaking. But let's delve now a bit deeper into the philosophy behind all these trends, what brought them about, how are they all interconnected and how actually they all started long before the pandemic. The pandemic was a catalyst, like an enzyme in whose presence processes become much faster. So the pandemic just kind of was a fast forward in a very old VCR. Let's start with money. The more money we make, the less we appreciate its relative, respective and proportional value to other people. With very few exceptions, rich people, no matter how stingy, seem to lose touch with the pecuniary reality of the 99% of the population who are poor or poor rare. Indeed, to the wealthy, money is not a store of value. I repeat, to the wealthy, to the super-rich, money is not a store of value. It is a token which allows them to participate in economic and non-economic games. It's all a big gain to them. I call this process of desensitization to the value of money, personal inflation. Why? Because precisely like classic macroeconomic inflation, as far as these affluent people are concerned, it thwarts the price signal. It destroys the price signal, embedded in inherent in money. It distorts the efficient allocation of economic resources. If you don't value money, you just throw it around, or you keep it in the bank and you do nothing with it. It also misinforms rich people's decisions and adversely affects their motivation to work, to save and to invest. I contend that rich people don't consume, or even if they do consume, it's a tiny fraction of their wealth. So they don't consume definitely not as much as poor people. Poor people consume 100% plus percent of their income every single month. Rich people don't. Rich people don't produce. A very tiny fraction of their wealth is tied down in manufacturing or services. Most of it is in assets, assets such as t-bonds and t-bills and stocks and real estate. So non-productive assets, they don't produce. And most importantly, it's a myth that rich people invest. Rich people do not invest. They do not invest in the productive economy. Poor people do. Rich people have an inflationary mindset. They prefer to spend their capital, but owing to the amounts involved, they are forced to hold on to the bulk of it. If you have Warren Buffett and you have 80, 90 billion, that's with a B, dollars, what are you going to do with it? You're richer than most countries in the world. What are you going to do with 90 billion? Where can you invest it? There are no investment opportunities. There are not enough goods to consume with such an amount. So most of it lies dormant, lies dead. Most of it is tied down in assets, both tangible and financial. These people wish to consume an inflationary effect, but they end up saving, which has a deflationary effect. They demonetize the economy. Rich people take money out of the economy and put it in bank vaults and in non-productive assets. The poorer people, the poorer, have a deflationary state of mind. So remember, the rich have an inflationary state of mind, but can't use the money. Poor folks, they have an opposite, the opposite. They have a deflationary state of mind. They would like to hold on to their money, but they are forced to spend most of it, or even all of it, not to mention avail themselves of additional credits and loans. Saving rate has been negative for many years, and even when it's positive, it's tiny, at least in the West. People wish to save an inflationary effect, but they end up consuming and having an inflationary effect. And so, all the economic players in the marketplace wind up acting irrationally against their innermost, as well as expressed, wishes and preferences. And this gap between the desires and actions of all the economic agents is the main source of instability and uncertainty in the capitalist system, based as it is, on wealth transfer from the many to the few, and on the accumulation in the hands of the few of all the assets and wealth. Income inequality, the few on the bulk, the many on nothing. What are the effects of these discrepancies in the perception of money between the rich and the rest of us? How is this psychological gap indeed abyss? How is it manifested in economic expectations and in one's grasp of one's purchasing power based on streams of future income? How does the price signal react to this yawning income inequality? And as I keep saying, it's not an economic issue. It affects the psychology of the players. You see, the larger the disparities between rich and poor, the greater the share of national wealth held by the rich, the more deflationary the economy. Rich people consume only a tiny portion of their wealth. The rest is tucked away in the vaults of financial institutions in real estate, in art. The money of the rich is effectively taken out of circulation and its velocity drops precipitously. It has no effect on the economy. The rich bleed the economy dry. Following the pandemic, most of the money, most of the wealth, most of the assets will be held by the rich and the economy will be dis-ex-sanguinated, will be without blood. It's like severe car crash or injury. Admittedly, rich people's savings do serve as a source of investments, but only when the transmission mechanisms of the financial system are intact, which they are not going to be after the pandemic. And when trust is reasonably high, trust in the system, which is not going to be after the pandemic. When these two are missing, working banking system and trust in the system, you can forget about transmission from wealth to investments. Investment will dry up as well, starting with capital investment. In times of crisis and recession, financial institutions tend to be rendered dysfunctional and trust abates. Redistribution via schemes of progressive taxation, they do ameliorate some of the deflationary effects of income inequality, but they can never counter it completely wholly. So if you look at conservative sociologists, they self-servingly marvel at the peaceful proximity of abject poverty and ostentatious affluence in American or, for that matter, Western cities. They say, wow, look at that. There's a gated community surrounded by a slum. And these people live in peace. That's the main achievement of capitalism. Devastating riots do erupt, but these are reactions either to perceived social injustice, Los Angeles, 1965, or to political oppression, Paris, 1968. The French Revolution may have been the last time the urban Sankulye raised the fuss against the economically enfranchised. In other words, the French Revolution may have been the last economic revolution, possibly the October Revolution in Russia. This pacific coexistence of the rich and the poor conceals a maelstrom of envy. Envy is the engine and the fuel of capitalism. Behold the rampant Schadenfreude, which accompanied the antitrust case against the predatory but loaded Microsoft. Observe the glee which engulfed many destitute countries in the wake of the September 11 atrocities against America, the epitome of triumphant prosperity at the time. Witness the postworld.com orgiastic castigation of a voracious chief executive officers. And of course, Bernie Madoff. Envy, it's a pathological manifestation of destructive aggressions, and it is distinct from jealousy, they're not the same. The New Oxford Dictionary of English defines Envy as a feeling of discontented or resentful longing aroused by someone else's possessions, qualities, or lack. Modification and ill will occasioned by the contemplation of another's superior advantages. Put simply, Envy is destructive. When you're envious, you want to destroy the objects of frustration, you want to bring him down to your level. You're poor, you want him to be poor. When you're jealous, he is rich, you want to be rich as well. Jealous is upward moving. Envy is downward pulling. Pathological Envy, the fourth deadly sin, is engendered by the realization of some lack, deficiency or inadequacy in oneself. The envious begrudge others their success, brilliance, happiness, beauty, good fortune, or wealth. Envy provokes misery, and misery loves company. Envy provokes humiliation and impotent rage. The envious copes with his or her pernicious emotions in five ways. Number one, the envious attack the perceived source of frustration in an attempt to destroy it or to reduce it to their sides. Such destructive impulses often assume the disguise of championing social causes, fighting injustice, touting reform, or promoting some kind of ideology, socialism, communism. Number two, the envious seek to subsume the object of envy by imitating it. In extreme cases, they strive to get rich quick through criminal scams or corruption, or by listening to self-styled gurus and coaches. There's a giant inside you, it's lurking, you can wake it up, if you just put your mind to it you can do anything you want, you can accomplish anything you put your mind to. And of course the law of attraction or the cigarette or others are shrink nonsense. The envious endeavor to outsmart the system and shortcut their way to fortune and celebrity. The third tactic is to resort to self-deprecation. The envious idealize the successful, the rich, the mighty and the lucky and attribute to them superhuman, almost divine qualities. At the same time, the envious humble themselves. Indeed, most of this strain of envious end up disenchanted and bitter, driving the objects of their own erstwhile devotion and adulation to destruction and decrepitude. Number four, the envious experience cognitive dissonance. These people devalue the source of their frustration and envy by finding faults in everything they most desire and in every one they most envy. And finally, there's avoidance. The envious avoid the envious person and thus the agonizing pangs of envy. Envy is not a new phenomenon, of course. Belisarius, the general who conquered the world for Emperor Justinian, was blinded and strict of his assets by his envious peers. I and many others have written extensively about envy in command economies, communism. Envy is also not likely to diminish. In the 18th century, the political philosopher and novelist Jean-Jacques Rousseau made a distinction between amour de soi and amour propre. Amour de soi involved striking a balance between regard for one's own welfare and well-being and the empathy that one owed and felt towards other people. It was another phrase for self-love, self-regard, and self-awareness. The latter, amour propre, was all about grandiose and malignant narcissism, an unseemly conflation of self-gratification and considered haughtiness, and the insatiable need to be reflected in the gaze of others as the only path to self-knowledge and self-consciousness. Amour de soi was transformed into amour propre by the acquisition of property and greed and envy that it inevitably provoked in others. It was Jean-Jacques Rousseau therefore the 18th century who first made the connection between envy, narcissism, and modern capitalist economies. Maybe a lot for those of you who are wondering and missed the introduction. In his book Facial Justice, Hartley describes a post-apocalyptic dystopia. He calls it new state in which envy is forbidden and equality extolled and everything enviable is obliterated. Women are modified to look like men and they are given identical better faces. Tor buildings are raised to the ground. Joseph Schumpeter, the prophetic Austrian-American economist, believed that socialism will disinherit capitals. In his book Capitalism, Socialism, and Democracy he foresaw a conflict between a class of refined but dirt-poor intellectuals and the vulgar but filthy rich businessmen and managers, and he said that the intellectuals virulently envy and resent the managers. Samuel Johnson wrote, a while before Schumpeter, he wrote, he was dull in a new way and that made many people think him great. Yes, I'm also reminded of Donald Trump. The literati seek to tear down the market economy which they feel has so disenfranchised and undervalued them. It's the envy of the mind, it's the mind envies matter. It's like life envies death. Hitler, who fancied himself an artist you may recall, labelled the British a nation of shopkeepers in one of his bouts of diatribe vitriolic raging envy. Ralph Rylant, the Kenneth Simon Professor of Free Enterprise at Robert Morris University, quotes David Brooks of the Whitley Standard, who christened this phenomenon bourgeoisophobia. Bourgeoisie is middle-class. Phobia, fear of, fear of the middle-class. The hatred of the bourgeoisie is the beginning of all virtue, wrote Gustave Lobert. He signed his letters bourgeoisophobus to show how much he despised stupid grossers and their ilk through some screw-up in the great scheme of the universe. Their narrow-minded greed had brought them vast wealth, unstoppable power and growing social prestige. Rylant also quotes from Ludwig van Mises, the anti-capitalist mentality. Van Mises says, many people and especially intellectuals passionately loathe capitalism. In a society based on caste and status, the individual can ascribe adverse fate to conditions beyond his control. In capitalism, everybody's station in life depends on his doing. In other words, when you're in capitalism, you can't blame some outside forces. There's no alloplastic defenses. It all depends on you. Wherever you are, is wherever you put yourself. Van Mises continues, what makes a man rich is not the evaluation of his contribution from any absolute principles of justice, but the evaluation on the part of his fellow men who exclusively apply the yardstick of their personal wants. Their desires, their ends determine his wealth. Everybody knows very well that there are people like himself who succeeded where he himself had failed. It's called relative positioning, by the way, when you keep comparing yourself to other people who are your peers, more or less like you. Everybody knows that many of those he envies are self-made men who started from the same point from which he himself had started. Everybody is aware of his own defeat. In order to console himself and to restore his self-assertion, such a man is in search of a scapegoat. He tries to persuade himself that he failed through no fault of his own. He was too decent to resort to the base tricks for which his successful rivals owe their ascendancy. The nefarious social order does not accord the prizes to the most meritorious men, such people, such failures, such losers, keep saying. It crowns capitalism, crowns the dishonest, the unscrupulous scoundrel, the swindler, the exploiter, the rugged individualist. And so in the virtue of prosperity, Dinesh D'Souza accuses prosperity and capitalism of inspiring vice and temptation. Inevitably, it provokes envy in the poor and depravity in the rich. With only a modicum of other statement, capitalism can be depicted as the sublimation of jealousy, socially acceptable form of jealousy. As opposed to destructive envy, jealousy induces emulation. Remember, jealousy is upward looking. You want to become rich. Consumers responsible for two-thirds of America's GDP, for example, gross domestic product. So consumers ape, imitate, roll models, and vie with neighbors, colleagues, and family members for possessions in the social status that possessions endow. Productive and constructive competition among scientists, among innovators, managers, actors, lawyers, politicians, and the members of just about every other profession. Such competition is driven by jealousy. The eminent Nobel Prize-winning British economist and philosopher of Austrian descent, of course, Friedrich Hayek, suggested in the Constitution of Liberty that innovation and progress in living standards are the outcomes of class envy. The wealthy are early adopters of expensive and unproven technologies. The rich finance with their conspicuous consumption the research and development phase of new products, he said. The poor, driven by jealousy, imitate the rich and thus create a mass market which allows manufacturers to then lower prices in mass production. So he says there are two phases. The rich buy products at the very beginning. The early adopters. The rich take risks because they're not mind losing money. And they buy the products at the very early phase. So this allows for research and development. And then the products are mass produced because the poor envy the rich and they want these products also. But jealousy is premised on the twin beliefs of equality and a level playing field. I am as good. I am as skilled and as talented as the object of my jealousy is the subtext. Given equal opportunities, equitable treatment and access and a bit of luck, I can accomplish the same, like anyone else, even more. So jealousy is easily transformed to outrage when it's presumptions. Equality, honesty, fairness, a level playing field. When these assumptions or presumptions prove wrong, people become furious. In a paper recently published by Harvard University's John M. Olin Center for Law and entitled Executive Compensation in America, Optimal Contracting or Extraction of Rents. In this paper the authors argue that executive malfeasance is most effectively regulated by this outrage constraint. Remember when people feel injustice, when people feel that the system is unfair, there's outrage. And the authors claim that this outrage constrains bad behavior. They say directors and non-executive directors would be reluctant to approve and executives would be hesitant to seek compensation arrangements that might be viewed by observers as outrageous. You wish. I completely or heartedly disagree by the way. Rich people and the agents of rich people, for example, top management. They're the object of thinly disguised envy. They're the raw materials of vulgar jokes and the targets of popular aggression. They are what might be called the newly rich, Nuvorish. Perhaps they should be dealt with more appropriately within the academic discipline of psychology. But then, of course, in my view at least, economics is a branch of psychology. There's a hybrid called behavioral economics. To many such extravagances represent a psychopathology or a sociopathology. Let's talk about the newly rich because this pandemic will yield a class of newly rich. People who were upper middle class will now become filthy, obscenely rich. People who have been rich will become richer and the super rich will be rich beyond rich. All the rest, 95 to 99% population, will become abjectly poor without savings, with lots of debts and with no prospects of employment and working 90 hours a week just to survive. The newly rich are not a new phenomenon. Every generation has them. They are the upstarts, those who seek to undermine the existing elite, to replace it and ultimately to join it. Indeed, the newly rich can be classified in accordance with their relations with well-attrenched old rich. Every society has its veteran, venerable, and aristocratic social classes. In most cases, there was a strong correlation between wealth and social standing. Until the beginning of this century, only property owners could vote for example and only they could participate in the political process to their own enormous self-interest and benefit. The land gentry, for example, secured military and political positions for its offspring, no matter how illiquid they were to deal with the responsibilities thrust upon them. Indeed, to this very day, the bulk of the wealth of the super rich goes to pet charities or distributed among their dim-witted, anti-social, indolent, and spoiled offspring. The privileged access and the insider's mentality, all boys' network to use a famous British expression. So this privileged access made sure that economic benefits were not distributed or spread evenly. This skewed distribution in turn served to perpetuate the advantages of the ruling classes. And one hand washed another. And in this limited sense conspiracy theories are right. The elites have vested interests. Where conspiracy theories are wrong is that they are coordinating these interests. They don't need to. They share the same values, same tactics, same coping strategies all over the world. Only when wealth was detached from the land was this solidarity broken. Land, being a scarce, non-reproducible resource, fostered a scarce, non-reproducible social elite. Money on their other hand could be multiplied, replicated, redistributed, reshuffled, made, and lost. It was democratic. Money was democratic in the truest sense of the world. With meritocracy in the ascendance at the time, aristocracy was in descent. People made money because they were clever. They were daring, fortunate, visionary. But not because they were born to the right family or married into one. Money, the greatest of social equalizers, wedded the old elite. So you saw, you know, this upstart, newly-rich, noroish marrying into older aristocracy in Britain. Blood mixed. And social classes with us blurred. Their aristocracy of capital and later their aristocracy of entrepreneurship. To which anyone with the right qualifications can belong. They trance the aristocracy of blood, genetic aristocracy, heritage. For some, this was a said moment for others, a triumphant one. The new rich at the time, talking about 100 years ago, 150 years ago, 200 years ago, chose one of three paths. Subversion, revolution, and emulation. All three modes of reaction were the results of envy, sense of inferiority and rage being discriminated against and humiliated by the old elites. Some new rich chose to undermine the existing order. This was perceived by them to be an inevitable gradual, slow and historically sanctioned process. The transfer of wealth and the power associated with from one elite to another constituted the subversive elements. The ideological shift to meritocracy, to democracy, to mass democracy as Jose Oteca el-Cassette would have put it. These shifts serve to justify the historical process and put it in context. I'm not doing it only for myself, the newly rich said, I'm doing it for the masses, for the people, for my nation. The successes of the new elite as a class and of the new elite of a class and of its members individually. These successes serve to prove the justice behind the tectonic shift. It's like the Puritans used to say, if you're rich, God love you. It proves your merit. It proves that you're virtuous. Social institutions and mores were adopted to reflect the preferences, inclinations, values, goals and worldview of the new elite and also later the tastes. This approach infinitesimal graduated cautious, all accommodating but also inexorable and all pervasive. This approach was in the heart of capitalism. The capitalist religion with its temples, shopping malls, banks, with its clergy, bankers, financiers, bureaucrats and with its rituals, this religion was created by the new rich. It had multiple aims to bestow some divine or historical importance and meaning upon processes which might have otherwise been perceived as selfish or chaotic or threatening and to serve as an ideology in the Althusserian sense, hiding the discordant, the disagreeable and the ugly while accentuating the concordant, conformist and appealing, the attractive. To provide a historical process framework, to prevent feelings of aimlessness and vacuity, to give life a meaning, to motivate its adherence, to perpetuate itself. These were the aims of the capitalist meta-ideology, philosophy. And I'm seeing these were and was, I'm using the past tense because something really really bad has happened with capitalism. It is transitioning to what I call neo feudalism. I thought it's going to take 50 years and in my interviews with Richard Grenon that's what I said but in one of these interviews I actually said unless there's a pandemic. Pandemics hasten processes. That's exactly what happened after the Black Death in Europe. The rise of laborers and wage earners started in Europe after the Black Death. So many people were left that they could bargain for their wages. The same is going to happen now. But let's continue before we discuss predictions for the future. Let's continue with a little, you know, with a philosophical foundation. Remember that the first type of the new rich were actually subversive. The second type of the new rich, also known as nomenclature in certain regions of the world, they chose to violently and irreversibly uproot and then eradicate, kill the old elite, execute them sometimes. This was usually done by use of brute force coated with a thin layer of incongruity ideology. The aim was to immediately inherit the wealth and power accumulated by generations of elitist rule. There was a declared intention of an egalitarian redistribution wealth and assets but reality was different. A small group, the new elite, scooped up most of the spoils. This happened, for example, in communist country where the nomenclature of the Soviet apparatus, the nomenclature of the communist party, the very few bureaucrats and office holders in the communist party, they lived like kings, they traveled abroad, they consumed foreign products, they listened to rock and roll. All the rest lived like slaves. And so this kind of thing amounted to a surgical replacement of one hermetic elite by another. Nothing changed, just the personal identities. A curious dichotomy has formed between the part of the ideology which dealt with the historical process and the other part which elucidated the methods to be employed to facilitate the transfer of wealth and its redistribution. While the first part, the ideology was deterministic, long-term and irreversible and therefore not very pragmatic. The second part, how to, you know, take all of the goods, take over the goods and redistribute them. The second part was an almost undisguised recipe for pillage and looting of other people's property. Communism and the Eastern European to Alessarex and the Central European versions of socialism, they all suffered from this inherent poisonous seed of deceit. So did fascism. It is no wonder that these two sister ideologies fought it out in the first half of the 20th century. Both ideologies prescribed the unabashed, unmitigated, unrestrained, forced transfer of wealth from one elite to another. The proletariat enjoyed almost none of the loot. The third way of the newly rich was that of emulation. The newly rich, who chose to adopt it, tried to assimilate the worldview, the values, the traits and the behavior patterns of their criticism. They tried to walk the same way, tried to talk the same way, they clapped themselves in the same fashions, bought the same status symbols, ate the same food, educated their children in the same institutions. In general, the newly rich looked like pale imitations of the real thing. Ersatz, not echt, as the Germans would put it. In the process, the newly rich became more catholic than the Pope itself, more old-rich than the old-rich. They exaggerated and caricatured gestures and mannerisms. They transformed refined delicate art to kitsch. Their speech became hyperbole. Their social associations dictated by ridiculously rigid codes of propriety and conduct. One could argue that the entire Victorian era, Victorian age, was this, exactly this, an imitation, caricatured imitation of the elites. As in similar psychological situations, patricied and matricied follow. The newly newly rich rebelled against what they perceived to be the tyranny of a dying class. They butchered the objects of emulation, sometimes physically. Realizing their inability to be what they always aspired to be, the newly rich switched from frustration and permanent humiliation to aggression, violence and abuse. These new converts turned against the founders of their newly found religion with a rage and conviction reserved to true but disappointed adherents. And this, I think, is what's going to happen after the pandemic. I think social unrest will coalesce around the world. New revolutionary movements will erupt all over the place. Many of them will be violent. There will be a lot of bloodshed. I foresee a future on this planet, like the October revolution, writ large. Everything has been globalized, exports, imports, products, values, mass media, show business, revolution, terrorism, revolution will be now globalized. Regardless of a method of inheritance adopted by the new rich, all of them share some common characteristics. Psychologists know that money is a love substitute. People accumulate money as a way to compensate themselves for past hurts and deficiencies. People attach great emotional significance to the amount and availability of the money. People regress when they are confronted with money. Show people money and they become children. They play with toys. They buy fancy cars, watches, laptops. They fight over property territory and privileges in a Jungian archetypal manner. Perhaps this is the most important lesson of all. The new rich are children, infantile, aspiring to become adults. Having been deprived of love and possessions in their childhood, these people turn to money and to what money can buy as a substitute. A poor substitute because it's never fulfilling, but still the only available substitute. Social distancing broke us apart, atomized us much more than before. Prior to social distancing about 11% of all households in the United States consisted of a single person following social distancing. The fear of each other. This fear will not go away with the virus. And I think we are headed towards totally atomized agnomic society to use Durkheim's term. And I think because of that we will all regress. The future is infantile. We are traveling back to the future. Our future is our past. We're all going to become children. And so as children we are going to be cruel, insensitive, unable to delay the gratification of urges and desires. In many countries children are the only capitalists to be found. I mean childlike capitalists. There these people spun off a malignant pathological form of chronic capitalism. As time passes these immature new rich will become tomorrow's old rich and a new class will emerge. The new rich of the future. And this is the only hope however inadequate and meager that the developing countries for example have to develop such a class. It's a set, decrepit and frightening picture. It's a picture of people who can find happiness in nothing except abrogating their adult chores and responsibilities. Renouncing other behaviors and traits and becoming children again. We have seen this trend in the West long before the pandemic. And there will be a lot of manifest expressed envy institutionalized effort. I think for example the whole phenomenon with Donald Trump is institutionalized envy. And so we're going to incorporate envy ostentatiously and conspicuously into our daily behaviors. Human to human transmission if you wish. Human to human interaction. Political institutions. The way we arrange our intimate lives. What's what will be left of them. And there will be a public outcry. The republic outcry against the old rich the new rich. And the enormous injustice which capitalism will become. Capitalism is transitioning from envy to to injustice to to miss to misdistribution or wrong distribution of wealth as a founding principle. Consider for example the public outcry against executive pay and compensation which followed disclosures of insider trading, double dealing and outright fraud. But even honest and productive entrepreneurs make more money in one year than Albert Einstein did in his entire life. And this strikes many people especially academics is unfair. Surely Einstein's contribution to human knowledge of welfare far exceed anything ever accomplished by sundry businessmen. Fortunately this discrepancy is caused for constructive jealousy emulation and imitation but it can lead to an ogee of destructive and self-ruinist envy which is I think where we where we heading. And such envy is reinforced by declining social mobility in the United States. Recent, relatively recent studies by the OECD organization for economic cooperation and development clearly demonstrate that the American dream is a myth it's a lie. In an editorial dated July 13th 2007 the New York Times described the rapidly deteriorating situation this way. Mobility between generations. People doing better or worse than their parents is weaker in America than in Denmark, Austria, Norway, Finland, Canada, Sweden, Germany, Spain and France. In America there is more than a 40% chance that if a father is in the bottom fifth of the earnings distribution his son will end up there too. In Denmark the equivalent odds are under 25% and they are less than 30% even in the United Kingdom. America's sluggish mobility is ultimately unsurprising. Wealthy parents, rich parents not only pass on their wealth in inheritances they can pay for better education, better nutrition and health care for their children. The poor cannot afford this investment in their children's development and the government doesn't provide nearly enough help. In a speech earlier this year in 2007 the Federal Reserve Chairman of the time Ben Bernanke argued that while the inequality of rewards fuels the economy by making people exert themselves opportunity should be as widely distributed and as equal as possible. The problem is that they have not don't have many opportunities either end of quote. So what about entrepreneurship? Entrepreneurship was the big white hope. Big white hope it was the only essentially the only transmission mechanism for upward mobility and now after the pandemic it's dead. Entrepreneurs recombine natural and human resources in normal ways. They do so to respond to forecasts of future needs or to observations of failures and shortcomings of current products or services. Entrepreneurs are professional though usually intuitive, futurologists. They're future oriented. This is valuable a valuable service and is financed by systematic risk-takers such as venture capitalists. So surely these people deserve compensation for their efforts in the hazards they assume. Exclusive ownership is the most ancient type of such remuneration. First movers, entrepreneurs, risk-takers, owners of the wealth they had generated, exploiters of resources all of these people are allowed to exclude others from owning or exploiting the same things. Mineral concessions, patents, copyright, trademarks, they're all forms of monopoly ownership limited in time but still what moral right to exclude others is gained from being the first. Nozik, a philosopher, advanced locks-provisor an exclusive exclusive ownership of property is just only is just I mean it's it's okay only if enough and as good is left in common for others and I was if you're not a pig, if you're a bear, if you're a bear or you're a pool you should never be a pig that's an old wall street credo. So if you're not a pig you monopolize your field because you were the first first mover advantage you invented something you own your invention whatever but you leave room for others to survive. If it does not worsen other people's lot exclusivity is morally permissible can be argued though that all modes of exclusive ownership aggravate other people's situation as far as everyone bar the entrepreneur. Exclusivity also prevents a more advantageous distribution of income and wealth exclusive ownership reflects real life irreversibility. A first mover has the advantage of excess information and of irreversibly invested work time and effort. Economic enterprise is subject to information asymmetry we know nothing about the future and everything about the past this asymmetry is known as investment risk society compensates the entrepreneur with one type of asymmetry exclusive ownership for assuming another type of asymmetry the investment risk. One way of looking at it is that all other people are worse off by the amount of profits and rents accruing to owners entrepreneurs profits and rents reflected in intrinsic inefficiency so you could argue that entrepreneurship is a form of inefficiency. Another way of looking at it is to recall that ownership is the result of adding value to the world it is only reasonable to expect it to yield to the entrepreneur at least this value added now in the future so you could argue either way the entrepreneur is adding something to the world so he's compensated for making the world better or you could argue that the entrepreneur is skewing skewing the free market so that he accrues monopolistic profits and rents either way depending on your on your worldview but in the future after the pandemic the first view will prevail people will be so envious disenchanted disillusioned so furious so fearful so risk-averse so paranoid so hateful so conspiracy-minded that they will regard anyone anyone with excess profit income or rent as the enemy we are heading to a really really bad place to an undermining of the very foundation philosophical and ideological foundation of capitalism which was meritocracy you work hard you're clever you have an idea you're talented you're skilled you deserve excess compensation in a theory of justice published in 1971 John Rawls described an ideal society and he described it this way he said number one each person is to have an equal right to the most extensive extensive total system of equal basic liberties compatible with a similar system of liberty for all number two social and economic inequalities are to be arranged so that they are both a to the greatest benefit of the least advantage consistent with the just savings principle and b attached to offices and positions open to all under conditions of fair equality of opportunity so Rawls's perception of a just society has a lot to do with scarcity of resources because look if resources are infinite then there is no meaning to the word excess I mean never mind how much money I make because resources are infinite you can make same or more if you wish but if resources are scarce and limited it's a zero sum game if I get something you get nothing the scarcity of resources land money raw materials manpower creative brains these are all scarce those who can afford to do so they hoard the resources to offset anxiety regarding future uncertainty and others wallow in paucity and poverty the distribution of means is skewed distributive justice deals with the just allocation of scarce resources army to you Rawls's definition once again of a just society because it's really really really very crucial it's in theory of justice a just society an ideal society is where one each person is to have an equal right to the most extensive total system of equal basic liberties compatible with a similar system of liberty for all number two social and economic inequalities are okay are to be arranged but they must conform to two conditions number one that the greatest benefit to the greatest benefit of the least advantage consistent with the just savings principle in number two in other words it says that the least advantage should be taking care of it such a system in number two these excess profits or rents or whatever they should be attached to offices and positions which are open to all under conditions of fair equality of opportunity so this is these are crucial but you see even the basic terminology is fast what constitutes a resource and what is meant by allocation who should allocate resources adam smith's invisible hand or maybe the government consumer business one major revolution nothing short of revolution in the wake of this pandemic is that governments took over the allocation of resources now everyone has a guaranteed basic income from the government checks arriving in the bank now governments stepped in they are paying the salaries they're paying salaries wages in the public in the private sector now companies don't approach their shareholders for capital they approach the public purse they approach taxpayers the pandemic did in four weeks or four or four months what marks and all these minions failed to do in a century America now is totally a totally socialist country i would even say marxist to some extent communist so let's go back to allocation should allocation reflect differences in power in intelligence in knowledge in heredity should resource allocation be a subject to a principle of entitlement is it reasonable to demand that allocation be just or merely efficient or maybe justice and efficiency or antonym or maybe synonyms the philosopher Jean-Jacques Rousseau aforementioned yes his work is an example of these irreconcilable tensions on the one hand Rousseau assures us that succumbing to an amorphous general will guarantees the simultaneous attainment of both the common good and the individual's welfare and well-being of that which is objectively best for him yet but just as we begin to equate this cloud-like general will with the market Rousseau launches into a tyrant against the economic dependence fostered by the efficient division an allocation of labor in line with each agent's comparative advantages and I was Rousseau says some general will will allocate teams in a just way but he refuses to identify the general will and he definitely says the general will is not the market he regards trading property and money as the roots of all evil not the harbingers of a just distribution of wealth he says they bring about injustice moral decay Marx took Rousseau to his logical conclusion with his theory of alienation in industrial societies and philosophers in Nietzsche's mold believed that the very concept of justice was unnatural man-made justice sustains the weak and the individual at the expense of the strong the collective and nature by comparison is squarely on the side the fittest the well-adapted and the group so there was this Darwinist or Darwinian mindset which which prevailed let the fittest and the strongest survive all the others go to COVID-19 but justice is not concerned with survival it's a big mistake justice is about equal access to opportunities equal access does not guarantee equal outcomes invariably determined by idiosyncrasies and differences between people of course no i mean only a fool would say that if you have equal access you will have equal outcome and this this is the message of various self-styled coaches and gurus all you need is access and the outcome is guaranteed get rich quick access leveraged by the application of natural or acquired capacities translates into accrued wealth disparities in these capacities of course lead to discrepancies in accrued wealth some people will get rich some people will not get rich some people will even get rich quick majority will not the doctrine of equal access is founded on the equivalence of men that all men are created equal and deserve the same respect and therefore equal treatment is not self-edited european aristocracy well into this century would have probably found this notion abhorrent uh philosopher social philosopher coseo tega icasset writing in the 1930s preached that access to educational and economic opportunities should be premised on one's lineage one's upbringing wealth and social responsibilities a succession of societies and cultures discriminated against the ignorant inscriminals in the united states criminals cannot vote most states against atheists against females against homosexuals members of ethnic religious and racial minorities the old the immigrant the poor children i mean discrimination is is is a hard-wired feature in societies communism ostensibly a strict egalitarian idea founded because it failed to reconcile fail to reconcile strict equality with economic and psychological realities within an impatient timetable so philosophers try to specify a bundle or package of goods services and intangibles like information or skills or knowledge justice though not necessarily happiness is when everyone possesses an identical bundle happiness though not necessarily justice is when each one of us possesses a bundle which reflects his or her preferences priorities predilections none of us will be too happy with a standardized bundle selected by a committee of philosophers or bureaucrats or any committee as was the case of the communism the market allows for the exchange of goods and services between holders of identical bundles if i seek books but i detest oranges i can sweep swap my oranges with someone in return for his books that way both of us are rented better off than under the strict egalitarian version where we all have the same number of books same number of oranges still there is no guarantee that i will find my exact match a person who is interested in swapping his books for my oranges so a liquid small or imperfect markets inhibit the scope of these exchanges additionally exchange participants have to agree on an index how many books for how many oranges this is the price of oranges in terms of books and here the post-pandemic world is going to implode it's going to implode because markets will be rendered illiquid small and imperfect by risk aversion and by illiquidity generally in other words people will not have money to invest and so markets will become smaller and smaller and smaller less and less liquid prices will not signal reality properly they will be subject to manipulation for example and sellers and buyers will find it difficult to match there will be inefficiencies as we call it and money in the obvious index does not solve this problem it merely simplifies it to facilitate these exchanges but it does not eliminate the necessity to negotiate an exchange rate it does not prevent market failures in other words money is not an index it is merely a medium of exchange and a store value the index as expressed in terms of money is the underlying agreement regarding the values of resources in terms of other resources the values of oranges in terms of books the relative values the market and the price mechanism increase happiness and welfare by allowing people to alter the composition of their bundles the invisible hand is just and benevolent but money is imperfect the aforementioned rules demonstrated in 1971 that we need to combine money with other measures in order to place value on intangibles and again this is where we're going to have serious problems after the pandemic the disruption is so enormous that many many transmission mechanisms have been disabled and i find it difficult to believe that many of them will kind of spring back to action within days or months or even years the very foundational the very foundation and the superstructure they both crumble at the same time both supply and demand were disrupted and also the meeting places between supply and demand and the ways to negotiate agreed prices for supply and demand in other words the signaling the prevailing market theory is postulated that everyone has the same resources at some initial point they call it the starting gate it is up to them to deploy these endowments and thus to leverage or increase their wealth while the initial distribution is equal the end distribution depends on how wisely or importantly the initial distribution was used egalitarian thinkers proposed to equate everyone's income in each time frame for example every year but identical incomes do not automatically yield the same accrued wealth the latter depends on how the income is used is it saved is it invested is it squandered relative disparities of wealth are bound to emerge regardless of the nature of income distribution and that's another problem with the pandemic we're emphasizing income we are ignoring conveniently of course and self-interestedly the rich who control the political apparatus and mechanism the rich ignore the issue of wealth they ignore the issue of capital they ignore the issue of savings or lack thereof they ignore investments they focus the public's attention on two relatively irrelevant issues income and products consumption some say that excess wealth should be confiscated and redistributed progressive taxation and welfare state welfare state aim to secure this redistribution redistributive mechanisms reset the wealth clock periodically at the end of every month for example or every fiscal year in many countries the law dictates which portion of one's income must be saved and by implication how much can be consumed these conflicts with basic rights like the freedom to make economic choices the legalized expropriation of income is known as taxes it's morally dubious anti-tax movements have sprung all over the world and their philosophy permeates the ideology of political parties in many countries not least the united states taxes are punitive they penalize enterprise they penalize success entrepreneurship foresight and risk assumption welfare on the other hand rewards dependence dependence up to the point of parasitism according to world's difference principle all tenets of justice are either redistributive redistributive or retributive and this ignores non-economic activities and human inherent variance of course more over conflict and inequality are the engines of growth and innovation which mostly benefit the least advantage in the long run experience shows that unmitigated equality results in atrophy corruption and stagnation dynamics teaches us that life and motion are engendered by an irregular distribution of energy by a gradient entropy and even distribution of energy equals death and status in economics as well so what about the disadvantage and the challenge 95 percent 99 percent of population what about uh extreme cases of disadvantage like mental retardation mentally mental insanity paralyze people chronically ill for that matter what about the less talented less skilled less daring people Dwarkin in 1981 proposed a compensation scheme he suggested a model of fair distribution in which every person is given the same purchasing power that's like basic income plans and then once given given this same purchasing power he the person uses it to beat in a fair auction for resources the best fit that person's life plan goals and preferences having thus acquired these resources we are then permitted to use them as we see fit obviously we end up with disparate economic results but we cannot complain we're given the same purchasing power and the freedom to bid for a bundle of our choice Dwarkin assumes that prior to the hypothetical auction people are unaware of their own natural allowance but are willing and able to insure against being naturally disadvantaged their payments create an insurance pool to compensate the less fortunate for their misfortune and this is of course highly unrealistic it's unrealistic because we are usually very much aware of our natural endowments and liabilities and limitations unless we are narcissists we are aware of our limits skills talents liabilities and others therefore the demand for such insurance is not universal nor is it uniform some of us badly need it badly wanted others don't want it at all it is morally acceptable to let willing buyers and sellers to trade in such coverage for example by offering charity for all but it may be immoral to make it compulsory most of the modern welfare programs are involuntary Dwarkin schemes I repeat most of modern welfare programs are involuntary Dwarkin schemes where everyone gets the same payment worse yet they often measure differences in natural endowments arbitrarily they compensate for lack of acquired skills they discriminate between types of endowments in accordance with cultural biases and fans libertarians limit themselves to ensuring a level playing field of just exchanges where just actions always resulting just outcomes justice is not dependent on a particular distribution pattern whether as a starting point or as an outcome Robert Nozick's entitlement theory proposed in 1974 is based on this approach that the market is wiser than any of its participants is a pillar of the philosophy of capitalism in its pure form the theory claims that markets yield patterns of merit and distribution in other words capitalism says that the market rewards and punishes justly capitalism generates what we call just desserts market failures for instance in the provision of public goods should be tackled by governments but a just distribution of income and wealth does not constitute a market failure and therefore should not be tampered with for example via taxation and then of course it leads us to income inequality even in the most egregious and extremely libertarian theory the level of income inequality today poses a serious question serious problem because there's no mathematical model that could yield this income inequality unless the playing field is not level in very significant and foundational ways in his programmatic and data laden term capital in the 21st century published in 2014 Thoma Piketty makes several assertions two of which married a closer look one that are the return on capital is in the long run always greater than g the growth of the real economy thus enriching the rich says if you have capital you make more money than if you operate in the real economy and number two he says inherited wealth tends to create a patrimonial form of capitalism back into the aristocracy in the french french and british ancien regime putting aside the somewhat artificial and dubious distinction between real and financial economy because i think financial economy is very real i mean ask anyone who has been damaged in the financial crisis 2008 but put that aside for a minute r and g are apples and oranges and they cannot be compared economic growth g is not the return on the real economy in the same way that r is the return on capital and its assets r is intended to compensate for a monopoly of risks it's comparable to the wave function in quantum mechanics it incorporates all the publicly and privately available information about future uncertainties and then it provides a distribution function of all possible scenarios let's put it more simply subject to political and market vicissitudes ups and downs capital can vanish otherwise but the real economy can never vanish capital is a property that the real economy doesn't have it can disappear the real economy never disappears what the pandemic had done is that for the first time it is challenging the resilience and very existence of the real economy because it's been so global and because both the demand and supply collapsed so while in the past we used to say that capital can vanish but real economy cannot today after the pandemic we are far less certain of this we are far less certain that the real economy will always be there regardless of what people's political meddling taxation inflation which is a kind of tax and pandemics and disruptive technologies still push comes to shove some vestiges of the real economy always remain you have to buy food capital can vanish after the completely for example in the 1930s in Germany capital wealth can be construed as a core option on the real economy especially on real estate and emerging technologies are amounts therefore to the premium in this option income inequality is growing because of the decline in the role and importance of labor which is being gradually supplanted by capital assets such as robots and computers as well as being off-shored outsourced and downsized labor is no longer an important input as it used to be and because a vast majority of people all they have to offer is their muscles they're in trouble vast majority of people in trouble income inequality reflects the structural shift in the relative value of inputs capital can buy a lot more labor nowadays and hence the apparent lopsidedness of the distribution of wealth luckily for the 99% the bulk of the nation's wealth is inactive dormant in deposits and other long-term assets or languishing in hordes of cash in the form of non-distributed profits such capital exercises political clout and muscle but is irrelevant in terms of wage compression inherited wealth is not different to any other form of capital it is merely an extension of the investment horizon a kind of immortality by proxy via your children foreign buffet leaves to be 300 or if he hands what's left of his wealth to future generation of buffets that's immaterial in terms of economic impact whether he physically has it in his pocket or his son physically has it in his pocket he's absolutely irrelevant there is no evidence that inherited wealth is less productive or more productive than riches obtained via entrepreneurship such claims have more to do with seething envy than with scholarly erudition inherited wealth concentrated in the hands of a few may be compared to an oligopoly which is not necessarily a bad thing there is no basis to prefer one type of economic activity over another on strictly scientific grounds investment is as important as entrepreneurship and finance is as crucial as manufacturing wealth inherited or not is always invested either in the financial sector or in the real one to rank economic activity is more or less preferable is ideology not science it's a judgment that is driven by values and predilections not by hard data yes you could distinguish productive investment from non-productive investments but they are both investments similarly to talk about a monolithic immutable oligarchy is laughable as any casual perusal of Forbes list of richest people would show the mobility inside this group is remarkable its composition is in constant flux most of its new members are there by virtual wages and bonuses actually they are managers agents of principles those novel these nouveau rich uh the new newly rich these are evices they raise the only issue of agent principal conflicts how the executive class managers institutionalized the robbery of their own firms and shareholders and rendered this plunder a fine legalized art and this travesty may be one of the main engines of skyrocketing income inequality together with the analogy of politicians in an increasingly plutocratic world it is a political failure has to be resolved politically is going to do with economics once the pandemic is over i think there are two things that are going to survive basic income guarantee to all i don't think people are going to give up on this i don't think small businesses are going to give up on this i think once it's been done there's no way of going back it's like you're losing your virginity the cherry has popped and the second thing i think is that the managerial class is going to come under severe severe and aggressive and potentially violent scrutiny they have been robbing all of us blind for ages no amount of taxation progressive of lead and the quantity of transfers from the state to the poor will solve the issue of income inequality the state should encourage wealthy people to invest and create jobs it should penalize wealthy people if they do not by taxing their wealth repeatedly it should help the poor this way there's very little else it can do and of course it should guarantee their income that's the basic bundle i mentioned at the beginning of this discourse that poor people have a deflationary effect and because poverty is going to explode there's going to be a supernova of poverty there's going to be a tsunami of unemployment there's going to be i mean and these things are going to take a whole generation to reverse the situation we are in right now has nothing to do with the depression in the depression era there was a one-sided internal shock today we have an external shock that is both supply and demand and has an effect on the real economy on main street and has a universal globalized atomized effect so that every single individual anywhere in the world is affected one way or another something like three quarters under under strict lockdown currently there's nothing in human history has prepared us for this nothing not even the biblical families nothing like that has ever happened since records began and so we are looking at the deflationary future traditional economics claims that deflation actually increases the value of cash to its holder by enhancing its purchasing power in an environment of declining prices there's a negative growth in the average price level so your money is worth more though highly intuitive this is absolutely wrong it is true that in the deflationary cycle consumers are likely to delay consumption in order to enjoy lower prices later but this precisely is what makes most asset classes including cash precarious and unprofitable deflationary expectations let alone actual deflation lead to liquidity traps and zero interest rates this means that cash balances and fixed-term deposits in banks yield no interest or even negative interest but even zero interest translates into a positive yield in conditions of deflation theoretically this fact should be enough to drive most people to hold cash yet what economists tend to overlook is transaction costs if you keep your cash in the bank okay you get no interest the bank charges account fees that outweigh the benefits of possessing cash even when prices are decreasing so the bank is charging you money prices are decreasing but very often the transaction costs even the money in the bank offsets the the the price decreases only in very extreme deflation is cash with zero interest profitable proposition which we take when we take transaction costs bank fees charges into account but extreme deflation usually results in the collapse of the banking system as the leveraging and default set in cash balances and deposits evaporate together with the financial institutions that have have helped them we have had numerous deflationary cycle last one brought Hitler to power more of a deflation results in gross imbalances in the economy this delayed consumption delayed capital investment and increasing debt burden in real deflation adjusted terms all these adversely affect manufacturing services and employment government finances worsen as unemployment rises and business bankruptcies soar sovereign debt another form of highly liquid safe investment is thus rented less safe more default from in times of deflation and exactly like inflation deflation is a breakdown in the consensus of a prices over the price signal prices are embodied in in in the currency and in other forms of debt and a prudent investor would stay away from these investment classes during periods of economic uncertainty at the end and contrary to the dicta of current economic orthodoxy both deflation and deflation erode purchasing power all asset classes suffer equity bonds metals currencies even real estate a sole exception is agricultural land food is a preferred means of exchange in butter economies which are the tragic outcomes of the breakdown the invisible hand of the market we're heading there we're heading to a deflationary butter economy economies revolve around and are determined by anchors stores of value that assume pivotal roles and lend character to transactions and economic players alike well into the 19th century tangible assets such as real estate and commodities constituted the bulk of the exchanges that occurred in marketplaces both national and global people bought people saw land buildings minerals edibles and capital goods these were regarded what millions means of production but also as forms of wealth and if you wanted them you were one thing inevitably human society organized itself to facilitate exactly these exchanges the legal and political system sought to support encouraging catalyzed transactions by enhancing and enforcing property rights by providing public goods and by rectifying market figures later on well into the 1980s symbolic representations of ownership of real goods and property for example shares commercial paper collateralized bonds forward contracts all these symbolic financial instruments that they they were all the rage by the end of this period financial instruments surpassed the size of markets in underlying assets and i was the real economy was dwarfed was dwarfed by derivatives the real economy was dwarfed by the financial instruments based on the real economy we all know this this was a foundation this was the reason for the mortgage crisis thus the daily turnover in stocks bonds and currencies dwarfed the annual value added in all industries combined and again mankind adopted to this new environment technology catered to the needs of traders and speculators businessmen and middlemen advances in telecommunications and transportation followed in excerpt the concept of intellectual property rights was introduced a financial infrastructure emerged replete with highly specialized institutions such as central banks and businesses also adopted and you know we had investment banks jobbers private equity funds everything became geared towards the bigger part of the economy which was finance and i think the real economy has been so wounded so wounded in this pandemic that if we want to have any real if we want to have any economic outcomes and derive any economic benefits we will have to gravitate to the financial markets i think this is precisely the reason that stocks haven't collapsed so substantially despite the fact that the entire real economy had done we are in the throes of a third wave instead of buying and selling assets one way is tangible or the other way as symbols where we increasingly trade in expectations in other words we transfer risks the markets and derivatives options futures indices swaps collateralized instruments so these markets of flourishing even now society is never far between even the most conservative economic structures and institutions now strive to manage expectations expectation is the main commodity used to be goods then services then information now expectations that's for example rather than tackle inflation directly central banks currently seek to subdue inflation by issuing inflation targets in other words central banks aim to influence public expectations regarding future inflation it works works perfectly the more abstract the item traded the less cumbersome it is the more frictionlessly exchanges in which it is swapped the smooth transmission of information gives rise to both positive and negative outcomes on the one hand more efficient markets and on the other hand contagion on the one hand less volatility on the other hand swifter reactions to bad news which kind of destabilizing markets hence the need for market breakers on the one hand the immediate incorporation of new data in prices and on the other hand asset bubbles here the two even the most arcane and abstract contract which was traded even the most outlier extreme type of contract was somehow attached to and derived from an underlying tangible assets no matter how remotely but this linkage may soon be dispensed with after the pandemic the future may witness the bartering of agreements that have nothing to do with real-world objects or values because there will be left no real world in days to come traders and speculators will be able to generate on the fly their own custom-made one-time investment vehicles for each and every specific transaction they will do so by combining of the shelf publicly traded components gains and losses will be determined by arbitrary rules or by reference to extraneous events real estate commodities and capital goods will revert to their original forms and functions their necessities to be utilized and consumed not speculated on civil lining plans economic expectations are often based on the reputation of the actors and agents involved past behavior is widely considered to be the most reliable predictor of future behavior trends are assumed to continue indefinitely barring some external shocks or shifting externalities when reputation-based expectations are frustrated for example goods that used to be free now require payment that's a kind of frustration and a change in expectations stakeholders suppliers consumers clients management shareholders government committee when their expectations are frustrated by some change for example the pandemic they feel cheated and deceived it's a natural human reaction they react by either avoiding the situation altogether opting out withdrawing or by acting aggressively or passive abrasive they demand they complain they batman this sabotage they engage in conspiracy theories we've seen it happen in the pandemic gradually the new information is incorporated into the reputational matrix and expectations the consequent behaviors and choices are modified accordingly finally i would like to discuss the forthcoming recession i want to to discuss the reason recessions did you bother to ask yourself why do recessions happen why capitalism is an up and down bipolar disorder economic system the fate of modern economies is determined by four types of demand the demand for consumer goods the demand for investment goods the demand for money the demand for assets which represent the expected utility of money let's call it deferred money periods of economic boom are characterized by a heightened demand for goods both consumer and investment the rising demand for assets and low demand for actual money low savings low capitalization high leverage investment booms offer a foster excesses for example excess capacity that invariably lead to investment busts but economy white recessions are not treated exclusively and merely by investment busts they are the outcomes of a shifting sentiment a rising demand for money at the expense of a demand for goods and assets which is where we are heading in other words a recession is brought about when people start to reap themselves of assets and in the process deleverage and they consume and lend less when they save more and when they invest less and hire fewer workers a new found predilection for cash and cash equivalents is a surefire sign of impending an imminent economic collapse and we are beginning to see this people are spending less they are more risk averse they are they have cash they're keeping it for bed a bedtime and one of the main reasons for that is because we cannot predict the trajectory in the path of the pandemic we don't know if it's going to last until summer we don't know if it's going to last until summer three years from we don't know how bad it's going to be we don't know if it's going to be a second wave or not etc when risk is when uncertainty is so total there's an immediate preference for cash and a total and a and a commensurate utter economic collapse of main street and the real economy because people have to put their money somewhere financial assets maintain their value everything shifts to virtual reality in fact virtual reality is far less dangerous and threatening and frightening than real reality and this etiology indicates the cure reflation printing money and increasing the money supply are bound to have inflationary effects inflation or to reduce the public's appetite for a depreciating money currency and inflation pushes individuals firms and banks to invest in goods and assets and reboot the economy and essentially that's why the stimulus packages are very useful government funds can also be used directly to consume and invest although the impact of such interventions is far from certain this is this has been an economic behavioral economic philosophical philosophical economic overview of the pandemic and its impacts when the pandemic is over if it is ever over because the virus could become endemic we could have such breakout we could have such outbreaks every year we could have covered 19 pandemics every year from now on and as long as there's no effective vaccine or effective cocktail of medicines or single medicine we're going to have to lock down and the horizon of uncertainty is right now right this very second as a minimum 18 months if not two years and possibly infinite we may discover that no vaccine works with the coronavirus as we had discovered with felines when we try to develop viruses for other coronavirus we may discover that no that we need that people who are infected with the covid-19 need to consume medicines for the rest of our lives like people who are infected with hiv the AIDS virus we don't know nothing is known we may discover to our horror and shock that antibodies developed after a single infection have no bearing on future infections and people can get reinfected again and again and again in fact we don't know yet it's unlikely but we don't know simply not know and it is because we don't know that these profound changes that i've described are going to come to pass which people can wait a month they can wait two months the economy cannot wait more than a month or two it has to operate it has to operate on new principles and the new prints these are the new principle the real economy is dead in the water the abstract symbolic economy is the only place to go be and invest and try to preserve the value of your money it's a pyramid scheme simply a pyramid scheme upon this scheme you put your money in and you hope the next sucker will take it off your hands i mean give you value somehow how long can this last well pyramid scheme with 340 million people in the united states can last for a while enough perhaps to develop a medicine or a vaccine and maybe not