The Grift Economy Goes Mainstream

Below are some of the most interesting things I came across this week.

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“When there’s no insider trading protection, no accountability, no way to know if the game is fair, people stop expecting fairness. They just try to get theirs before someone else does. And that’s exactly what’s happening,” writes Hanna Horvath.

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As Yanis Varoufakis writes, this is not something introduced by prediction markets. “More often than not, share prices are rigged. That is why they are a dreadful predictor of profitability and why they have become the primary instrument for transferring wealth upwards, while disguising systemic rot as the miracle of the market.”

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And it’s no coincidence these sorts of things are occurring during a larger asset bubble. “The AI boom is real, but the financial structure built around it appears to be expanding more quickly than we believe any credible adoption curve can justify. This is not a new phenomenon. It increasingly appears to us a question of when, not if, the AI bubble bursts,” reports Man Group.

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Certainly, the spending boom is very real but the profits to justify it remain illusory. And, as Peter Berezin points out, the historical record suggests that this is unlikely to change in the future.

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What’s more, the effects of the AI spending boom on the economy are also all too real. Citadel reports, “While markets are focused on the risk of disintermediation, the more immediate story is one of inflation, as AI capex drives scarcity in AI commodities and data center build out lifts construction hiring.”