Who Benefits When Bubbles Burst?

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Charles Hugh Smith examines this important but often neglected question. Really, who does benefit from a bust?

He identifies the answer – people in power who use “shock doctrine” tactics to grow their power during and in the wake of an implosion. But he doesn’t think that the people who benefit from busts are blowing bubbles just for power grab purposes. He believes that naivete is actually key. We generally agree with him.

Those in charge of the Status Quo believe the fantasy that the next bubble will usher in the long-awaited return to organic growth. As absurd as this may seem, I don’t think we should discount the naivete, real-world inexperience and credulity of those in power–not just in the state, but in think-tanks, academia and central banks.

Keep in mind that these organizations ruthlessly select out dissenters and those with real-world experience. Those who question the Status Quo arrangement in academia, think-tanks, state agencies, central banks, etc., are weeded out: passed over for advancement, sent to Siberia, marginalized or fired. Those left in charge have little real-world experience outside the cloistered halls of power, and little willingness to risk their own rise to power by questioning the Keynesian Cargo Cult’s serial bubble-blowing as the magic that will spark organic growth.

This quasi-religious faith cannot be questioned, for the simple reason there is no Plan B. There is no official policy alternative to the Keynesian Cargo Cult’s serial bubble-blowing, because any alternative would necessarily disrupt the existing power structure.