Distortion Alert: How Markets Blow Up The Economy

I cringe every time somebody tells me “it’s a market economy.” I get the economic reality of that statement, but it also signals a loss of control.

What is the market economy? It’s when the value of your 401(k) tanks. It’s when gasoline and natural gas price soar because of decisions made 3,000 miles away. It’s why everything from appliances to surgeries cost too much.

Nomi Prins is someone who knows the inner truth of the market economy. As a former Goldman Sachs employee, she’s seen it and lived it. In her new book “Permanent Distortion: How the Financial Markets Abandoned the Economy Forever”, (Public Affairs, 2022), she once again speaks truth to power.

Permanent Distortion is an exposé of how the global economy has become “irrevocably splintered.” When it looks like the economy is slowing down, stocks perk up. Pathetically low savings yields for most Americans means huge profits in the bond market. Down markets mean fat gains for computer-guided trading on Wall Street.

“We’re living in a permanently polarized world where the mega-rich are the winners, and the never rich are the losers, of an unprecedented distortion that can never return to ‘normal,’” Prins says, whom I interviewed over the years, mostly in the wake of financial crises. “Plus, as central bankers attempt to clean up a mess of their own making, and inflation and other crises rage, there’s more chaos to come.”

How did we get here? An cult-like obsession with market economics. This creates a massive global reality distortion: “The real economy ­­– for the average worker – can be measured by productivity and results,” Prins adds.

“It behaves more according to traditional rules of money and economics. The financial markets-based economy – doesn’t. It has become a synthetic by-product of years of loose money, fabricated by central banks, greasing the wheels of a system dominated by financial titans. That’s why stock markets can skyrocket in the face of a global pandemic and threats of nuclear war. It’s also why the real economy continues to lag behind the markets during financial, social, and geo-political turbulence.”

This is a must read if you want to understand the underlying misdirection of global economy policy. I wish I could say this was virtual reality, but it’s all too real for all but the ultra-rich.

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