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Episode Summary:
In this episode of Revolution Now!, Peter Joseph explores the origins, mechanics, and societal effects of Wall Street and the broader financial system. He critiques how the financial markets, while portrayed as integral to the economy, are actually a form of gambling that provides little real value to society. Peter argues that Wall Street represents a detached, parasitic layer of capitalism that benefits the wealthy while exploiting the rest of the population. He also touches on the misleading belief that stock markets are beneficial for the general public’s retirement savings, explaining how the system is rigged to disproportionately favor the rich.

Additionally, Peter reflects on his own experiences with burnout in activism and how he’s adopted a more detached, academic approach to maintain his mental health. He shares insights on how to continue fighting for systemic change without being consumed by the emotional toll.

Looking ahead, Peter plans to discuss modern monetary theory (MMT), the concept of out-system activism, and how his podcast aims to reshape the activist mindset for effective social change.

Transcript:
Peter Joseph:
Good afternoon, good evening, and good morning, everybody. Welcome to the September 29th program of Revolution Now. My name is Peter Joseph. What I’d like to do today is talk about Wall Street and the financial system, how it all came to be, how it operates, the economic and social effects. I also want to touch upon the idea of MMT, or modern monetary theory, as it’s very commonly invoked today by activists as the basis for new policy solutions out there, something I disagree with on the grounds that the kind of policy the theory suggests would simply be too improbable to implement given existing structural forces.

Some may be familiar with the idea of in-system versus out-system activism, as I’ve commonly talked about this distinction. In-system activism utilizes existing avenues of political, legal, and economic influence seeking, ultimately, policy change. In-system activism doesn’t see the structure of the system itself as a problem or at least it doesn’t act like it does. There is no shortage of activists out there writing books, making media, and holding events surrounding the idea of system level change, talked about all the time. But if you look closely, that’s not actually what they’re proposing. What they call system change is just the add-on of more regulatory patches or policies. In fact, the very term has become a terrible misnomer thrown around with no distinction. Everyone likes to drop statements about how this “system” we have is corrupt, or incompatible, or wrong, or inhumane yet virtually no mainstream activists that say these things actually approach it from that position. They are still operating in-system.

In contrast, out-system activism sees the entire socioeconomic structure rooted in the market economy as too limited in its potential expression, too limited in what it’s capable of adapting to, to be useful in the long run. It can’t solve the problems inherently and hence, true activism today must come from outside of what the system supports, forcing structural change, not policy change. The structuralist movement, if you want to call it that, people that think this way is interested in structural change, not policy change. And it isn’t to say that improvements can’t be made using tools of policy, but the inhibition inherent to fight back will always come from the root of the system itself, making any seeming advancements in policy tenuous and easy to overturn in time.

Now, before we jump into all this more so, a quick personal note inspired by an email I recently received where the rather frustrated individual described how exhausted, and demoralized, and unmotivated they were as they’ve worked so long trying to get information out there and they’re not seeing any new results, therefore nothing’s advancing. Why should they keep bothering to do any of this?

As I imply in my Patreon introduction letter, kicking off this new round of my own activism, I’ve reoriented my way of thinking about this kind of work. Around 2017, I pretty much stopped everything except for focusing on my film, InterReflections, which is a social commentary piece, but it’s also personal to me as a piece of art. This gap in my activism really was a result of feeling disenfranchised, and alienated, and agitated with the activist community at large, the lack of advancement, even including communities that I’ve been actively a part of, being generally disappointed on the whole. Make no mistake, I have great compassion and respect for anyone who goes out of line to criticize the current system, seeking some kind of change because that’s not even common for most people. People live in their little bubbles, I call them the bubble people, and the bubble people are only concerned about their own little worlds and their finances and their own families, and they don’t really extend out.

So again, it’s not an issue of a lack of appreciation. It’s the dysfunction that’s the problem. And since that dysfunction is so severe, we are seeing the world get worse and worse and worse, almost relentlessly on every level, so it’s natural to be burnt out and exhausted. It’s natural to see cycles of social movements come and go because it’s such a mess.

So how should you think about it? How do I think about it? One of the great organic geniuses of the 20th century was comedian George Carlin. I put him right up there with Dr. Martin Luther King and others when it comes to a very rare sociological talent to perceive and understand complex human patterns without the requisite academic background that most would require to figure out the same things. Some may know this phrase I coined a while back called “the Carlin level”, and it’s the point where the emotional stress you feel in pursuit of something becomes so severe your only choice to maintain your sanity and health is to not care anymore. George Carlin went from a rather peace minded hippie, if you will, to a really dark cynic in his later life, publicly stating that he had no interest in the future of humanity or more accurately, his term was he has “no stake in the outcome”. He has also stated numerous times that behind every cynic is a failed idealist.

If you listen very carefully to his more personal interviews, he slowly reveals that the reason he takes the cynical perception is because he really can’t look at it any other way to maintain his own health. For a man suffering from heart disease, which eventually took its toll on him, the stress of caring is a direct assault on one’s longevity, especially carrying on the level that he did. And I think many in the structuralist movements do because the objection is grander than this political party or that political party. It’s an objection to the system itself, which Carlin was outspoken. In fact, Carlin was one of the first I’d ever seen talk about stress in the body long before mainstream epidemiologists were.

Anyway, I bring this all up because this was influential in my own perspective, not to be a cynic necessarily, but to figure out how to create the mental trick to not let this wear you down. When I approach activism now, I do it from an academic perspective. I’m detaching myself. I see it as a game, an exercise. I’m compelled to do it because I do feel the need to have stewardship for myself, humanity and the habitat, but I refuse to have a stake in the outcome anymore. In other words, I try my best not to take it personally. This is something that you have to work on, as I do. It may seem cold and heartless, but the fact is, if you really feel empathic about what’s happening in the world, your mental health is going to suffer unless you’re countering it in some way.

On a certain level, it really comes down to what are we even doing here on the planet anyway? Humans are not here to just get jobs and bigger houses and bang each other as much as possible and all the other hedonistic value distortions people tend to pride themselves in our distorted society today. The fact is we’re here to survive from an evolutionary standpoint, and we can’t even get that right. I can’t think of any other purpose to existence than trying to facilitate balance within the species and with the habitat. That is the true measure of social success. And when we are as far away from that as we are now, moving in wrong directions on many different levels, yeah, it’s easy to be upset about it.

So enough of that, let’s now jump into the subject of Wall Street. And given where I am now in time, I’m going to go ahead and say that there’s a good chance I’m going to break this program up into two shows because I don’t think I’m going to get to it all in one day.

So, what is Wall Street? The term Wall Street has become symbolic, not referring to the actual street in New York city, but rather the whole institution of financial investment trading. So keep that in mind as I go along because I’ll probably use such terms interchangeably.

I have a unique history with Wall Street both directly and indirectly. Believe it or not, I used to be a short-term trader from my own account when living in New York city years ago. I even studied with professional traders that worked literally on Wall Street. And while I have very little pride in this kind of work, I definitely was inspired to learn more about macro and micro economics through it, eventually coming to terms with just how counterproductive and insidious this proxy financial market system really is. I say proxy system because that is what the stock futures, currency options and derivatives markets are. They are proxy instruments that represent things but have no intrinsic value. Just made up widgets in a literal Ponzi scheme by technical definition, a gambling game that creates nothing and serves no viable social function, and yet normal people today treat the financial markets like they are part of the true economy. You can’t watch a standard news program without a section dedicated to what Wall Street did today. “The Dow is up X points because of” blah, blah, blah, as they pretend to explain why.

Truth is, you could end the entire global network of investment trading right now and demolish all the exchanges and investment banks in the world, and it would have no bearing on civilization’s ability to create, design, produce, and distribute goods and services on this planet. Actually, I take that back. It would have an effect. It would be a positive effect. If you abolished Wall Street and hence, the whole financial proxy instrument, fake asset trading game entirely, you would actually see great improvement in the true productive economy, Main Street as it’s called. Because the financial markets, as I think people are slowly starting to figure out, panic after panic decade after decade, actually make things worse in the economy and society, and increasingly so as time has moved forward because the institution is evolving in scope and influence and has evolved as such through what’s called financialization.

Now, if you step back and think about what money is supposed to do in its most basic utility as a medium of exchange and store of value, it’s supposed to be a means by which productive work occurs. You use money in order to facilitate economic activity between actors. Economic activity meaning building actual goods, mining a resource, or providing a service that helps in some way tangibly. Yet in this proxy investment system, nothing is being created, just gaming for profit, buy low, sell high, etc. It’s like the old line from the movie Wall Street where the Michael Douglas character says, after commenting on his vast wealth, “I create nothing. I own.” All financial asset investment is, is gambling by way of an abstracted widget that doesn’t exist with players pushing prices around through bidding and offering, buying and selling. That’s it. Fundamentals don’t matter because it’s just news. And staggering amounts of money is spent into this not to make anything once again, not even to help some companies operate in fact, but to simply gamble for profit billions and billions and billions of dollars year after year wasted into this mechanism.

Can you imagine if all that money, energy, and general institutional resources were spent on actual needs of society like fixing highways, or re-engineering our energy infrastructure, building institutions for the homeless and so on and so on? Some people even talk about money as energy, which is a fair argument. It’s the power to do work. Well, we are seeing an incredible amount of wasted social energy with the existence of Wall Street. The incentive is simply to make money out of money, which is the rich man’s wealth game. And of course, mind you is absolutely natural to the evolution of the market system of economics.

While both Main Street and Wall Street are based on a general social indifference, they’re antisocial by nature, Wall Street is like the neurotic psychopathic spawn of Main Street. On the subject of social indifference, Wall Street simply incentivizes it in a more direct way, commoditizing destruction and disregard such as in the form of short sales. Short sales allow someone to profit off of the failure or the drop of an asset or institution. It’s called a short trade, people sell before they buy in the interest to see a decline in a stock or other related issue, which implies the failure of some institution at the same time if you want to keep a correlation. It’s a loose correlation, it’s not really relevant, but the intent is there. And while such a phenomenon may seem novel to Wall Street, it’s really just an abstract variation on the main theme in the incentive structure of capitalism.

Main Street also incentivizes general disregard for competitors, for employees and even consumers. When a competing business fails, it’s in the best interest of other competitors. When employees are vulnerable and desperate, it’s in the best interest of employers. When people are unsatisfied and sick, it’s in the best interest of industries catering to such needs such as the medical community or the therapeutic community. However, at least on Main Street, everybody is frequently reminded that we are all human beings interacting, bringing out some kind of basic moral empathic sense. On Wall Street, however, the human aspect is completely removed, replaced by mere abstractions that are utterly detached from any sense of humanity.

I would love to hear what Adam Smith would say today, Adam Smith, one of the philosophical founders of capitalism, if he was to see this evolution of the financial system and Wall Street financialization. I think he would be horrified and deeply confused. Yet once again, it’s still a completely natural unfolding. All Wall Street is, is the reduction of the mechanics of common economic trade, as we see on Main Street, reduced to the extent where it no longer matters what a given item being traded is. Again, the widget. Simply trading for the sake of trading profit for the sake of profit and nothing more, literally. It’s just part of this march toward what some have called the cancer stage of capitalism, moving decisively toward caring more about just making money and turning everything into a commodity to be exploited rather than any kind of social advancement.

Wall Street is simply the amplification of the core market incentive system. Again, that’s called financialization. It’s become more profitable for the leaders of our society, the rich people, to simply gamble on these proxy instruments rather than do anything with actual economic production.

Now very quickly, I suspect at least one person out there listening is confused and disagrees with assessment of the stock market, assuming that it actually does relate to a company’s performance or help the company or help society. But you have to understand the evolution. What we think of as an investment in a traditional sense is you give money to a company, they utilize it in their means of production and then they produce something and then they make a profit and you get a reward at the end, usually in the form of a dividend. In the past, dividends were actually very common, but not anymore. Again, this is all part of the predictable evolution of the market incentive, moving from a physical economy to an utterly decoupled financial one. It’s a natural gravitation.

Today, when you buy a stock through an exchange, you are not investing in a company or influencing it in any way. Only during the IPO, the initial public offering, where the shares are first released is this generally the case. After that, once the shares are in the system, it’s just a giant casino using the outstanding shares and nothing more. Needless to say, a person today, owning a share of Apple has no say in what that company is doing and the money they use to buy that share has no relevance to the company itself, unless, unless you account for these extremely cryptic, highly internal relationships to banks and future corporate loans based on outstanding market share value and other contrived things I’m not even going to bother talking about because they’re not really relevant.

There are generally two ways to value a company today, market value and book value. The book value relates to actual assets of a company, the balance sheet, and the same way that you would describe your net worth by valuing what you own, how much money you have in the bank, and you tally up the number’s net worth. Market value, on the other hand, is the total value that you get when you add up, at any given time, all the shares of the company outstanding.

Apple today has a market value of about two trillion, at least last I checked, I don’t know what their book value is, but I can tell you it’s not even remotely close to that number. If everyone started to sell off Apple, trying to extract this value of two trillion, it would also be reduced, in the end, by likely 75, 80% as people cashed out. Why? Because unbeknownst to most, the way prices change in the financial markets are not serially cumulative. Increased value comes from bidding power and bidding power does not have to be measured or uniform. It jumps.

In other words, if I see a stock for $10 and I want to buy it, and for whatever reason other people wish to buy it at the same time, the collective interest, the demand can jump the price higher as people bid just as you see on eBay or an auction. So you could bid on an item for $10 only to have another person come right after you and bid $20, jumping the price straight up 100%. In the stock market, if enough people are able to move the price of a stock from say 10 to 20, over a series of competitive bids, the new value of 20 would become the basis for the total market value. Assuming, say a thousand shares, the original market value at $10 would have been of course, $10,000 while the new $20 price we just achieved would make it now 20,000, 100% increase in market value. Yet the actual money spent by the traders or investors to move the share price through bidding most certainly did not put 10,000 more dollars into the stock as a whole. In other words, it’s all bullshit.

Again, every day we have to suffer through the news and this reminder of this institution as if public information about the stock market is of some great social importance, which brings us to a truly devastating part of this nonsense, and that is how the public has been manipulated to think the stock market is good for their retirement.

Allow me to preface this a bit. I look at the stock market as a rich man’s game where the rich sidestep true social contribution and focus only on making money from money alone. To justify this inequality-producing machine, taking valuable resources from society for the benefit of the rich, offering nothing to the normal person, an illusion needed to be created to make it look like this machine had some kind of larger social role. And the way you do that is you find a way to lure the general public into the institution, making them dependent on it and feel invested in it. The best way to do that is you convince everybody that they should put their life savings, their retirement money into the system through low risk things like mutual funds, blue chips, bonds, make sure people have their 401(k) all linked in to protect the machine. What convinced people of this rationale? Because the market generally rises over the course of time, however, the central driver of this rise is not understood, and that is simply the creation of more and more money expanding the money supply. Markets are inflationary in this way.

Today, 83% of all stocks are owned by roughly 10% of the population, which is a slight improvement from 20 years ago when it was about 1%. These numbers do ebb and flow, but the pattern is the same in terms of the elitism. The richest 5 to 10% of the population own the stock market and its gains and the legion of poor and middle-class people putting their retirement into the market, seeking that tiny longterm percentage return are really just helping the rich because it’s sanctifying the system, legitimizing it, while also providing more precious liquidity to it as traders gamble on people’s life savings in all sorts of bizarre contrived ways.

If you remember the first COVID-19 stimulus bill in the United States, a massive chunk of hundreds of billions of dollars was handed to the Trump administration for their own distribution secretively. And I have no doubt that this money, along with the stunning banking and corporate bailout packages provided to big business included in that package as well, was done deliberately to make sure the stock market continued its upward move, giving the illusion the economy was still okay. Trump’s economists clearly have all this in the back of their mind, which is why Trump always talks about the stock market endlessly as if it’s the only barometer of the economy. Why? Because the whole thing is manipulated by increases in the money supply and there’s nothing better than a crash and the monetary injection to keep that going.

Even in my experience as a trader years ago, one of the open secrets in Wall Street, in the Wall Street community, is that when the central banks prime the pump and create new economic stimulus, it almost inevitably goes into the financial markets. A very big part of it does. And when you couple that consistent pattern with the inflationary nature of the ever-increasing money supply, along with population growth, it’s pretty much inevitable that the US stock exchanges will continue to rise in the long-term as long as the system remains as it does, irrespective of what happens on Main Street. Hence once again, the ruse that manipulates people to throw their life savings into it, ultimately creating liquidity and help the rich preserve their money machine.

Likewise, you may have noticed that the financial system and Wall Street have been at the root of most all major economic crises of the past few decade. The vast majority in the past 200 years, in fact, if you really look at banking panics and so on. This is something that people miss in the reality of class war.

Think about this, virtually every time the financial system crashes, the wealthy end up simply getting more wealthy in the long run, while the poor suffer and continue to stagnate. The mechanism here, and I’m not talking conspiracy, is simply the fact that crashing the financial system, allowing it to be bailed out as it inevitably needs to be, is always a good thing for the upper-class in general. It secures their structural dominance because they don’t really lose. They gain larger in the end.

As we see right now in the financial decline that is a result of COVID-19, but still inherent to the flaws of the system, small businesses have been destroyed while big businesses flourish, also allowing big corporations to now buy and absorb their failing competitors, reducing competition. It also increases the labor supply as unemployment rises, which means laborers are going to get that much cheaper due to the laws of supply and demand. At the same time, it hurts unions as they have less to bargain with in desperation. And when the government does step in through the central and commercial banks, finding ways to inject more money into the system to get it going, the stimulus as they call it, where do you think that money goes first? It almost inevitably goes to the ownership class first, the rich, which is, again, why today you have a virtually inverse relationship between the stock market and the true productive economy.

Generally speaking, I would say there are two reasons for this continual pattern. First, deep in the bowels of market philosophy is the idea of trickle down economics because the important people in this kind of economy are actually the owners in terms of the philosophy of the economy. The idea is that in order to get money moving faster in the economy to create growth, you have to incentivize the owners to hire more people and so on. You have to fund the job creators, as they would say. So big businesses naturally get tons of money under the pretense they will hire more people, expand, pay more money, provide more benefits, et cetera, et cetera, et cetera. The sad thing about this theory is it actually does work, but to a very, very poor degree and over a very long period of time. But that little degree is all politicians need to justify the pattern and keep implementing it. And since the stipulations rarely force businesses to do anything, inevitably the higher echelon and the corporate structure see the stock market as more profitable than any investment in their actual physical companies.

And if there is inflation, literal inflation, meaning the devaluation of money, if this occurs because of the stimulus, which sometimes it does, sometimes it doesn’t- inflation is a unique equation, it has to do with how money is being used, if money goes into the stock market itself it tends to not be inflationary because it just sits there, but when it comes out into Main Street, when it actually is in the hands of normal people using it to buy goods and the money supply has expanded, and the effect is there, what you see is the devaluation of the currency of people who can’t afford to have it devalued. So the rich people using the stock market use all the money they can go out and even buy luxury things without experiencing the inflation. But by the time the chain reaction occurs where trickle down actually gets money into the pockets of normal people, the inflationary effect, if the circumstance is right, is going to harm the middle and lower class once again. So that’s another thing to think about.

I state this not to get into some big discussion about inflation, which again can be complex, but just to show yet another level of built-in class war that systemically keeps the rich rich and the poor poor.

Now coming back to the main subject of why monetary injection, not only in the US but across the world, tends to go into the financial system before anywhere else, disproportionately benefiting the rich at the expense of the poor, the second reason has to do with the very nature of how the process of monetary injection occurs. We’re going to take, for example, QE, known as quantitative easing, an increasingly common practice of central banks. From 2008 to 2015, the US central bank bought bonds in order to inject almost four trillion into the troubled economy with the bonds being from the holdings of financial institutions, such as commercial banks, pension funds, insurance companies, and guess what? Because the bonds are coming from the financial institution, remember bonds are exchanged for the credits that the Federal Reserve makes, it’s no surprise that all that money that was exchanged for the bonds went right back into Wall Street, not Main Street.

And sure, while some trickle down helped create jobs and expand the general economy, the profit gain by the existing rich was substantial. In the words of economist, Anthony Randazzo, “QE is fundamentally a regressive distribution program that has been boosting the wealth for the already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy. It is a primary driver of income inequality.” A report by the Bank of England stated that its QE program raised the value of stocks and bonds by 26%, or about 970 billion, with about 40% of those gains going to the richest 5% of British households. In fact, in 2013, Andrew Huszar, a former US Central Bank employee, made a rather dramatic guilt ridden admission as reported by the Wall Street Journal. He stated, and I quote, “I can only say, I’m sorry, America. As a former federal reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street, but I’ve come to recognize the program for what it really is, the greatest backdoor Wall Street bailout of all time.”

It is troubling to realize that the institutions most responsible for creating economic crises are actually the ones that gain the most when attempts to fix them occur. Moral hazard.

From late 2007 to the official end of the great recession in 2009, the top 1% of America saw its income drop by about 36% while average family income dropped by about 17%. Okay, so it looks like the rich were suffering, right? However, this is just a transition phase. From 2009 to 2012, the 1% gained 31% while the 99% gained 0.4%. 31% to 0.4%. In effect, the top 1% captured 95% of the total wealth growth in the US recovery. In fact, if you track the ebb and flow of expansion and contractions, there is a common theme in the economy, the rich do lose with everyone else to a degree during recessions, usually a bit more in percentage terms, but once the boom starts again, the rich gain substantially more than everyone else, pushing inequality higher. In 2012, the top 10% took 50% of all income, an amount unprecedented in us history. The moral of the story is that in the long run, recessions and collapses and panics and crises simply help the rich in the end. It’s been that way for a long time, as I’ve stated.

That’s a good stopping point. When I return next week, I’m going to delve into the rest of the things I mentioned at the beginning of this podcast regarding the financial system, the fractional reserve lending system, I will finally talk about MMT. And I also hope to talk about out-system activism as a program.

While this program it’s called Revolution Now, I really can’t propose the solutions I think about without establishing the reasons behind them, which is why I’m covering so much in these earlier episodes. Obviously general information is a big part of this podcast, but the goal of this podcast is to engineer a new activist mindset and a new activist program, which I have been developing in the background for some time. All right, everybody talk to you later. Be safe out there.