The United States equities markets are the envy of the world with over $52 trillion in notional value representing ownership in some of the most innovative and successful companies on the planet. It is no understatement to say that the American securities framework and the dollar-based monetary hegemony has been the most successful financial system in the history of the world.
Yet at the same time it’s undeniable to realize that despite the roaring markets America is not in a great place internally. Culturally there are two Americas, with nearly completely incommensurate values and worldviews in which the most foundational ideas about reality itself are now contested. Despite the polarization there is one thing that is undeniably true, America is still a great place to do business and opportunity—even in wake of its fading power—still exceeds many other developed countries. And so long as that remains true, the Big Vehicle that is the American project will assuredly plow ahead on its preset path regardless of internal strife, albeit one where nobody is at the wheel and its institutions are subject to irreparable sclerosis and stasis.
Nowhere is the more clear than with the Securities and Exchange Commission, a government agency which under the last administration seems to have been completely defanged and gutted from the inside. Investment scams that historically would have clearly have fallen under the remit of the agency have been let to run wild with no consequences. Nowhere is this more clear than with the proliferation of crypto fraud which has exploded in its scope and damage with seemingly no guidance or answer from our democratic institutions.
The fundamental framework for investment contracts, the Securities Act of 1933, can no longer be considered the law of the land if it is not enforced. The outlaws have strolled into town by the thousands, tied the sheriff up in his office, and have proceeded to pilfer anything that isn’t tied down. Some very clever crypto investors have realized that in institutional sclerosis of a declining system they can effectively launch a distributed denial-of-service attack on its legal system and overwhelm the courts to the point where laws become unenforcable. The wheels of justice have been clogged and simply can’t turn anymore when criminality becomes the everyday norm.
And why wouldn’t they try, the scope of the gains to be made from dismantling the SEC puts literally the entirety of the US capital markets in the pot for the taking. Every public company now has a normal cap table which is regulated and controlled, but now they simultaneously can issue a shadow cap table which allows them access to issue completely extralegal shares and sell them to any international buyers with no governing law. The opportunities for manipulation and profit are limited only by your imagination and we haven’t seen that kind of opportunity for naked profiteering since the 1920s.
There is a kind of twisted neoliberal logic to what companies like Tesla and MicroStrategy are doing here, they are in a sense just optimizing for shareholder value. But the definition of a shareholder has shifted from what the SEC defines to what they define. There’s no cop on the beat in the digital proxy-equity shadow economy, and crypto is a world in which the Pirate Code and appeals to “community” have replaced the courts and our democratic institutions.
My only surprise is that the twilight of Securities Act hasn’t led more private equity firms to just start raiding the nearly 600 listed zombie companies and turning them into exchanges and crypto pump and dump farms on the back of existing brand recognition. If I was a corporate raider my head would be spinning with dollar signs with the opportunity to basically gut large portions of the NYSE and squeeze every last bit of value out of them into an offshore crypto slush fund completely beyond the reach of the tax authorities. Once PE firms finally realize this, there are literally trillions to be made from the regime change of the United States from rule of law into hypercapitalist digital anarchy. If you want to profit from collapse, this is easiest and surefire way to secure your chunk of the American economic carcass in some offshore tax haven so you can sip mojitos from the beach and watch the end.
This could all happen very fast once the capitalist paperclip maximizer gets ahold of the equities market, like a giant black hole devouring a star and ejecting the capital outward. The world after that cataclysm is likely a very different landscape and probably one in which the balance of international power shifts to the Asian pole and to countries which can effectively isolate themselves from the systemic risks of crypto.
All this being said, none of this is a certain future. The United States could bring all these unregistered crypto securities under the remit of the SEC and stymie shadow capitalization tomorrow if there was political will to do so. Perhaps SEC Chairman Gensler isn’t a bumbling bureaucrat with his hands tied behind his back, and will actually give the markets the chemotherapy they need to halt the spread of crypto cancer. But I’m not holding my breath.
Historically we’ve always seen an ambient level of corruption that Americans have simply learned to tolerate, and the only difference now is that like a frog boiling they’ve decided to simply self-cannibalize their markets in a giant orgy of corruption and grifting. And there is a kind of historical poetry for this being the way the American empire ends itself from within, not with civil war but with scofflaw financialization.