From atop the Stoa stairs there are many trends converging and their outcomes becoming almost unavoidable. There have been several recent reports on developments that I saw coming many years ago and are only now being reported in the media.
Editors note: do not take anything in this article as support or advocacy for Marxism or redistributionist philosophy. Don't, or you will simply miss an opportunity to think up creative solutions. You have been warned.
I'll start off with some details that form the connections within my thoughts.
Back in the 1990's there was the dot com rush, where Internet companies were flashing in and out of existence faster than quarks in a nuclear implosion. Most were gobbled up by others, many simply fizzled as they were a name and a shingle with no real product or service to market. There were two major problems with the dot comms. One, the Internet was still in its relative infancy and the number of users were very limited. Two, most of the dot comms did not have a product or service that was not already being done more efficiently than the traditional brick and mortar companies in the day. There was a speculation frenzy that drove up private shares simply by putting a ".com" after any meaningless jumble of letters or numbers. Damn the product or service. As you well know, that bubble did not last and by the time it popped there were at least 200 IPOs per year hitting Wall Street. Millions of investors lost everything and a few became millionaires and billionaires. A few made it out of the carnage like Facebook, Amazon, and eBay.
Out of the pile of newly minted rich, there were those that simply frittered away the wealth or lost it through additional start-ups that could not get funding. A handful of individuals, who were better at evaluating other start ups, rather than actually running a start-up, began to use there networks to broker deals in the venture capital arena.
Due to recurring bubbles and instability in technology and commodities trading (think ENRON and WorldCom) the government had to involve itself deeper into the process and "protect the little guy". It became much harder for a privately held company to do two things: 1, meet the conditions required to launch an IPO bid, and 2, remain a publicly traded company due to the onerous demands of continuing regulation and regulatory over-sight. It simply became easier to remain a privately traded company then to go public.
This had at least two big effects on the venture capital market going forward. 1, The big companies stabilized their market shares and their values climbed at the same rate, in general, as the housing market due to the greater liquidity that individuals were pulling from real estate to gamble in the markets, thus making individual shares of "stable" companies too expensive for the common day trader. The big clearing houses had the cash and the reserves to continue to trade, even in the new regulatory market. 2, Fewer IPOs meant fewer outlets for venture capital, or at least the "big scores" that were had just a decade earlier. Capital flowed further into real estate and other climbing commodities, which, you guessed it, CREATED MORE BUBBLES.
THEN, when the housing market collapsed in 2008 and commercial properties by 2010, credit became tighter to get. Banks virtually stopped lending and still lend very little to this day in 2011. Now, people who have the money and a legitimate credit score to purchase a home, are being denied the privilege to buy that home. How is this?
Let me sketch out a few more points.
Those few individuals who started in the dot com trenches and managed to hang onto their wealth were ambitious risk takers. Smart, risk takers since the dumb ones had already dissipated their wealth. They saw that the conventional lines of credit in the country were frozen. They saw that hundreds of established companies were failing and that there were virtually no new IPOs. They had liquidity, but no outlet.
Groups of these individuals began to see the foreclosure spikes and saw a golden opportunity starting in late 2009 into early 2010. They knew that eventually the market would regain most of its loses (so the reasoning went) and snapping up properties at 1-50% of their previous sale amounts would lead to fantastic future profits. They even became white knights to many as they would take over a mortgage and then allow the previous homeowner to pay rent on the property and a previously agreed upon amount, to be adjusted if the prior owner ever moved out.
Others saw this and decided to cut out the middle man and white knight stuff. They began buying everything in sight, entire developments that had failed were now being purchased, completed and then rented out to the hundreds of thousands who had been foreclosed upon. Individuals trying to purchase a home now have to compete with venture capitalists who are willing to pay cash on the barrel. Banks and funds that are holding these toxic foreclosures will always take the money now rather than taking on yet another "risky" 15 or 30 year mortgage.
So now the little guy, who has done everything right, kept their credit clean and even has 20 or 25% to put down on a new home are being squeezed out of homeownership. Many must continue to rent rather than own.
This market is hot right now for the land lord. Millions are being displaced through foreclosure and home values continue to decline. The bottom may not really be reached for as many as 5 more years from now (yeah, I said it).
Now, back to the smart investors who are looking for the bigger scores. There are some of the dot com survivors, namely the ex-founder of the now defunct Netscape browser, who are doing something about the lack of IPOs hitting the market.
Traditionally, privately held companies, who now really, really, want to stay that way, offer shares when they are trying to raise funds. These are not publicly traded and are not regulated. You must be "invited" to purchase these shares if they are issued, or swapped among the private owners. This is an exclusive club that has had its own rules for a very long time. Enter the Gen X'ers into this equation. Like the caddies leaping into the exclusive pool in the movie "Caddyshack", these people are using their influence and networking skills assembled and put together during all the bubbles since the dot comms. They are spending extravagant amounts of personal cash and partner cash to purchase wedges of stocks in privately held firms. Sometimes spending 10 to 20 times the normal amounts of "access". Like Rodney Dangerfield in that movie, they are detested by the establishment, but kept on because they have the hard, hard cash and the guts to invest it.
What comment am I making from all this financial and cultural data?
Wealth, both cash and gold (soft and hard currency) is being collected into fewer and fewer hands. One group is turning us into a nation of lease holders (rent) and another group is slamming the door on the minting of new millionaires. America has traditionally had a very, very fluid class dynamic. Many poor can become rich and visa versa. Closing that door locks out the middle class, the same middle class that is currently being picked apart by the government, inflation, and progressive taxation.
I marvel at the continuing similarities between the decline of the Roman Republic and the decline of the American Republic. The Romans devalued their currency, just as we are. The Romans made laws that were selectively enforced...I'm looking at you Eric Holder and Mr. Obama. The Romans became embroiled on too many battlefronts at the same time, draining an already strained treasury. I'm think of Libya and other places where America has troops deployed. The Romans used Slave Labor on into the 2nd Century A.D. while the Americans have our own version of slave labor, called "Undocumented Immigrants". The Roman government began to hand out the Consulship to wealthy senators instead of capable Senators (Caesar being a frightening example of wealth and skill), these Senators had wealth that the Republic needed to tap to equip its ever growing Empire. America has the crony Capitalists such as GE, GM, and any number of other large Megacorps. The Romans distracted their people from the growing inflation and taxation by holding ever elaborate games in the coliseum with the blood of the Gladiator being supreme. In America we have reality TV demonstrating to everyone that some one else out there has life tougher than you, so get over it. We have professional athletes in Basketball, Football, Baseball, Hockey, and Soccer that take the place of the hallowed Gladiator. Distractions aplenty for a sleeping American population.
The parallels are really there, I'm not just seeing historical convergences by coincidence. If nothing is done to bolster the Republic, then it most certainly will fail.
By the time Octavian had killed the last rebel off the coast of Greece and welded Egypt into the Empire, the Republic was already truly dead, though the population was completely unaware of this fact. Octavian knew that the people would kill him just as fast as they had killed his adoptive father; if he tried to rule openly. Instead, he was simply known as the First Consul in the Senate. Speaker of the Senate, you could say. He could initiate legislation and he could veto it, but the people still had the ILLUSION of participation. His rule was so long and prosperous, that by the time his successor came to the purple, the illusion was no longer needed.
Where is America on that path now? IS our Republic even still alive? Pelosi and Reid have each stated that the Constitution is meaningless in today's political landscape. Others in Congress have openly stated that there are three branches to government: The House, The Senate, and the Supreme Court. They already feel the bindings of the Constitutional strictures too loose to hold them any longer and they are slipping free of "WE THE PEOPLE".
Serfdom came about in Europe because by the late Roman Empire, all the property that had been in individuals' hands gravitated into the Latifundia. Vast agricultural or population zones owned by a few rich and powerful individuals. The people lost the ownership of the land and rented their homes and plots from the land lord since the individual had been taxed and regulated out of ownership. This lead to the European aristocracy that was not toppled until a growing mercantile trade rose to re-create a middle class and sweep away the indebted and moribund upper class during the Renaissance.
This collection of property and corporate power is tracking with what happened to the Roman Republic and transformed it into the Roman Empire. Where are we? What are we and where are we going?
Think on this. Ponder it. If it does not make you shake a little then you don't understand. There are creative solutions that we can take NOW. It does not require a collapse and an intervening millennia to rebuild what once was.
Live well.
--Zavost
