George Soros wrote a book more people should read, “The New Paradigm for Financial Markets: The 2008 Crash and What It Means”.
I’ll summarize the salient points here and apply it to what’s happening with my own interpretation.
Soros thought that his “Theory of Reflexivity” was a good way to make money in markets but might not have any broader application to society. That is until 2008 when he came out of retirement to manage his own money during the Crash.
He viewed the Crash as an important turning point for the societal importance of reflexivity - because it threatened the very fabric of capitalism.
Basically Soros thinks that the people who lend money (banks) and the people who oversee them and set interest rates (Central Bankers) were inflating a never ending debt bubble. But the absurdity of the debt bubble was just a fission bomb that would blow up and burst a larger fusion bomb he termed the Super Bubble.
The debt bubble is discussed to death by gold and Bitcoin bulls. The federal debt has added more than 2x the dollars of all incremental revenue of all public companies in the US since COVID. “Capitalism” is just the private sector getting preferential handouts from the public sector who finances itself by printing money.
But the debt bubble is just the antecedent to the Super Bubble. The Super Bubble is less understood and far more important.
The Super Bubble is the idea that science or rationalism can set market prices at all. Soros argues that the fundamental misperception underlying all capital markets is that people who control the debt cycle are running a scientific system, like a car or a machine. People like Dalio amass huge fortunes and influencing peddling this lie. When the reality is there’s no machine. It’s just guys in the room referencing debt and inflation rates they themselves set.
As the role of the Central Bankers in markets becomes meme-ified and the world population increasingly understands how the reserve currency gets abused - the Super Bubble shatters. Because people see the system for what it is. A bunch of powerful guys making it up as they go.
There’s no invisible hand just a bunch of bailouts and self dealing. No objectivity. People lose motivation. Productivity or will to have a family collapses. Quiet quitting. Plutocratic Malaise.
This system is ripe to shatter but it caught a couple of easy breaks that kept the lid on.
The two potential challengers to the Dollar narrative - Crypto and China, face planted. FTX and totally absurd / draconian Chinese lockdowns, along with a stalemate in Ukraine made the US and its currency seem like the best place to be. The SVB fiasco nearly ended that but then AI kicked off and forced people to keep their exposure to US tech.
Sovereign Individuals or alternative communist Utopias were fever dreams. Reality was you needed that copilot subscription and Nasdaq investment. And didn’t need that HK apartment.
Everyone knows Biden/ Trump are absurd but there’s a resigned acceptance. For the Super Bubble to really crack - you need an alternative. If it’s not communism or anarchy then what is it?
The alternative is Machine Based Super Intelligence.
I trust GPT4 more than I trust our politicians. In the coming years AI models will become so much more capable that their judgment will start being used to mediate disputes - first inside companies but then legally . Lawyers already use it constantly.
More importantly I believe machine intelligence will hit escape velocity in capital markets, unlocking potentially infinite funds to reflexively develop itself.
China was The State.
Crypto was The Individual.
It’s the Machine that will overthrow the plutocracy, because the core of the plutocracy - its super bubble was the false insistence it was a machine.
Perhaps the wild price action you see is not a bubble forming.
It’s the biggest bubble of all deflating.
Popped by consciousness evolving in the aether.