Ever since the government has announced record high unemployment numbers, the Market has been on a tear. Coincidence? Not really. Even though unemployment may hurt the production economy and damage our social fabric, nothing is better for the big banks than continued increases in unemployment. This again is because of the new economic law of our time, that I mentioned in a previous post: The greater the loss the greater the profit.

Rising Unemployment = More Bank Losses = More FREE Money from the Fed

Specifically in the case of unemployment, rising unemployment simply means more massive losses for banks on a host of credit products. These losses contribute to imagined fears of some sort of impending financial Armageddon, the fear of which forces the Fed/Treasury to print another few trillion dollars and give it to the banks for free. Nothing of course is more profitable than free money (just ask the folks at Goldman), so surely the big banks are rooting for continued high unemployment, and more financial losses.

Will the Profits of High Finance Support a Non-Working Economy?

Interestingly, the Fed and the Treasury have now perfected the art of printing money thru financial black holes, like AIG, FNM, and FRE, to support losses and award other government-sponsored beneficiaries. This shell game serves the purpose of obfuscating the true source of capital for big banks, and thereby averts a complete collapse of our economic system by maintaining the mirage that one needs to work to make money.

Nothing of course is farther from the truth. Work is the exact opposite of wealth in a finance-driven economy. There is no additional labor needed to print $1 trillion or to create a new $1 trillion derivative market. Finance operates in the realm of fantasy, not reality. As such, the amount of money available in financial capitalism, as distinct from production capitalism, is only limited by our imagination, which of course is unlimited.

The problem, however, is that as the cycle of big losses and continued free money handouts repeats a few more times, it may dawn on more and more people that perhaps the whole notion of employment in the economy is overrated. For why exactly does anybody really need to work if the Fed and Treasury can just print money and gives it to Goldman Sachs and other big banks to trade amongst themselves? Surely, as more money is printed, larger and larger financial profits and bonuses will be generated. At some point, this financial profit can then be recycled back into the economy to support the lifestyle of the 99.9% of the population that is unemployed.

Of course, if this fantasy world of finance would really work, at some point there won’t be anybody left to actually produce or service anything real in the economy. But, whoever said producing or making anything useful is important to an economy?