One path: the status quo will continue more or less as-is. The second path: a cultural-social revolution rebalances the vast asymmetries that characterize the status quo.
BY CHARLES HUGH SMITH ON SUBSTACK / READ AND SUBSCRIBE TO CHARLES ON SUBSTACK
There’s a fork in the road ahead few discern, though many sense an unease, a sense that things that should trigger alarm no longer move the needle.
One path: the status quo will continue more or less as-is.
This projection is based on a specific set of explicit and implicit beliefs.
The explicit beliefs are based on metrics and trends that are viewed as self-evident:
1. The US has abundant hydrocarbons and is pursuing a vast expansion of nuclear power. The US will remain largely energy-independent. We’ll all have plenty of energy to fuel our consumerist lifestyle of permanent abundance.
2. The US economy will continue expanding as trillions of dollars are invested in AI data centers and the adoption of AI in corporations and organizations, and in the buildout of an electrical grid robust enough to support this vast expansion of power generation and consumption.
3. “America First” will protect and expand our national interests.
4. The US dollar will continue to be the global economy’s reserve currency as stablecoins broaden its use and ownership.
5. AI and robotics will continue improving by leaps and bounds, improving efficiencies and productivity. Some jobs will be lost but since technology always creates more jobs than it destroys, this will be a temporary phenomenon we can get through with Universal Basic Income (UBI) or enhanced unemployment benefits.
6. The extraordinary rise in the valuations of housing and stocks are not bubbles, they are realistic market appraisals of supply and demand. These are not bubbles that will pop, these assets will continue rising in value as bidders seek to own more of them.
7. AI and other technologies are “democratizing” enterprise and wealth creation by giving everyone powerful tools to create value, i.e. make money.
8. Inflation will remain controllable via the well-oiled tools of monetary policies deployed by the Federal Reserve and the US Treasury.
The unstated implicit beliefs are:
1. AI will improve in “good” ways faster than it expands the means of malicious exploitation.
2. AI will eliminate all its current deficiencies of hallucination, AI psychosis, etc., as it improves.
3. The status quo–that the top 10% own the majority of the wealth and hold the majority of power, and the top 0.1% own and control an increasingly asymmetric share of the wealth and power–will continue to be “the way it is” because the system is constantly optimizing output and profits. This concentration of wealth and power is a natural consequence of optimization.
4. The bottom 80% who depend on earned income/wages will be left out of this vast expansion of wealth but they’ll be happy with scraps: UBI, extended unemployment, a few hundred extra dollars in tax refunds, etc., as long as their house continues rising in value.
4. Society doesn’t count (or doesn’t exist). All that matters is the economy, technology and finance. If these are expanding the wealth and power of the top 10%, everything is going great and will continue on the current trajectory for decades to come.
5. There is no Moral Universe and so there is no moral crisis. Every problem can be solved with finance, technology or political compromises.
6. Scarcity isn’t the problem, as we can generate more abundance. AI / technology will generate solutions in every sector: healthcare, education, etc.
Since the vast majority of those with visibility, wealth and power are in the top 10%, this set of beliefs is the conventional worldview.
This fork has a potential detour loop. All the explicit and implicit beliefs remain the same except for one: the US dollar remains the reserve currency.
In the detour, all fiat currencies go to zero value as the only way to offload the crushing consequences of soaring debt and the endless expansion of the money supply is a reset of the entire monetary system, replacing fiat currency with sound money, generally defined as gold, silver and bitcoin.
All the wealth currently held in fiat currency will be transferred to the owners of gold, silver and bitcoin. This will be the greatest transfer of wealth in history.
Once the current unstable fiat system is made stable via sound money, we’re good to go per the belief structure outlined above. This worldview is summarized as “fix the money, fix the world.” If we fix the money, all other problems will be solved by the status quo tools of finance, technology and political compromises.
What’s striking about this set of beliefs is the implicit assumption that a system in which the interests of the bottom 80% are discounted or ignored is rock-solid and stable.
Those living in the top 10% bubble assume this neofeudal arrangement--we smart, hard-working members of the managerial, professional, entrepreneurial, creative elite are being rewarded for optimizing everything under the sun, and the peasantry are happy with their lot in life despite having no say in the distribution of wealth and power–is the natural order of things and therefore stable and permanent.
This assumption overlooks human nature’s sensitivity to fairness, agency and injustice. The possibility that the bottom 80% currently losing ground to inflation, job insecurity and poor health might reckon the system isn’t serving their interests doesn’t compute in the top 10% bubble, which rationalizes the widening asymmetries in wealth, power, income, opportunity and health.
In the bubble, the rationalization is: everyone will benefit in the long run as AI and robotics do more of the work, freeing us from drudgery.
That the ownership of the assets and income streams fattened by this transfer of income from wage earners to owners of the AI-robotics / assets is concentrated in the top 10% is simply the natural result not of a system rigged to benefit the few at the expense of the many but of smart, hard-working people optimizing everything under the sun and entrepreneurs being rewarded for improving everyone’s lives.
This rationalization overlooks the reality that the interests of the bottom 80% have no role in setting policies. Every election, those voting for “hope and change” or “making America great again” find that nothing really changes: healthcare, higher education and housing all continue becoming more unaffordable, job insecurity and financial precarity increase, the rich and powerful face no consequences, and so on.
In the framework I outlined in my book Investing in Revolution, the economic interests of those holding the wealth and power and the shared interests of society are no longer balanced: economic interests are all that count.
The Moral Universe doesn’t exist in the status quo worldview outlined above. I constantly write about the pivotal role of moral decay, but few if any of the hundreds of posts, essays and commentaries I read ever mention moral decay as the key crucible of what happens next.
Healthcare offers a window on this widening asymmetry / imbalance.
The bottom 80% are increasingly burdened by both poor health and unaffordable healthcare and healthcare insurance. The top 10% either have gold-plated healthcare insurance from their government or corporate job, or their income is large enough that healthcare insurance is not an issue for them, any more than the cost of food is an issue for them.
They live in a bubble where the concerns of the bottom 80% simply don’t register. The bottom 80% can’t move because they can’t afford to lose the healthcare benefits of their current job. The bottom 80% are routinely bankrupted by their share of healthcare costs, even with insurance. The bottom 80% rush to have procedures done before their spouse is laid off and the family loses their healthcare insurance.
That America’s healthcare system is on track to bankrupt households, employers and the nation doesn’t bother those in the top 10% bubble, as they have the connections and income to advance to the front of the line and receive the best care available. The system isn’t broken in their view; it’s working great: they have personal trainers, buy organic produce at Whole Foods, and have insurance.
In this “leadership” bubble, virtue-signaling policy tweaks are all that’s needed. That the health of the populace is declining in truly alarming ways is not an issue in their worldview because it’s not an issue in their experience.
That what the top 10% label “progress” is experienced as Anti-Progress by the bottom 80% doesn’t register. (I explain the asymmetries of “Progress” and Anti-Progress in my book The Mythology of Progress.)
Also striking is the belief of those foreseeing the collapse of fiat currency–the detour in the Road to Super-Abundance–that the populace impoverished by “the greatest transfer of wealth in history“ will passively accept their impoverishment and take no action to remedy this asymmetry.
Equally striking is the assumption that the government which holds a monopoly on both force and the power to define legal tender, i.e. what the government decrees is “money,” will passively allow its own dissolution as its monopoly on “money” is replaced by private owners of gold, silver and bitcoin.
The possibility that the state would use its monopoly on force to expropriate or outlaw the private ownership of gold, silver and bitcoin as the only means of regaining its monopoly on legal tender does not register in this worldview, though it’s entirely rational from the point of the view of those holding a monopoly on force to use that force before it dissipates in the collapse of the state-controlled currency.
The second path is that a cultural-social revolution that rebalances the vast asymmetries that characterize the status quo by reordering the values, priorities and incentives embedded in the socio-economic-political system.
Put another way, those whose interests have been discounted or ignored because they run counter to the interests of the top 0.1% and top 10% will demand that their interests are represented in decisions that affect the shared interests of society.
This cultural-social revolution will be driven by the increasingly asymmetric distribution of wealth and power that is destabilizing the system beneath the surface of rising stocks, GDP, corporate profits and government borrowing/spending.
In a health analogy, the status quo measures the patient’s pulse (rising stocks, GDP, corporate profits) and declares the patient is in optimal health while beyond the visibility of this metric the patient is terminally ill with a fast-metastasizing disease.
We can understand this as the result of being caught up in the gearing (engrenages) of a system that rewards those contributing to increasing asymmetries of wealth, power, income and outcomes.
The second path isn’t simply about shared interests and rebalancing the increasingly asymmetric distribution of wealth and power; it’s also a moral reckoning in a socio-economic order in terminal moral decay.
The Moral Universe doesn’t exist in the belief structure of the top 10%’s worldview. But humanity exists in a Moral Universe whether we acknowledge it or not, and all the projections and metrics of super-abundant energy, AI, robotics, income and wealth do not replace the Moral Universe or extinguish its swing from the current extremes of greed, corruption, moral decay, self-serving blindness and delusion to the other end of the spectrum.
Maybe the first path is the one history will take. But since all systems that reach extremes eventually revert to the opposite end of the spectrum, I expect history will take the second path of moral reckoning and cultural-social revolution. How this plays out cannot be anticipated, as the dynamics will be emergent and non-linear.
For some, the first path is the Fourth Turning–a tumultuous but positive transition to AI super-abundance.
A trend that increases the asymmetric distribution of wealth and power isn’t a transition; it’s simply more of the same. A true Fourth Turning overturns the system that distributes wealth and power so asymmetrically that the interests of the many are ignored to serve the interests of the few.
The second path is not a popular projection of the future. It doesn’t even register as a possibility in a delusional status quo blind not just to its own excesses and hubris but to the consequences of its blindness, excesses and asymmetries.
