I have suspected for a long time that the root of the problem is how we distribute new money.

New money means basically printed money. We have an inflationary system, and I’m on the fence about whether that’s a good thing versus the other different problems you get with deflationary money. But that’s beside the point.

The fair way to distribute new money would be to drop it from helicopters, more or less. Instead we give it to banks. New money enters circulation at the top.

That does a couple things. First it inflates assets, which is one cause for why housing went nuts. Second, it transforms the economy from a competition to sell the best product to customers into a competition to be first in line for inflationary money distribution.

That’s what we have now. You are not the customer. There are no customers. The stock is the product and the Fed is ultimately, after a chain starting with big banks, the buyer.

Companies make more money selling their stock than selling their product. Selling a product is only valuable insofar as it makes the stock look better to buyers who have not yet realized productivity is no longer the goal, who have not yet reached /r/wallstreetbets levels of enlightenment about the new nature of the system.

Over time the trend is for the whole system to drop the pretense of productivity. At the street level investment fully degenerates into gambling and is finally replaced, as is happening now, with actual gambling. At the elite level people like investors and founders start to realize that creating value has degenerated into a show to attract investment capital (new money), and so they should just drop the pretense. In fact it makes sense to drop the entire pretense of operating a productive economy. The political class can also drop the pretense of running a productive society and just declare themselves kings and hold decadent parties, as we're seeing now.

So we end up with kings ruling over a casino. Which is why we have a wannabe king who is a former casino boss.

(Deflationary money can lead to serfdom too but via a different failure cascade that starts with a collapse in investment since holding money is less risky.)

If, instead, we implemented QE by dropping money from helicopters, the whole economy would be capitalized and would start spending money purchasing things people want. Businesses would remain oriented toward selling things to customers and to one another, with stock sales being secondary fund raising activities as they should be. Investment would continue to be a better bet than gambling.