Series Table Of Contents

Previously: Greatest Story Never Told

To fully decode the Financial Matrix and confront the Index Fund Question—whether or not passive investing is “worse than Marxism”—we must trace the code back to its source and examine the Architect’s monumental legacy across markets, finance, and economics. The institutions Marschak built, led, and shaped—and the wider networks of students, colleagues, and collaborators that formed around them—directly produced or incubated virtually the entire canon of modern finance and econometrics:

To separate Marschak’s technical legacy from the ideology animating it is impossible—for they were always the same project, as the full arc of this series will prove. Models and equations served as scientific-seeming camouflage for the Architect’s vision for society, translating his political aspirations into mathematical form.

Once laundered through equations, that vision could circulate under the veneer of objective technical knowledge rather than as contestable political commitments. Over time, as economists, financial institutions, and regulators absorbed the Architect’s vision and methodology—and embedded them into Nobel Prize-winning theory and market practice—his ideology was invisibly installed as the base layer of the Financial Matrix’s operating system. By rewiring markets from within, Marschak encoded the digital nervous system through which global capital—and increasingly AI—sees, prices, and governs the world.

Marschak’s Marxism

In his youth, Marschak pledged his political allegiance to Marxism by joining the Mensheviks. As we will show in later chapters, this was no mere youthful dalliance with Marxism. He did not renounce Marxism upon arrival in America; rather, he shed its name but not its nature, changed its uniform and its language—and wove its ideology so deeply into the fabric of the modern world that we no longer even recognize its origins. The lesson Marschak carried out of Russia and Nazi Germany was not that socialistic planning was impossible or ill-advised; it was that planning by overt seizure was primitive—Marschak needed to design a subtler, more sophisticated architecture capable of optimizing society without anyone noticing.

Marschak exploited a profound psychological truth: to most observers, a market is ‘free’ so long as the State hasn’t literally seized the factories, outlawed private property, or begun centrally planning the price of a loaf of bread. It appears to be capitalism if people conspicuously consume Hermès bags, corporations compete, entrepreneurs launch startups, and Elon Musk is able to IPO SpaceX.

From Marxism To Truman Show Technocracy

Marschak left overt Marxism behind in Russia and Germany, but he did not abandon the fatal conceit that had animated his youth; in America’s capitalist economy and universities, he found a new host for his technocratic ideology. Here, the old socialist revolutionary traded its worker’s coat for a suit, and reemerged as mathematical economics in order to disguise the socialist-planning question as neutral economic “science.”

These formulas, theorems, and algorithms were not discovered as “natural laws of capitalism” nor were they ever intended to describe markets. They were invented specifically as a Trojan horse to reconstruct markets as administrative tools for socialist planners.

A model of markets, once embedded in algorithms, academia, regulation, and institutions, teaches capital how to flow. The map begins to rewrite the terrain. For Marschak, that was the entire point. His life’s work was not to map the market terrain, but to replace it. He desperately wanted society rendered mathematically tractable, because then and only then could he attempt to rationally “solve” society as an optimization problem.

Even the socialists had discovered that markets were useful—not for the freedom and prosperity they promised, but as instruments of optimization and social engineering. Let consumers buy, let investors purchase index funds, let workers choose jobs, let prices allocate day-to-day production—but only within pre-approved channels. The commanding heights—interest rates, savings, investment, the structure of the economy and financial markets—should remain planned and under “rational” administrative control.

Programming Markets: Seizing The Means Of Allocation

The problem with all of this, of course, is that once human life is reimagined as a mathematical optimization problem to be ‘solved,’ your preferences as an individual become the system’s most persistent inefficiency to be engineered around.

Anyone who has used Google Search or a social media app has already experienced this type of algorithmic black box. The social media feed never simply defaults to showing us what we want; it edits and arranges information long before we encounter it while scrolling on our iPhones. The feed algorithmically decides what gets surfaced, what gets “shadow-banned” and buried, what gets amplified, and what is removed altogether from the menu of possible thought. This logic was infamously captured by the quote “freedom of speech doesn’t guarantee freedom of reach.”

Because the control does not appear to be overtly top-down, it still sometimes feels like reality unfolding naturally before us. And the interface is generous with the vocabulary of agency: it permits us to like, mute, and follow—allowing us to feel as if we are experiencing “choice,” “preference,” and “market feedback.” Subconsciously, we come to believe we are the authors of our feeds—that their information content reflects a thousand small choices we made freely, a digital self-portrait of our interests. We are not the authors of our feeds, however, but rather their subjects: social media is a Truman Show engineered for us by those who designed the algorithm. It is not a mirror of reality, but a mechanism for allocating it.

Prices—in both the financial markets and the real economy—have long been subject to the same treatment at the hands of the Architect and his intellectual descendants. Once prices are captured by their models and equations, they become a control surface—one that can reward, punish, subsidize, ration, channel, and discipline behavior without ever announcing itself as command.

The social media feed makes the mechanism of control intuitively obvious in a way the price system rarely does. Few among us have ever felt prices being curated by algorithms, but nearly everyone has seen “influencers” boosted on Instagram or Twitter—and has viscerally felt a feed curating their informational reality without their consent.

Index Funds As Social Media Influencers

The algorithms powering social media feeds are many, but one mechanism inside the recommendation stack has a direct analogue in capital markets. “Influencers” that already attract engagement are more likely to be boosted, which can generate still more engagement, followers, and distribution in a self-reinforcing loop.

The S&P 500’s market-cap-weighted algorithm operates on a similar principle, but directs capital rather than engagement: the larger a company’s market value, the greater its index weight—and the greater the share of each new dollar flowing into passive index funds that is automatically allocated to it. As and others have shown, the result is a rich-get-richer curation system that converts prior market success into future allocation priority.

From The Invisible Hand To Invisible Fist

But index investing is merely one algorithm by which capital is now directed. As later chapters will show, nearly all such algorithms—and more importantly, the ideological methodology on which they are based—can be traced through Marschak.

The Architect didn’t use his scientific-seeming math to invent a thermometer that measures the temperature; instead, he invented a thermostat that sets the temperature. He seized the means of allocation—the price system itself—rather than the means of production. In doing so, he helped turn capitalism into a curated feed of HyperPrices masquerading as real prices, just as social media feeds display curated HyperReality.

Soviet-style central planning becomes unnecessary if the Financial Matrix determines which judgments are allowed to become prices, which are amplified, which are suppressed, and which are snuffed out before they can register at all. What the social media feed is now doing to our “information content,” the Financial Matrix had already been doing to prices in the economy and markets.

The point is not that passive investing, HFT, “quant factors,” CAPM, Sharpe ratios—or any of the Architect’s intellectual offspring—are literally Marxist. The danger is perhaps more insidious than overt central planning: all of these ideas were developed as part of a broader project to import the logic of socialist planning into the market itself—not by abolishing prices, private ownership, or competition, but by programming the mechanisms through which capital is measured, ranked, and allocated. They are all prominent expressions of the same sweeping ambition we explored in Value In The Age Of AI Technocracy—an ambition fundamentally hostile to Adam Smith’s “invisible hand” and the American conception of freedom.

Priests & Merchants

The Architect and his immediate intellectual descendants were ideologically driven Priests: theorists who embedded their ideology into mathematical models, benchmarks, and seemingly neutral rules. Investors, on the other hand, are Merchants: they need not understand or believe in the ideology; they only need to profit. Their creed is “these are the market conditions now,” and they adapt to whatever thermostat setting they’re handed rather than asking who set the temperature and why.

The Priests therefore only needed to win adoption by a “long march through the [financial] institutions”: once the S&P 500 became “the market,” for example, dissent became defined as tracking error. The Merchants then did the rest, reinforcing the Priests’ ideology. When trillions in passive flows mechanically bid up the largest index weights, for example, the rational investor does not protest the distortion—he anticipates it, front-runs it, and pockets billions:

Society Optimized To Run Like A Motherboard

All of this perhaps explains why modern ‘capitalism’ increasingly behaves like a social media feed—one in which the Forgotten Man is “shadow-banned.” This is hardly an accident: Marschak and colleagues laid much of the theoretical groundwork for not only the algorithmic systems that now govern the Financial Matrix, but also for social media and AI.

Marschak and company permitted the market to live—even Hermès bags and SpaceX—but only after stripping it of sovereignty. Technocratic planners determined the top-down architecture, markets were permitted to optimize locally within predetermined channels, and consumers and producers were “nudged” as necessary to meet the planners’ goals.

Only now, perhaps, does Slavin’s caustic quip about high-frequency trading fully land: New York City “optimised to run like a motherboard”—while human beings were left “just loitering.” Slavin had inadvertently revealed the terminal logic of the Architect’s dream.

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Series Table Of Contents

Previously: Are Index Funds Communist?

Designed, Not Discovered: The Ideology Is The Architecture

In Part I: Hypermarkets, we introduced the Architect: the long-forgotten father of finance, whose influence permeates every aspect of the modern economy and financial system.

In Part II: Are Index Funds Communist? we revisited the decade-long debate over whether index investing has “crossed the Rubicon”—grown large enough to impair the price system.

But even the boldest heretics treat passive investing as a brilliant “free market” innovation rooted in Nobel Prize-winning science that simply grew too large—a victim of its own runaway success.

The market distortions now visible under pervasive passive indexing are not merely the result of scale, however—even if scale is what finally made them impossible to ignore. They are the wages of an Original Sin committed by the Architect at the birth of modern finance itself—one whose true origins and nature have never been properly told.

Of course, a controversial beginning proves nothing on its own, nor do compromised origins in and of themselves invalidate everything downstream. Einstein was famously a socialist, and Wernher von Braun’s rockets reached the moon despite the ideology of his youth.

But finance is neither physics nor rocketry, and there is a world of difference between discovering a law of nature and attempting to write one. In modern finance, what masquerades as organic discovery has, from its very inception, been deliberate legislation—a claim so sweeping, and so improbable on its face, that it can merely be asserted here, accumulating the weight of proof across the chapters to come.

Nevertheless, the Nobel Prize-winning financial models that now govern trillions in assets did not reveal underlying reality—they purposefully remade reality in the image of the Architect’s ideology. As these models hardened into the Financial Matrix, that animating ideology became its organizing law, conscripting economic and social reality into its service.

When Ben Hunt warned that markets had become a ‘political utility,’ his diagnosis was more literally accurate than even he could have known: what he identified is not a recent corruption of the market, however, but rather a feature hardcoded into its architecture at the moment of Original Sin nearly a century ago.

Expose the Architect and his ideology, and we entirely invert the foundational myth of global capitalism, forcing us to recast everything we think we know about the markets, about finance—even about twentieth-century history itself.

The Map Rewrites The Terrain

An 825-mile trench runs from New York to Chicago, its path cleared by rock saws and dynamite blasts—the culmination of a secretive $300 million project to forge the straightest route geography would permit between the two financial centers.

It carries no passengers; it moves no water, oil, freight, or electricity.

It carries one kind of traffic, and exists for only one reason: so that an algorithm can execute a trade three milliseconds faster than competing algorithms—“37 times faster than a person can click a mouse.” The fiber optic line, built by Spread Networks and vaulted into notoriety by Michael Lewis’ Flash Boys—his exposé of High Frequency Trading (HFT) and Flash Crashes—became the physical emblem of an economy optimized for financial algorithms.

The trench itself ended at a server farm in New Jersey, but as the network’s signal breached lower Manhattan, the city itself began to contort around the vast infrastructure required to process it. The signal surfaced at 60 Hudson Street—the former Western Union headquarters, now a massive carrier hotel boasting 45,000 square feet of server space—making the traditional servers down on Wall Street agonizingly slow by comparison. A fierce proximity war erupted. To shave a few milliseconds of latency from the execution time, the surrounding blocks were hollowed out; buildings that once housed people, offices, and ordinary commerce were gutted and repurposed to meet the demands of trading algorithms.

Whatever humans were doing couldn’t possibly be as valuable as what an ultra-fast trading algorithm could accomplish in the same square footage. As Kevin Slavin noted mordantly, New York is “becoming optimised to run like a motherboard...and you, all of you [humans], are just loitering.”

More than a decade before AI frontier labs began reshaping the world to accommodate their data centers, our landscape had already been terraformed—or perhaps more accurately, algoformed—around the mathematics of modern finance. The raison d'être for this algorithmic manifest destiny: extracting money from the prices of assets traded within the Financial Matrix. Not prices determined by human buyers and sellers deciding what something is worth, but HyperPrices emitted by algorithms fighting other algorithms at the speed of light.

Spread Networks’ cable, and Manhattan-as-Motherboard, are spectacular physical monuments to the Architect’s Original Sin. They expose the hardware substrate of the Financial Matrix: the physical layer through which abstract mathematics acquires force in the material realm, translating equations into power over human life itself.

This is the dream of the Architect made manifest: the teeming chaos of decentralized human judgment snuffed out and replaced by the cold certainty of mathematics—a world in which human enterprise is no longer the purpose of finance, but a dangerous force to be disciplined, sterilized, and routed around.

The Respectable Algorithm: Index Investing

But HFT’s rewriting of both markets and our physical terrain alike is only the most lurid outward expression of the Architect’s deeper ideology. Elsewhere, that same ideology hides inside innocuous-seeming institutions: pensions, 401(k)s, target-date funds—and in the gospel of index investing that has increasingly made passive funds the core of those portfolios, and indeed of markets themselves.

On the surface, a passive index fund innocently nestled within a retirement account seems universes removed from the fiber-optic cables and flash crashes of high-frequency trading. One is frantic and predatory; it involves firms tunneling through mountains, hollowing out buildings, and displacing human tenants to benefit execution times for algorithms with violent names like The Knife. The other is respectable, passive, almost pastoral—the financial equivalent of farming, patiently harvesting the slow-ripening bounty of American Exceptionalism for widows, orphans, and everyday savers, operating on a tectonic scale of decades rather than microseconds.

One is dragged before Senate hearings; the other is preached as gospel by those same Senators—as well as presidents, regulators, attorneys general, academics, employers, retirement-plan consultants, wealth managers, and personal-finance gurus. One is so fast no human being can perceive it; the other is so simple no human perceives it to be an algorithm at all. The differences are superficial, however: differences of speed and respectability, perhaps, but not of kind.

Animating both—animating all of modern finance—is the same underlying belief that markets can be “solved” by math and rules. In order to “solve” the equations—as we explored in The Price Of Everything & Value Of Nothing—prices are assumed to be no different than other data warehoused across a sprawling network of hard drives on Microsoft Azure or Amazon Web Services (AWS). This assumption allows prices to be acted upon by rules and mathematics as if they were the same as any other type of number such as temperature or voltage. Neither HFT nor index funds ask what something is worth to individual humans—both have simply replaced that question with a self-referential rule that takes it as given that price and value are virtually synonymous.

These mathematical “solutions”, however, were not laws of nature—latent in the market and awaiting revelation by some University of Chicago professor scribbling equations in chalk on a blackboard, as if finance had finally discovered the physics of markets. Someone wrote this source code into the Financial Matrix: a specific person, at a specific moment in history, possessed by a purely ideological need to make the world tractable to mathematics and algorithms.

To find the Architect, we must descend from the University of Chicago ivory tower—with its mathematically pristine models of economic equilibrium and efficient markets—and enter an all-too-human world that was catastrophically un-optimized: a world so chaotic, so bloody, so irrational, and so saturated with violence that no math could have described it, let alone tamed it.

The Architect’s Great Escape

The year after the outbreak of the Russian Revolution, in the late autumn of 1918, a 20-year-old Menshevik was fleeing for his life. He’d nearly been killed as three rival factions shot at each other across the city. His revolutionary career lay in tattered ruins; he had no money, no country, and had no clear idea about his future.

The vicissitudes of fate that had brought him to this point had been improbable even by the standards of revolutionary Russia. He’d traveled by horse cart, by truck, and on foot. Staying had meant prison, or worse; en route he had already been seized once by a suspicious Cossack, and escaped arrest by diving under a freight train car just as the train began to move.

Before the revolution, he’d already known the inside of the Tsar’s prison, but this was a new order of danger for the young man whom the tsarist secret police, after tracking his Kiev student cell, had once code-named Dobryi: The Kind One.

Under moonlight, as the wagons climbed a ridge, horsemen surrounded the wagons. They demanded papers, but they wanted money, clothing—anything portable. They robbed the caravan, allowed it to move on, and then circled back to rob it again—playing a sadistic game of cat-and-mouse with the refugees for amusement. Among their plunder were two dozen freshly starched shirt collars of Dobryi’s Georgian companion, who complained bitterly about his loss for the remainder of the journey.

Dobryi, however, knew better than to fret over such bourgeois vanities. Not long before, somewhere near a stanitsa—a large Cossack settlement—Dobryi had already learned the fate of several comrades who had been seized from a train and shot—among them a fellow commissar for land, who had been told, simply, “you oversee the land? we will put you under it.”

It was on the Georgian Military Road—a historic thoroughfare that had borne armies, pilgrims, and refugees for centuries—across those Caucasus mountain passes and down into Georgia, that Dobryi was now attempting his escape.

In prior months, he had served as a Secretary of Labor in the makeshift socialist government of the Terek Republic—a fragile coalition consisting of Mensheviks, Bolsheviks, and Socialist Revolutionaries sharing power alongside Cossack atamans and tribal delegates from a dozen mountain peoples, most of whom had been shooting at each other within recent memory and would be again, soon.

Dobryi had written the founding manifesto for the rival breakaway Mozdok Provisional Government of the Terek Republic, which formed when the Bolsheviks consolidated their grip on the capital. It opened: The People’s Government of the Terek Region declares to all the citizens... His colleague Mamulov had insisted they work in the phrase Alexander II used when establishing the new courts: “Not the right of force, but the force of right.”

As Secretary of Labor earlier that year, he had been assigned the task of drafting labor legislation for the industrial workers of the region. He studied German social insurance models and unsuccessfully attempted to turn them into policy for an oil-and-railway economy already surrounded by armed groups that barely recognized the government’s authority.

Money had already ceased to exist in any meaningful sense; “white money,” handmade bankers’ checks on scraps of paper, was printed in excess because real currency was scarce. Dobryi, as Secretary of Labor, helplessly watched the inflation spiral out of control. He stood in the main square of an oil city with burning gushers on its horizon and told unemployed proletariat that “the workers must not be the kept woman of the revolution”—a line he would later call very stupid, because he had nothing to offer them but words.

The Republic’s leader was shot dead at a military parade in June and the region tipped into civil war. By July, the Cossacks had declared open war on Soviet Bolshevik authority. By August, a purge congress had been convened; meanwhile the Volunteer White Army under Denikin was consolidating power and advancing toward the Caucasus. Dobryi’s closest friends—Menshevik and Bolshevik alike—were expelled or fled.

For weeks he hadn’t known whether a girl counted among the dead was his sister. He telegraphed ahead from Kazbek, a waystation on the Georgian Military Road, and descended to find his sister waiting at the school of St. Nina in Tiflis; he later described the reunion as one of the greatest experiences of his life. They left Tiflis by train to Poti—Batum having fallen to the Turks—and took a boat to Sevastopol, crowded with German prisoners of war returning home after the Armistice.

Somewhere on the water he contracted Spanish flu, a scourge then killing tens of millions across the continent and beyond. Dobryi ran a fever that his sister described as the highest she had ever seen. One man on the boat died of the flu and was buried at sea. Someone let Dobryi into the engine compartment, which was sweltering—probably the wrong environment for a deadly flu; still, he nursed himself back to health on cognac after another passenger assured him it was the best remedy. By the time they reached Sevastopol he could walk, but only just, and he held his sister’s shoulder as if she were a walking stick. They were quarantined on arrival.

They traveled from Sevastopol to Kiev. On the streets of Kiev, German soldiers walked in groups of four, patrolling a city that was no longer theirs to patrol, maintaining order. The Germans had cleaned up Kiev and the railroad station, which had been all but abandoned to filth—most notably the cracked shells of sunflower seeds that Russians ate nervously while arguing politics; the Germans posted VERBOTEN signs, and swept everything out.

The Architect In Exile

His name was Jacob Marschak.

And once you understand what he spent the rest of his life building, why he built it—and how his students, colleagues, and institutions carried that project forward—you will never see index funds, markets, or society itself the same way again.

Both Jack Bogle’s Vanguard and Spread Networks’ fiber for HFT algorithms are—in a line that runs straighter than that cable itself—Marschak’s intellectual offspring. His life story supplies the Rosetta Stone that decodes the mystery of modern market structure, for he is the hidden Architect. His ideology permeates the entire edifice of modern finance so completely that it invisibly reprogrammed the market from the inside out.

Marschak authored the primary kernel of the Financial Matrix: the base layer of code through which global capital—and increasingly Artificial Intelligence—now sees, prices, and governs the world. “Alpha,” “beta”, and “market neutral.” Options pricing and the hyper-financialized casino of 0DTE derivatives. Multi-manager pod shops like Citadel and Millennium. Quantitative powerhouses like Renaissance, D.E. Shaw, AQR, and Jane Street. Factor investing. Prediction markets like Kalshi and Polymarket. All of it is downstream of Marschak.

Marschak would find his way, eventually, to Weimar Berlin, then flee the Nazis and land in London; he escaped the impending World War by emigrating once again—this time to America. By the time he reached New York in 1939, Marschak had already involuntarily emigrated three times in two decades—surviving pogroms against Ukrainian Jews, Tsarist prison, the Bolshevik Revolution, two hyperinflations, the Great Depression, Nazism, and the outbreak of a Second World War.

He had escaped all of the old world’s catastrophic attempts to plan society; and yet nonetheless he would spend the next forty years translating the same fatal conceit that had just laid waste to everything around him—the dream of “solving” society—into a new form on American soil.

Up Next:

The Control Surface: Markets As Social Media Feed For Capital

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Sources / Further Reading

This essay draws on multiple accounts of Jacob Marschak’s life, including Jacob Marschak, Recollections of Kiev and the Northern Caucasus, 1917–18, interview conducted by Richard A. Pierce for UC Berkeley’s Regional Oral History Office; Kenneth J. Arrow, “Jacob Marschak,” Biographical Memoirs of the National Academy of Sciences; Robert W. Dimand and Harald Hagemann, “Jacob Marschak 1898–1977: From a Russian Revolutionist to President-Elect of the American Economic Association”; and Béatrice Cherrier, “Rationalizing Human Organization in an Uncertain World: Jacob Marschak, from Ukrainian Prisons to Behavioral Science Laboratories.”

Series Table Of Contents

Previously: HyperMarkets

The Silent Road To Serfdom

A decade ago, deep in the lull of Wall Street’s late-August doldrums—when trading desks were thinly staffed and the financial world was waiting for Labor Day to breathe life back into the markets—a team of high-ranking investment strategists at AllianceBernstein roused investors from their torpor.

Bernstein published an investment strategy note that lent institutional imprimatur to the ultimate economic heresy:

The Silent Road To Serfdom: Why Passive Investing Is Worse Than Marxism

The idea had actually been circulating for months before Bernstein dragged it into the mainstream limelight. Chris Wood—then at CLSA, now Global Head of Equity Strategy at Jefferies—had made much the same argument in GREED & Fear, but Bernstein’s note was what finally handed the heresy its pulpit.

On its face, Bernstein’s note read like financial clickbait (if not redbait). You were buying, quite literally, the market. How on earth could owning the market be anti-market? The answer was right there in the very word itself! The accusation of Marxism wasn’t just counterintuitive. It was seemingly incoherent—bordering on insanity.

The S&P is the very concept of American enterprise: ticker-ized, bottled, and sold for pennies. Bogle, not Bolshevism. Not a product so much as a principle—capitalism incarnate, indexed and evenly distributed—the purest expression of the idea that markets, left alone, know better than any Soviet expert, committee, or central authority ever could.

Why, index funds are as American as baseball, hot dogs, apple pie, and Chevrolet! Yet here was a room full of suits at a firm overseeing nearly $1 trillion in assets, arguing that—beneath this patriotic veneer—the quintessential capitalist investing vehicle was more Red than chess, cabbage, borscht, and the Lada.

For generations, Wall Street had famously viewed Marxist central planning as its ultimate ideological foil—the very negation of markets, prices, competition, and freedom. How, then, could the most popular investment vehicle in the history of American capitalism—the wholesome, foundational staple of every modern portfolio—be not merely flawed, but fundamentally worse than the blind bureaucracy of the Kremlin’s Gosplan?

Defenders Of The Faith

Bernstein’s note sparked a wave of media coverage and debates, including a hilarious (by finance industry standards, anyway) article from Bloomberg columnist :

Over the ensuing years, financial luminaries joined the fray. Towards the end of 2016, Burton Malkiel—the famous Princeton economist and author of the bible of passive investing, A Random Walk Down Wall Street—rode to indexing’s defense in the Wall Street Journal:

Malkiel concluded his op-ed:

Index funds have been of enormous benefit for individual investors. Competition has driven the cost of broad-based index funds very close to zero. Individuals can now save for retirement far more efficiently than before. It’s been a while since I’ve brushed up on Marxist economics, but to me that sounds more like a transparent, well-functioning market economy than a “silent road to serfdom.”

The case, it seemed, was closed: the Godfather had spoken.

From Heresy To Chorus

Six months later, however, Jack Bogle—the other godfather of passive, the man who built Vanguard into a behemoth—grudgingly conceded that, taken to its logical extreme, Bernstein’s thesis was correct:

Then, later that year, the man who wrote the book on bubbles—Yale’s Robert Shiller, Nobel Laureate and author of Irrational Exuberance—appeared on CNBC to voice his own concerns:

By 2019, of The Big Short fame escalated the rhetoric, comparing the passive bubble to the synthetic credit structures that helped detonate the 2008 Crisis:

Burry recognized in equities the same alchemy of risk he had once diagnosed in mortgages:

Central banks and Basel III have…removed price discovery from the credit markets, meaning risk does not have an accurate pricing mechanism in interest rates anymore. And now passive investing has removed price discovery from the equity markets. The simple theses and the models that get people into sectors, factors, indexes, or ETFs and mutual funds mimicking those strategies—these do not require the security-level analysis that is required for true price discovery.

This is very much like the bubble in synthetic asset-backed CDOs before the Great Financial Crisis in that price-setting in that market was not done by fundamental security-level analysis, but by massive capital flows based on Nobel-approved models of risk that proved to be untrue.

The One-Man Crusade

In the years since, has waged what amounts to a one-man crusade. He has pressed his case before regulators, at hedge fund dinners, and on the podcast circuit; now, he is set to make his definitive argument in a highly anticipated book titled “The Greatest Story Ever Sold.”

Green argues that passive investing is systematically destroying the price discovery mechanism that makes markets function, causing a host of unintended consequences. By replacing active, valuation-driven analysis with algorithmic, flow-based buying, passive capital mechanically inflates mega-caps regardless of fundamental value, starves smaller companies of funding, and strips liquidity from the system. The result is a brittle, hyper-concentrated market stripped of corporate accountability and increasingly prone to violent systemic shocks:

This past week, Scott Rubner—formerly of Goldman Sachs, now Head of Equity and Equity Derivatives Strategy at Citadel Securities—offered what amounts to meaningful institutional validation of part of Michael Green's thesis:

Passive vehicles are playing an increasingly dominant role…Passive buying is not neutral in today’s market structure. Every $1 allocated into the S&P 500 increasingly becomes a pro-growth, pro-momentum, and pro-large-cap allocation.

Scoreboard, Bro!

That, in essence, has been the overwhelming response from market participants, academics, regulators, politicians, attorneys general—and Presidents!—alike.

Look at the returns. Look at the line. Line go up. Line has always gone up. Line will always go up.

For a decade, every existential alarm was drowned out by the engine-roar of a historic bull market that made the skeptic look like a crank. When the tachometer has been pinned at redline for that long—and every skid gets corrected by a diabolus ex machina before it can turn into a crash—nobody wants to pull over and check under the hood; they’d much rather shove the S&P chart in the face of any would-be Cassandra.

The Ghost In The Index

Nonetheless, we have spent the better part of the last decade building our case—looking under the hood of the markets and taking apart the index engine: studying its mechanics, tracing its history, reverse engineering it, and stress-testing its failure modes.

Ever since Bernstein’s 2016 note, the public debate has circled a now-familiar set of concerns. Bernstein, Wood, Shiller, Burry, and others sensed that something about passive investing had gone horribly off the rails. has done more than anyone to turn that intuition into a serious, sustained prosecution. That work is indispensable, and there is no need to relitigate the case on terrain the “Cassandra of Passive Investing” has already mapped better than anyone.

Instead, we return to the far stranger and more provocative question originally posed by AllianceBernstein. At first glance, that question appears to be about index funds. But after a decade of research, we have come to understand that this framing is itself a trap.

To fixate on the Index Fund Question—the now-familiar debate over whether passive investing has “crossed the Rubicon” and grown large enough to impair the price system—is to stare at a shadow on the wall of Plato’s Cave. The index fund is not the source; it is one silhouette among many, cast by an ideological war that predates modern Wall Street entirely.

Look past the shadow, therefore, and we don’t just illuminate the mystery of index investing—we expose the Financial Matrix itself: a digitally remastered Plato’s Cave whose projections have become our reality, whose engineered architecture we mistake for the natural landscape itself.

To see the Financial Matrix in its entirety, we must chase the shadow of Wall Street’s index funds back through economic history to the source that cast it: an arcane, seemingly inconsequential quarrel amongst ivory-tower academics. A parochial spat so thoroughly beneath notice that it might earn a single footnote in a graduate syllabus, if that—adjudicated, interred, and forgotten a century ago.

It wasn’t settled, though. The ideological war never ended—it simply evolved to the point where it became systemic. It shed its name but not its nature, changed its uniform and its language—and wove itself so deeply into the fabric of the modern world that it is now being fought in digitally remastered form on NVIDIA GPU clusters by people who may not have any idea they are on this battlefield, using tools they may not even recognize as weapons.

For a decade, even as the debate over passive grew more intense and more consequential, Bernstein’s original heretical question remained unanswered. The Sorcerer’s Apprentice & The Man Who Broke the Markets now answers it—decisively—from an entirely different origin point.

The Greatest Story Never Told

We cannot end the debate—nor understand how the “dumbest” algorithm in the history of finance became entangled with the most “intelligent” technology ever developed by mankind—without turning away from the shadows and returning to the source that cast them: who created index funds, what they actually are, where they came from, when, and why. An odd place to begin, perhaps, because the answers are by now taken for common knowledge.

As everyone knows, their origin is settled history, documented ad nauseam. Ask virtually any MBA graduate, Wall Street veteran, or financial journalist, and they will confidently recite the same immaculate conception story.

They will point to the University of Chicago. They will invoke the holy trinity of the passive revolution: Harry Markowitz’s math, Eugene Fama’s unbeatable markets, and Jack Bogle’s missionary zeal to evangelize and democratize capitalism’s bounty for the retail investor.

It is a pristine gospel of American exceptionalism: conceived in Midwestern lecture halls, funded by Yankee capital, forged in the competitive fires of the free market, and delivered to the retail investor as a Promethean gift stolen from the Olympian market gods themselves.

That creation myth isn’t entirely wrong, as far as it goes, but it is most certainly profoundly incomplete. For it is a child’s bedtime fairytale; one that picks up safely somewhere in the middle of the story, after omitting the foundational chapters. It has been sanitized so thoroughly—and in such a way—that it alters the very meaning and trajectory of everything that followed. If Michael Green is writing The Greatest Story Ever Sold, consider this its missing prequel: the Greatest Story Never Told.

Lurking in the shadows behind those Chicago economists—behind all the fancy mathematics that made modern portfolio theory possible, behind the Nobel Prize-winning models that gave index funds their intellectual legitimacy—there is another, hidden lineage: one far more interesting, far more improbable, and far more consequential than the staid procession of scientific ‘eureka’ moments we’ve all learned in school.

And it doesn’t begin anywhere near a University of Chicago seminar, or a Vanguard conference room in Valley Forge, Pennsylvania—or even in America at all, for that matter.

It begins in the winter of 1918—steeped in blood, on another continent entirely—with a brilliant young Menshevik Commissar fleeing for his life from the Bolsheviks across the frozen southern hinterlands of war-torn Soviet Russia.

Up Next: The Greatest Story Never Told

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Series Table Of Contents

Previously: Alchemy Of Risk

The Goatse Singularity

In 2024, an autonomous AI agent known as truth_terminal began posting deranged, semi-mystical riffs on the obscure early-internet meme “Goatseus Maximus.” By all rights, it should have vanished into the digital landfill alongside the rest of that year’s AI slop.

Instead, the trickster-hyperstition helped summon a cryptocurrency worth—at one point—nearly $1 billion, becoming the first AI agent in history to make itself a millionaire:

Most onlookers chalked it up to run-of-the-mill crypto casino insanity—crossed with a fledgling AI bubble—and moved on with their lives.

That was certainly an understandable reaction. It was also a profound mistake.

Because the Goatseus phenomenon was not an aberration. It was a portent—one that only surrenders its meaning once we unearth who actually wrote the source code of modern finance, and why he wrote it.

It is only through the lens of his identity and his motives that we can understand the Original Sin—the fatal flaw he embedded in that code at its very inception. And only then does the madness of the AI memecoin cease to be an online joke or some bizarre symptom of “late-stage capitalism.” It reveals itself as a feature, not a bug: the inevitable, logical endpoint of post-modern financial theory.

The Financial Matrix’s Architect

We must therefore travel back nearly a century in search of a man whom not one in a thousand Wall Street veterans could place, even though his ideas hold absolute dominion over all of their work—and indeed, over much of modern society.

His ideas govern the entire edifice of modern global capital, dictating the flow of tens of trillions of dollars, from the most sophisticated hedge funds, to banks and insurers and pension funds, to plain-vanilla 401ks and Robinhood accounts. Every quantitative model, every risk framework, every portfolio construction method and capital allocation system—in short, everything that underpins the global financial system and economy—traces its intellectual lineage to this single, forgotten figure.

He wrote the primary kernel of the Financial Matrix: the foundational code through which global capital—and increasingly AI—now sees, prices, and governs the world. Index funds. “Alpha,” “beta”, and “market neutral.” Options pricing and the hyper-financialized casino of 0DTE derivatives. Multi-manager pod shops like Citadel and Millennium. Quantitative powerhouses like RenTech, D.E. Shaw, AQR, and Jane Street. Factor investing. Prediction markets like Kalshi and Polymarket. The sub-millisecond algorithms of high-frequency trading. The now-gated private credit and private equity vehicles blowing holes in pension funds’ and insurers’ balance sheets because allocators chose them for the very “volatility laundering” illusion they had been taught to prize. Every mortgage loan, once alchemized by the securitization machine. Robo-advisors. Even lowly consumer credit scoring.

All of it flows from this same intellectual spring.

And the source is poisoned.

The Poisoned Spring Of Modern Finance & AI

The poisonous flaw remains hidden precisely because it is everywhere—an ambient feature of modern life. Having lived inside this man’s world for so many generations—having built society upon his abstract academic assumptions—we now find that his worldview has become the very air we breathe.

Those assumptions, invisible as they are, have opened deep fault lines beneath our civilization. Occasionally, the fault lines rupture violently—and even if few can correctly trace the rupture back to its ultimate source, everyone can feel the world lurch. The Nobel prize-winning masterminds of Long-Term Capital Management believed in these ideas so deeply that they convinced themselves, and their investors, that risk had been scientifically erased—until they nearly single-handedly crashed the global financial system in 1998. A decade later, seduced by the same logic, Wall Street alchemically transmuted toxic debt into AAA-rated mathematical certainties; the ensuing collapse nearly took down the global system, demanded even larger bailouts, and trapped the economy on “emergency” life support—a supposedly “temporary” measure that has since become our permanent reality.

Yet even those near-civilizational catastrophes were shrugged off as anomalies rather than indictments of the structural blindness our Architect embedded into the very foundation of modern finance. Instead of questioning the foundation, we consecrated it as doctrine and mistook blindness for objective truth—dressing it in rigorous mathematics, validating it with Nobel Prizes, and encoding it ever more deeply at the root level of global capital and even society itself.

Long before AI learned to hallucinate in language, the human architects of modern finance theory had already learned to hallucinate in mathematics.

Now, those two hallucinations are converging.

Possessed by the same hubris that forged the Financial Matrix, we are hard-coding that fatal conceit into the AI “Machines Of Loving Grace” set to govern our technocratic future.

The Map That Ate The Territory: The Uncanny Valley

At first glance, Michael Najjar’s photograph “high altitude—financial markets between reality and simulation” appears to be a generic mountain vista. Only upon close inspection does the image reveal itself as impossibly strange and unnatural, uncanny even: for no earthly mountain features such a needle-sharp spire.

The mountain’s apex marks the exact S&P peak that preceded the 2008 Financial Crisis. Najjar algorithmically reshaped the topography of a real mountain range, forcing the terrain to reflect the virtual data mountains of world stock market indices over recent decades.

Najjar’s art perfectly evokes Borges’ fable about an Empire whose cartographers drew a map so detailed it became indistinguishable from the territory itself. As the actual Empire collapsed, its citizens unwittingly began living within the abstraction that they themselves had forged; the map was so vividly real to them that they entirely forgot the reality of the collapsing Empire outside of the map’s boundaries.

Baudrillard used Borges’ fable to describe the hyperreality of modernity: we live in the map now, he said, and have forgotten the real.

When the truth_terminal bot conjured a billion-dollar asset out of nothing, it was simply operating within the parameters of the financial world we built for it. The AI stepped into a financial ecosystem that had already been hollowed out into a pure simulation, and proved that it could bootstrap a meme to $1 billion market capitalization with far more ease than an entrepreneur could create a $1 billion enterprise.

Goatseus Maximus is now the map. There is no territory—only Swedish Fish Oreos.

And lurking behind that absurdity—behind the hollowed-out simulation that modern finance has become, behind the Financial Matrix itself—is our Architect, and the worldview he imposed on us nearly a century ago. One that unleashed our Sorcerer’s Brooms and allowed them to take on a life of their own—producing “math we have written but can no longer read…math that is no longer derived from nature, but rather…rewrites nature,” and forcing the real world to resemble Najjar’s algorithmically-shaped mountains.

The Programmer In The Shadows

To find the man who created these algorithmic mountains—the prime architect of the Financial Matrix—we must look past the Mount Rushmore of modern economics; beyond Keynes, beyond Friedman, beyond the Nobel laureates who later collected the prizes for financial theory—even beyond Markowitz himself.

We must exhume a long-forgotten figure buried deep in the catacombs of the dismal science. Because the Original Sin embedded in the code he wrote is even now trapping the world in a final, systemic infinite loop.

Up Next: Are Index Funds Communist?

Next: Are Index Funds Communist?

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Previously: Financial Repression

The greatest trick the modern financial system ever pulled was convincing us that we are still playing by the old rules.

In Part I: The Forgotten Man, we showed how the productive middle class has been reduced to a “coppertop battery” whose life force powers the Financial Matrix.

In Part II: The End of Illusion, we explored how raw political force increasingly replaces the illusion of markets. This week’s front-page headlines made the point for us:

Yet the recent overtly authoritarian turn now dominating both federal and local American headlines is not some sudden aberration. For nearly two decades before the past few months’ headlines—since at least the 2008 Crisis—the Financial Matrix had already been nudging “market” outcomes, its mechanisms invisible because the user interface remained superficially intact. To the casual observer—and even to most professional investors—capitalism appeared unchanged from its pre-2008 form. The operating system beneath, however, had been invisibly rewritten into something else entirely; only the tickers flashing across Bloomberg screens preserved the illusion of continuity.

What changed in 2008 was not so much the rules themselves as the removal of the last guardrail preventing their full application. The Financial Matrix didn’t materialize from the aether; rather, it represents the perfected digital evolution of an analog precursor whose roots stretch back nearly a century—to a revolution most Americans are unaware even occurred.

The 1930s built the underlying hardware: an institutionalized framework of state intervention masquerading as free markets. But it wasn't until the Great Financial Crisis that the system received its digital operating system upgrade—when central bank QE, ZIRP, and the blind algorithmic and passive ETF flows they enabled and amplified were deployed at sufficient scale to make them the “market” itself—effectively masking state intervention as natural market action.

That two-part revolution—the 1930s hardware of state-directed “capitalism”, digitized into the Financial Matrix OS in 2008—preserved market form while shifting their substance to the State. To understand what lies beneath the Financial Matrix’s failing disguise and to make sense of Multiflation—what is happening now, what comes next, and what it all means for your capital—we must return to the source: the Great Depression.

The Revolution Was: Phase I

The Great Depression shattered faith in the existing economic order and opened the political field to a wide range of radical proposals for how Western societies should organize themselves. Many competing visions emerged from that crisis. Here, we examine the one that ultimately defined the American system for the remainder of the twentieth century.

(In our series on Value Investing and Ben Graham we will soon turn to a parallel movement. Born of the same crucible but largely driven underground after the 1940s, this technocratic alternative vision has quietly reasserted itself over the past decade—and now, supercharged by the advent of ChatGPT and AI, possesses the tools to build directly on the Financial Matrix’s captured institutions and mechanisms as its own infrastructure.)

But while that alternative technocratic vision was driven underground until recent years, the system that actually conquered twentieth century economics hid in plain sight such that most Americans never noticed anything had changed. Garet Garrett was one of the few who correctly identified the precursor to what would, nearly a century later, reach its perfected form as the Financial Matrix.

In his 1938 essay The Revolution Was, Garrett argued that Americans fundamentally misunderstood the political transformation they were living through under FDR’s New Deal. By maintaining the outward forms of American government, markets, and money—while radically altering their substance—the Roosevelt administration achieved total regime change without firing a shot. Garrett’s book title warned that the coup wouldn’t happen in the future with guns; it had already occurred in the past through words.

Garrett described how the revolutionary New Deal had succeeded through linguistic camouflage:

[It was accomplished] not only within the form but within the word, so that people were all the while fixed in the delusion that they were talking about the same things because they were using the same words. Opposite and violently hostile ideas were represented by the same word signs. This was the American people’s first experience with dialectic according to Marx and Lenin.

The facade of the U.S. Constitution and institutions remained intact, but their underlying meaning and function were now altogether different. Garrett was effectively documenting the resurrection of an ancient political art; Edward Gibbon observed the same strategy nearly two millennia earlier, when Augustus—the first Roman emperor and Julius Caesar’s adopted son—consolidated Roman imperial power:

Augustus was sensible that mankind is governed by names…the senate and people would submit to slavery, provided they were respectfully assured that they still enjoyed their ancient freedom.

The architects of the New Deal, too, understood that Americans would submit to a new order provided they were assured they still enjoyed their ancient liberties. Gibbon’s description of Augustus’ method reads as though it were written about FDR:

The image of a free constitution was preserved with decent reverence: the Roman senate appeared to possess the sovereign authority, and devolved on the emperors all the executive powers of government.

Just as Augustus had preserved the image of a free constitutional republic while concentrating all executive power in himself, FDR absorbed nearly unchecked authority while citizens continued to speak of the “constitution,” “private property,” “free markets,” “prices,” and “capitalism”—unaware that these terms now held altogether different meanings.

Garrett was not alone in his diagnosis of the New Deal. John T. Flynn—a progressive journalist who had written for the New Republic and initially supported FDR before breaking bitterly with the New Deal—saw the same pattern as Garrett and pressed it to its logical conclusion in As We Go Marching. Writing in 1944, Flynn warned that American fascism would not arrive wearing a swastika but rather wrapped in an American flag:

But when fascism comes it will not be in the form of an anti-American movement or pro-Hitler bund, practicing disloyalty. Nor will it come in the form of a crusade against war. It will appear rather in the luminous robes of flaming patriotism; it will take some genuinely indigenous shape and color, and it will spread only because its leaders, who are not yet visible, will know how to locate the great springs of public opinion and desire and the streams of thought that flow from them and will know how to attract to their banners leaders who can command the support of the controlling minorities in American public life. The danger lies not so much in the would-be Fuhrers who may arise, but in the presence in our midst of certainly deeply running currents of hope and appetite and opinion. The war upon fascism must be begun there.

Flynn wasn’t so much forecasting a distant future as he was describing forces already at work under FDR, in language that could have been written about modern-day America:

Fascism will come at the hands of perfectly authentic Americans, as violently against Hitler and Mussolini as the next one, but who are convinced that the present political system has outlived its usefulness and who wish to commit this country to the rule of the bureaucratic state; interfering in the affairs of the states and cities; taking part in the management of industry and finance and agriculture; assuming the role of great national banker and investor, borrowing billions every year and spending them on all sorts of projects through which such a government can paralyze opposition and command public support; marshaling great armies and navies at crushing costs to support the industry of war and preparation for war which will become our greatest industry; and adding to all this the most romantic adventures in global planning, regeneration, and domination all to be done under the authority of a powerfully centralized government in which the executive will hold in effect all the powers with Congress reduced to the role of a debating society. There is your fascist. And the sooner America realizes this dreadful fact the sooner it will arm itself to make an end of American fascism masquerading under the guise of the champion of democracy.

Three New Deals: Precursor To The Matrix

Garrett autopsied this revolutionary transformation in FDR’s America, but the New Deal wasn’t a peculiar accident of American politics—it was merely one manifestation of a homologous global ideological response to the Depression. The Forgotten Man was a global phenomenon; the productive middle class everywhere had been crushed by the Depression—whether in the form of the American yeoman, the German Mittelstand (small business owners) and Frontkämpfer (front-line veterans), or the Italian Ceto Medio (middle class) and Reduci (returned soldiers).

In his desperation, the Forgotten Man on both sides of the Atlantic turned to leaders who promised that State power could restore order. Wolfgang Schivelbusch’s Three New Deals argues that FDR’s America, Mussolini’s Italy, and Hitler’s Germany all converged on remarkably similar economic solutions to the Depression. Each regime chose a ‘revolution within the form’: preserving the comforting symbols and vocabulary of private property and free market institutions while decisively breaking with laissez-faire liberalism.

(Note: To preempt any potential misreading or confusion, this comparison isolates the shared mechanics of state-directed economic policy, not the morality of the three governments. The focus here is strictly economic.)

Rather than abolishing capitalism outright—as did the Bolsheviks in Russia—all three retained its shell, filling it with the machinery of state coordination and planning. Mussolini gave this chimera a name: 'the Third Way’—neither Soviet collectivization nor laissez-faire capitalism, but corporatism, the formal merger of nominally private enterprise with the State.

Even contemporaneous critics recognized that beneath the different symbology, similar economic policies were taking hold in all three countries. In Hell Bent for Election, one American critic observed that FDR’s NRA had cartelized industries, fixed prices and wages, and suppressed competition under state direction—its Blue Eagle insignia marking compliant businesses—and drew the uncomfortable conclusion that:

If we had had a Nazi or Fascist party in 1932, perhaps it might have written a platform that would conform to what Mr. Roosevelt tried to foist upon the country under the wings of the Blue Eagle.

As Schivelbusch documented, the official newspaper of the Nazi Party (NSDAP), too, explicitly recognized its kinship to FDR’s policies:

Just as National Socialism superseded the decadent “bureaucratic age” of the Weimar Republic, the Völkischer Beobachter [the official newspaper of the Nazi party] opined, so the New Deal had replaced “the uninhibited frenzy of market speculation” of the American 1920s. The paper stressed “Roosevelt’s adoption of National Socialist strains of thought in his economic and social policies,” praising the president’s style of leadership as being comparable to Hitler’s own dictatorial Führerprinzip. “If not always in the same words,” the paper wrote, “[Roosevelt], too, demands that collective good be put before individual self-interest. Many passages in his book Looking Forward could have been written by a National Socialist. In any case, one can assume that he feels considerable affinity with the National Socialist philosophy.”

The newspaper admitted that Roosevelt maintained what it called “the fictional appearance of democracy,” but it also proclaimed that in the United States “the development toward an authoritarian state is under way.” The author added, “The president’s fundamental political course still contains democratic tendencies but is thoroughly inflected by a strong national socialism.”

Nor were the aesthetic similarities between the regimes lost on Europeans and Americans:

Hitler’s Vampire Economy

Of these three regimes, Hitler’s Germany pushed the revolution-within-the-form furthest, perhaps because the blow to the Forgotten Man was particularly fatal in the case of Germany—where it arrived as the coup de grâce to a society already hollowed out by a devastating military defeat, the shame of Versailles, and the ravages of hyperinflation and cultural revolution.

Gunter Reimann’s The Vampire Economy documented in great detail the German system. While the Soviet model of communism—the one that Mamdani’s NYC now takes inspiration from—abolished private ownership entirely, Reimann showed how the National Socialist regime, like that of FDR, meticulously maintained the facade of capitalism.

The German Vampiric system was called Zwangswirtschaft, literally, “compulsory economy”. Nominal private ownership existed alongside the appearance of normal prices, wages, and markets—while the State entirely eviscerated its substance. Entrepreneurs were effectively sidelined, replaced by government-appointed ‘shop managers’ who followed State directives for production and distribution rather than consumer-driven market signals.

Do not be deceived by partisan framing of “right-wing” Nazis versus “left-wing” Communists: the Nazi approach was simply an alternate form of central planning, as Mises explained in Omnipotent Government:

The German and the Russian systems of socialism have in common the fact that the government has full control of the means of production. It decides what shall be produced and how….But there is a difference between the two systems. The Russian pattern of socialism is purely bureaucratic. All economic enterprises are departments of the government, like the administration of the army or the postal system…

The German pattern [of socialism] differs from the Russian one in that it (seemingly and nominally) maintains private ownership of the means of production..There are, however, no longer entrepreneurs but only shop managers (Betriebsführer)…The government tells the shopmanagers what [to do]...Market exchange is only a sham. All the prices, wages, and interest rates are…in appearance only...This is socialism in the outward guise of capitalism. Some labels of capitalistic market economy are retained but they mean something entirely different from what they mean in a genuine market economy.

Mises showed that property rights are not legal title—mere pieces of paper— but rather the power to exercise actual control over resources. Strip that power while preserving the paperwork, and prices lose their anchor: they become proto-HyperPrices, superficially market-determined figures that have been severed from genuine economic meaning and reduced to State ventriloquism.

In June 1942, Mises pressed the same case directly to the American public in a letter to the New York Times—arguing in real time, while the war still raged, that the Reich's economic system was not the opposite of socialism but its twin, dressed in capitalist clothing.

Whenever private capital attempted to exercise economic control independently of State imperatives, the Vampire Economy bared its fangs—for example when Hitler’s economic enforcer, Hermann Göring, clashed with industrialists over resource control:

Göring insisted that the Ruhr, like the rest of German business, must subordinate its private interests to the national need, pointing to the fact that Germany was heavily dependent on foreign sources of iron ore…and so more vulnerable than in 1914 [WWI], a comparison to which Hitler constantly returned…Göring demanded that the Ruhr industrialists should undertake the development of the low-grade ores in central and southern Germany. When they refused, he declared that “the State must take over when private industry has proved itself no longer able to carry on…”When the iron and steel industrialists produced a paper rejecting Göring’s autarkic policy, he threatened them with arrest as saboteurs and compelled the private firms to invest some of their own funds in the state-owned competitor with which he now confronted them. Krupp was offered a large arms contract at the same time in order to split any attempt at a united front in opposition.

2008: The Operating System Rewrite

The Nazi Vampire Economy was not an aberration that died with Hitler in 1945. What Hitler had taken to its logical extreme, the New Deal’s “revolution within the form” implemented in softer form—and the underlying blueprint, stripped of its jackboots, quietly became the architecture of postwar “capitalism”.

For seventy-five years, the New Deal’s institutions underpinned the American economy—and, as the US supplanted Britain as the epicenter of global finance, the world's as well; we’ve traced some of this history in the Metamorphosis of Money, the Keynesian Kaleidoscope, the Alchemy of Risk, and elsewhere in the Sorcerer’s Apprentice.

This apparatus of hidden state control expanded almost imperceptibly over the ensuing decades: first through the New Deal and Bretton Woods system, and then through the 1971 severance of the dollar from gold, which removed the last constraints on a fully hyperreal economy.

Then, in 2008, the financial system ruptured. What we think of as the “subprime crisis” was not a “black swan” or a one-off “market failure” caused by a few years of subprime and CDO excesses, but rather the inevitable culmination of decades spent perfecting the Vampire Economy through the dark art of risk transmutation.

The Great Financial Crisis and governmental responses—Money Printer Go BRRR—birthed a second revolution within the form, precipitating a phase transition in which the financial markets were predominantly nationalized by stealth. If the New Deal redefined the vocabulary and institutions of capitalism, 2008 digitized the Vampire Economy, birthing the Financial Matrix.

The Vampire Revealed

The Financial Matrix’s genius was its invisible system of wealth extraction from the Forgotten Man—who watched helplessly as his purchasing power was eroded, his savings devoured by inflation, his prudence punished, and his virtue mocked by a system that rewarded speculation and fraud.

The mechanisms corrupting capitalism were so arcane that the immiserated middle class could never quite identify its assailant—and so the illusion held. Meanwhile, wealth exploded for those positioned inside the Matrix—asset holders armed with access to cheap credit, the ability to front-run or shape government-directed capital flows, and the Plunge Protection Team’s put.

Central banks stopped intervening in markets at the margins and became the market—the State the ultimate “market” participant, the remaining substance of capitalism replaced with a videogame simulation. The user interface—tickers, stock prices, property titles—remained intact, but the underlying operating system was replaced with State-conjured “liquidity”—the raw fuel for blind algorithmic flows that transmitted and amplified both across every market.

The 2008 rewrite of the global economic operating system perfected the Vampire Economy’s operating model and extended the blueprint beyond the financial markets. Governments need not nationalize what they can control by other means. After 2008, that principle metastasized invisibly across three interlocking fronts: financial, industrial, and informational.

Front I: Financial

The Vampire Economy commandeered the financial plumbing through which all capital flows—and it extended well beyond the QE, passive flows, and algorithmic amplification already examined.

At the commercial banking level, for example, the State need not explicitly nationalize the banks; it need only make bankers understand who they ultimately work for. Marc Andreessen detailed the insidious nature of modern “debanking” and Operation Chokepoints 1.0 and 2.0: financial institutions serve as instruments of government and ideological control while maintaining the facade of private enterprise. While one might debate the accuracy of Andreessen’s claims, his core observation is salient and mirrors a well-documented historical pattern; indeed, Gunter Reimann explored how banking institutions were transformed from pillars of private enterprise into whips of the authoritarian state in Vampire Economy:

Within Germany itself, the banker’s activities are likewise circumscribed. He plays a dual role, a fact which creates many unpleasant and even risky situations for him. He is the head of a “private enterprise,” yet he must always act like a representative of the State. A private investor would be naive if he continued to rely on the advice of “his banker” whom he has known for many years and who formerly advised him how to invest his money. The advice he would get now would consist only of the instructions the banker gets from the Government…it is not illegal to refuse, but inadvisable. If he withdraws large funds for private investments or otherwise remains stubborn, the banker will have to send a report to Government authorities informing them about the case. They will then check on how the money is used. The local Party leader will keep in touch with the bank manager, too, and learn of withdrawals or of the existence of liquid assets and make use of this knowledge... These big banks are today… under private ownership. This fact easily misleads the foreign observer. For under fascism “private banks” are as much under State control and are as co-ordinated as ordinary State banks. The transformation of the big banks from protectors and pillars of private enterprise to the whip of the authoritarian State to be used in controlling private enterprise…

This pattern of control is now hardcoded into the Financial Matrix; it was again clearly illustrated by the 2022 Canadian trucker protests—during which time the government invoked emergency powers to freeze the bank accounts of protestors and their donors, transforming private banks into direct enforcement arms of the state overnight.

Front II: Industrial

While American regulators—to date, anyway—rarely threaten industrialists with outright arrest as did Herr Göring and the Nazis, State-directed capital allocation continued from the New Deal to the present in various guises.

Regardless of one’s view on the necessity of such policies, when government-mandated ESG or “national security” industrial policies regarding climate change, Anthropic AI, rare earths, and semiconductors force capital allocation based on political rather than economic dictates, the State effectively transfers a portion of de facto control from shareholders to itself, leaving shareholders with nothing but empty words and a paper illusion of ownership.

The State need not nationalize a factory outright: it need only control the conditions under which private capital may operate: which industries receive credit, which are starved, which “private” firms receive government contracts as a reward for compliance—and which are threatened with legal and regulatory strangulation for defiance.

Just as Göring compelled German industrialists to subordinate private capital to state imperatives, the modern American regime increasingly dictates the deployment of private wealth. This week the Pentagon approached General Motors and Ford about converting production capacity to arms and military supplies—echoing Göring's demands on the Ruhr industrialists (and America’s own wartime conversion of Ford’s plants to bomber production):

Front III: Informational

Just as the Vampire Economy required command over capital and industry, it demanded an equally tight grip on discourse. Mirroring the strategies of the first two fronts, the State avoided the messy optics and legality of nationalizing the press or the internet outright. Instead, it outsourced enforcement—ensuring platforms, broadcasters, and payment processors understood the economic and legal consequences of permitting certain viewpoints.

Deplatforming, demonetization, algorithmic suppression, and advertiser boycotts achieved what outright censorship would have made obvious: the systematic removal of dissent and crimethink. The infrastructure of speech—search, social, payments, cloud hosting—remained in ostensibly private hands but was de facto State-directed.

The Twitter Files, for example—documented by Matt Taibbi and colleagues, and submitted to the Supreme Court in Murthy v. Missouri—exposed the operational details: government agencies routing content suppression through nominally private platforms. The vocabulary of the first amendment and free press was preserved; their substance was not.

The 2020 Glitch: Mr. Market’s Schizophrenic Break

The illusion of free markets held, mostly, for twelve years after the Great Financial Crisis. Then the COVID era forced the system into overdrive, and the sheer scale of the intervention short-circuited the Financial Matrix.

As governments printed trillions and locked down the global economy, the schizophrenic disconnect between Wall Street’s manufactured prosperity and Main Street’s economic ruin became too vast to conceal. The Forgotten Man finally saw glimpses of the underlying code.

Now, as the “coppertop batteries” run dry, the Matrix is glitching, and the “desert of the real” is bleeding through the screen. The comfortable fiction of free-market capitalism died, and the Vampire Economy is laid bare.

The financial illusion is now buckling under the weight of compounding, real-world Multiflationary shocks: a replay of the Smoot-Hawley tariff wars as “economic security” and autarky replace free trade; kinetic conflict spreading across Eastern Europe, the Middle East, Venezuela, and beyond; accelerating stagflation amidst crippling spikes in energy and commodities; the weaponization of currencies, shipping lanes, and supply chains; and widespread civil unrest against open borders, the soaring cost of living, and the managed decline of the Forgotten Man.

These are not isolated events, but rather symptoms of Multiflation: the fracturing of the “great moderation” and the post-WWII “rules-based order.”

Conclusion: The Desert Of The Real

What we are witnessing is not the birth of something new, but rather the perfection and revelation of a century-old process—and the death of the illusion that disguised it.

We have entered an era in which capital is no longer yours to deploy as you see fit; it has been redefined as a resource held in provisional custody, subject to recall whenever the sovereign sees fit. What was once private property is now a mere license—revocable, conditional, contingent on compliance.

This is the inheritance of the revolution-within-the-form. FDR’s New Deal put the State inside the market; 2008 digitized the Vampire Economy and extended it across every front of modern life. The substance migrated to the sovereign while the citizenry, comforted by familiar words and flickering numbers, scarcely noticed.

The Forgotten Man is perhaps beginning to notice now. This transition from private property to state-managed license is increasingly visible at every level of Western society: from Mamdani’s NYC; to the state level—California sweeping dormant digital assets into state coffers, Washington and a growing list of states engineering wealth and exit taxes; to the Federal policies of the Trump administration.

Nor is this a uniquely American phenomenon; it is a global movement toward a compulsory economy across the Western world. At Davos, “stakeholder capitalism,” “15-minute cities,” CBDCs, and more are championed as inevitabilities.

In Germany, proposed legislation would block individuals from purchasing homes based on "anti-constitutional" views—granting local authorities first refusal on sales and allowing intelligence agencies to vet buyers without a criminal conviction. From Ireland’s systematic use of forced purchase orders and punitive taxes to compel private property into state-mandated utility, to Canada’s debanking and agreements with first nations, private property is being compelled into the service of the state.

Up Next: Part IV

In Part IV, we examine what happens when the systemic failure of the Financial Matrix escapes the confines of the financial markets. History shows that when the financial illusion fails, the Forgotten Man’s rage flows toward whatever symbols of the new order are nearest at hand—the perceived architects and beneficiaries of the system.

Add the accelerant of Artificial Intelligence—which threatens to creatively destroy wide swaths of the economy—and you have the recipe for an explosive cocktail. As the vanguard of the digital economy is now discovering, that “explosive cocktail” is no longer mere metaphor, but rather a literal Molotov lobbed at their front door:

The next day, a second attack occurred at Altman’s house, this time a shooting:

These attacks are not merely isolated symptoms of societal decay or neo-luddism; they are the kinetic real-world eruptions triggered as the Financial Matrix fails and the tectonic forces of Multiflation, unleashed by its collapse, crash into one another. As the Forgotten Man’s purchasing power evaporates, the technocratic “Alternative Vision” poses a threat—whether real or perceived—of finalizing his economic obsolescence.

The Multiflation Method

The question is no longer whether Multiflation is transforming the global economic landscape, but how to successfully navigate its forces. Multiflation demands a reassessment of risks that have not been taken seriously for nearly two decades: counterparty risk, geographic vulnerability, political risk, and the accelerating possibility that the rules governing ownership and property rights will be rewritten mid-game. The Multiflation Method is our evolving investment framework, and we’ll address each of these risks in essays to come.

Be Water.

Series Table Of Contents

Previously: The Forgotten Man

The Forgotten Man—the productive middle class—has been reduced to a “coppertop battery” whose life force powers the Financial Matrix.

The Financial Matrix’s architects styled themselves Sorcerers, but proved mere Sorcerer’s Apprentices—summoning forces well beyond their control. Like the fable’s enchanted brooms, the Financial Matrix has taken on a life of its own, flooding the chamber—the global economy—and drowning civilization in the deluge.

In Goethe’s original tale, the Sorcerer eventually returns to break the spell; in our reality, however, there is no Sorcerer to restore order and halt the rising waters.

When civilization drowns, what Leviathans surface from the depths? And how do we preserve wealth in their wake?

When Money Dies, Reality Dies

During COVID, our Sorcerer’s Apprentices lost control of their spell and devoured economic reality: the markets—if not society itself—suffered a schizophrenic break. Ever since, we’ve inhabited a world that feels increasingly like a fever dream; a glitching simulation in which the cause-and-effect logic of the past no longer applies:

While some attribute the gnawing sense that something is terribly wrong—that “nothing feels real”—to the rise of AI and social media, the roots of this dissolution reach far deeper—to the foundations of civilization itself.

AI and social media certainly intensify our disorientation, of course, yet such feelings of irreality are—and have always been—a defining feature of money’s death throes. Money is society’s operating system; when money dies—as it loses its meaning and value—so too does everything else: life feels increasingly hyperreal, a hollow facsimile of its former substance.

We are not the first society to experience this particular affliction. Well before the advent of AI deepfakes, Thomas Mann described the Weimar hyperinflation as a “witches’ sabbath”—a feverish enchantment under which reality dissolved into delirium. As Paul Cantor argued in his seminal essay Hyperinflation and Hyperreality—and we explored further in The Flight Into Fake Values—Mann traced this dissolution to “the monetary madness of the Weimar Republic”:

Mann suggests that if we seek an explanation of the dissolution of authority in the world he is portraying, we should look to the monetary madness of the Weimar Republic…Inflation eats away at more than people’s pocketbooks; it fundamentally changes the way they view the world, ultimately weakening even their sense of reality. In short Mann suggests a connection between hyperinflation and what is often called hyperreality...

A strong sense of counterfeit reality prevails in “Disorder and Early Sorrow.” That fact is ultimately to be traced to the biggest counterfeiter of them all the government and its printing presses…Inflation is that moment when as a result of [money printing] the distinction between real money and fake money begins to dissolve.

That is why inflation has such a corrosive effect on society. Money is … the principal repository of value. As such, money is a central source of stability, continuity, and coherence in any community…To tamper with the basic money supply is to tamper with a community’s sense of value. By making money worthless, inflation threatens to undermine and dissolve all sense of value in a society.

This sort of counterfeit reality—born of counterfeit currency—is recurrent throughout history. Indeed, it is perhaps no coincidence that the term hyperreality itself emerged during America’s last great monetary crisis. Baudrillard coined it in the 1970s amidst the stagflation spawned by the collapse of Bretton Woods. While he observed that the untethering of money from gold allowed it to “escape…beyond any reference to the real,” it was Cantor who later traced the causal link—demonstrating that monetary derangement is the wellspring of the hyperreality that Baudrillard was exploring. Baudrillard more fully developed hyperreality in Simulacra and Simulation—published near the conclusion of the great stagflation, in 1981—which became one of the inspirations for The Matrix:

The artists of the Great Mirror of Folly, too, depicted the all-consuming hyperreality devouring their own society during John Law’s infamous monetary experiment, the Mississippi Bubble of 1719-1720. Law’s financial alchemy produced not only the notorious speculative mania, but also a “world in masquerade”—enchanted by symbols severed from substance, in which “ideas and words themselves seemed to lose all meaning.”

This selfsame spell has now been cast over the West. Though we have not—as yet— reached Weimar-scale hyperinflation, the pervasive hyperreality and mass dissociative state that Thomas Mann and the satirists of the Great Mirror captured is nonetheless unmistakable in our society.

Nor is it solely a product of the pandemic and its aftermath; in truth, the seeming ‘normalcy’ of recent decades had itself been a manufactured construct all along. The COVID era simply revealed the code underlying the simulation for what it was.

For those who began to see through the Financial Matrix during COVID, the shock wasn't so much the chaos, but the realization that the prior order had been a lie. The Forgotten Man had played by the rules—saved, worked, deferred gratification—only to discover the game was rigged from the start.

COVID made the rigging visible in ways that shattered all prior illusions. Small businesses shuttered while asset prices soared. Inflation destroyed the value of wages and savings while asset holders multiplied their wealth within the Financial Matrix overnight. ‘Essential workers’ were praised even as they were impoverished by inflation. And even now the revelations of corruption still pour forth—fresh scandals and fraud emerging in relentless succession from every stratum of society—each one making the emperor’s nakedness impossible to ignore.

From Hyperreality To Hostility

The dying of money—and the hyperreality this unleashes—engenders a population that is disoriented and increasingly angry. Amidst this civilizational unmooring, people grasp for systems and saviors that promise to restore order and meaning, even when—or precisely because—those systems and saviors are radical.

The “political center” cannot hold because the economic center—the Forgotten Man—has been eviscerated, stripping the body politic of its natural immune system and leaving it vulnerable to ideological contagion. Long-gestating radical doctrines that perhaps struggled to gain purchase suddenly find fertile ground amidst a populace that has lost faith in the system.

When honest work can’t secure basic necessities; when saving means impoverishment; when owning a home becomes impossible for many; when the prudent are punished while the reckless and corrupt rewarded; when the Forgotten Man feels as if he is being robbed and held hostage with his own money—betrayal hardens into rage. When the “coppertop batteries” realize the rules they’ve been playing by are a suicide pact, they don’t shrug and peacefully withdraw to Galt’s Gulch. If reality itself has been inverted, they feel, then the old system deserves to be burned down.

The Forgotten Man—and particularly the young Forgotten Man—impoverished by the Financial Matrix operating under “capitalism’s” banner, doesn’t distinguish this counterfeit simulation from genuine free markets; he simply knows the game is rigged and attacks ‘capitalism’ itself. As Peter Thiel noted on the eve of the pandemic—even before all hell broke loose—the Forgotten Man already had nothing to lose and no stake in the system:

The situation has only deteriorated since. Those positioned within the Financial Matrix—asset holders—have grown wealthier as debased dollars fuel asset price inflation. Meanwhile, the majority of Americans—net asset negative and living paycheck-to-paycheck—have been doubly plundered: debasement devours their purchasing power while their tax dollars both fatten fraudsters and further entrench their disenfranchisement. The Financial Matrix’s architects had chosen the winners and losers in advance—and the Forgotten Man was excluded by design.

And so a spectre haunts the global capital markets: the façade of the Financial Matrix’s “free market” is increasingly being abandoned for a variety of ‘isms’—all of which take the form of intensifying political control over the economy and financial markets. While these emerging political forces may superficially appear to be mortal enemies locked in battle, together they are consummating the destruction of the old order.

Like predators fighting over a dying animal, they rend the ‘Forgotten Man’ apart from all sides. The “Invisible Hand” gives way to iron fists reaching out to strangle what remains of private capital—accelerating the violent economic whiplash and financial repression that defines Multiflation.

Gotham City: Smash The Kulaks!

The capital of global finance—the largest metro area in America, the city that houses Wall Street, the thrumming mainframe rendering the Financial Matrix—has just elected a mayor whose stated ambition is to replace “the frigidity of rugged individualism with the warmth of collectivism.”

Mamdani’s housing czar has openly declared that the government has a “sacred right to seize private property” and that “homeownership itself is “a failed public policy,” as well as advocating for a future where the “middle class [is impoverished]” and “the state guarantees high-quality housing to all”:

Mamdani and his administration are explicitly championing what can only be described as a textbook Bolshevik-style program of collectivization—the seizure of private property and its transfer to state control. The term is chosen deliberately, not as hyperbole: collectivization has a specific historical meaning that applies here.

Mamdani’s and Weaver’s rhetoric, too, mirrors that of the Bolsheviks. The road to collectivization first required demonizing the kulaks—the productive, middle-class yeoman farmers who served as the backbone of the rural economy. Though their ‘wealth’ was often meager—perhaps a metal plow or a few extra livestock—they were vilified as predatory ‘class enemies’.

Once transformed into villains in the public consciousness, their dispossession became not merely permissible but morally necessary:

In the eyes of the State, their independence was an intolerable affront to the collectivist ideal, justifying their destruction in the name of The Radiant Future. In Stalin’s own words:

That is a turn towards the policy of eliminating the kulaks as a class…Without it, no substantial, let alone complete, collectivisation of the countryside is conceivable. That is well understood by our poor and middle peasants, who are smashing the kulaks and introducing complete collectivisation.

The Soviets called this campaign dekulakization. Millions of kulaks were stripped of their property, exiled, imprisoned, or worse—all in service of “the greater good”.

Today, landlords and homeowners are being targeted as New York’s kulaks—exploiters whose private ownership stands in the way of the collective good. The danger isn’t so much that Mamdani will replicate Stalin’s atrocities, but rather that he will replicate Stalin’s economics: once the principle is enshrined that private wealth is in fact public property awaiting reclamation, confiscation becomes constrained only by power and practicality—whether institutional guardrails hold against political will, whether capital escapes before the trap closes, whether the targeted are able to successfully defend themselves—in courts, or by other means.

The possible failure of Mamdani and his comrades to fully realize their collectivist goals does not justify dismissing such openly stated intentions to collectivize as mere posturing; history warns against such complacency. Even after seizing power in 1917, the Bolsheviks were widely dismissed by domestic opponents and foreign powers alike as fringe radicals whose grip on power couldn’t possibly last—their regime viewed as ephemeral, their programs too extreme, too economically ruinous, too contrary to human nature to ever be fully implemented.

Whether Mamdani ultimately succeeds or fails in implementing his specific programs matters less than understanding the forces that elevated him to power. These same Multiflationary forces are producing similar outcomes across the West, making figures like Mamdani less important as individuals than as “morbid symptoms” of Gramsci’s interregnum now metastasizing across the West—canaries signaling that the air has already turned toxic.

The specific tactics and degree may vary, yet the essence remains: all subordinate private property and market allocation to political control. California, for example is proposing a redistributive wealth tax on unrealized gains:

This ‘soak the rich’ philosophy is now accelerating rapidly throughout the West:

The Netherlands is proposing taxing unrealized capital gains:

Unwilling to cut spending in the face of insurmountable debt loads—perhaps the result of an intentional Cloward-Piven strategy—Western governments are converging on a politically expedient prescription: dekulakization. What begins by targeting ‘billionaires’ and ‘landlords’ inevitably cascades as governments redefine the threshold of ‘wealth’ ever lower—until those who cheered the confiscations discover that they, too, are kulaks.

Washington Seizes the Commanding Heights

As New York City, California, London, and beyond embrace Bolshevist-style collectivization and wealth redistribution, Washington is pursuing ever more extensive economic interventionism—trending towards the “German pattern” of socialism that maintains capitalism’s facade while increasingly implementing socialism’s reality: private property remains in name but becomes subject to comprehensive state direction in practice.

Unlike Soviet-style collectivization, the German model preserves the form of private ownership while hollowing out its substance. Businesses retain their titles and corporate structures, but their fundamental decisions—what to produce, where to invest, what prices to charge—become increasingly subject to political diktat rather than market forces. The current trajectory in Washington—while far less extreme than historical precedents—shares this essential characteristic: the progressive subordination of economic decisions to political control.

The shift from market pretense to political diktat is now accelerating into public view. President Trump’s DOJ announced an investigation into Fed Chair Jerome Powell—perhaps the latest salvo in his campaign pressuring Powell to cut rates:

Powell’s response was immediate and defiant, framing the DOJ subpoenas as naked political interference in monetary policy:

The hysterics over President Trump’s supposedly novel incursions into “Fed independence” ignore historical precedent—see LBJ and Nixon—and obscure a deeper truth. The Trump-Powell confrontation represents less the corruption of a pristine pillar of free markets than the abandonment of pretense: the Fed was never a market institution. After all, what is a central bank with monopoly control over credit if not—functionally, at least— Plank 5 of the Communist Manifesto?

How is it possible to have free and open markets when the operating system of the entire economy—money and interest rates—is closed source and set by committee diktat? Or when a President can “influence” the committee? Asking such a question is heresy, of course. The Fed is the monetary water in which we swim—so ubiquitous that questioning it is as nonsensical as questioning gravity. Central banking is viewed not merely as compatible with capitalism but essential to it—without which it would be impossible to imagine a modern economy.

Yet the vaunted myth of sacred “Fed independence” as an essential ingredient of American capitalism is even now being revealed by President Trump for the farce it always was. Indeed, hysteria over Trump pressuring Powell provides the reductio ad absurdum to the entire Fed apparatus: we’re debating which central planner should control money and rates. It brings to mind the apocryphal exchange attributed to Churchill/Shaw about propositioning a socialite for a million pounds, then haggling down to five—we've already established what the Fed is, now we're just haggling over who holds the levers.1

War Socialism & The New Command Economy

The ongoing confrontation with Powell, dramatic as it is, represents only one front in a broader policy offensive in Washington to seize what Lenin called the “commanding heights”—the strategic control points of the economy.

Tariffs become weapons; industrial policy targets strategic sectors; the federal government now owns stakes in ‘private’ enterprises ranging from Intel to rare earth miners to steelmakers; the President secured “golden shares” holding ultimate veto power over corporate actions; extracted revenue cuts from chipmakers’ China sales; floated taking direct stakes in oil companies and pressured them to invest $100 billion in Venezuela—all as a “down payment on a sovereign wealth fund”. At the same time, the President threatens pharmaceutical companies with “every tool in our arsenal” if they don’t slash prices, while proposing credit card rate caps and new GSE mandates to purchase mortgages.

Even now, US policy appears to be escalating towards explicit “war socialism”—a hard, command-and-control economy in which private economic decisions are subordinated to strategic national objectives:

Conclusion: Who, Whom?

The insidiousness of the Financial Matrix was always its camouflage—how convincingly its trappings mimicked a market economy. Now, however, the system has entered its terminal phase. As Multiflation accelerates and the “coppertop batteries” run dry, the disguise is being discarded in favor of brute political force from all quarters.

We are living through what Antonio Gramsci termed the “interregnum”—that dangerous twilight in which “the old world is dying, and the new world struggles to be born.” The “morbid symptoms” of which he spoke now surround us—and find their collective expression in Multiflation: the Forgotten Man, hyperreality, glitches in the Financial Matrix, rage, populism and extremism, cults of personality—all of it.

It is no longer contested whether private wealth will be subject to political diktat, or whether political allocation should supersede market allocation. The only question remaining is Lenin’s: “who, whom?”—who does what to whom, the reduction of all politics to this zero-sum question.

The political spectrum has converged on a single premise: State primacy. While the warring factions may fight among themselves as if they are mortal enemies, all political conflict is a knife fight over who wields control over the State’s supremacy over private capital—and against whom.

Next: The Vampire Economy’s Three-Front War On Capital

Yet what may appear as a sudden, radical departure from American norms—“the old world dying”—is in fact the end state of a process that began generations ago. The forces now converging—from Mamdani’s collectivization to Trump’s interventionism—aren’t so much shattering the system as stripping away the remaining threadbare illusions obscuring a transformation set in motion long before any of today’s political leaders were even born.

To understand what lies beneath the Financial Matrix’s failing disguise—and how to preserve wealth in the Multiflationary maelstrom now engulfing us—we must return to the source: FDR’s New Deal.

In Part III, we examine how the New Deal laid down the primitive scaffolding for what would—seventy-five years later—be perfected into the Financial Matrix. Understanding this system’s origins and history—and its current unraveling—is prerequisite to the preservation of capital as the interregnum intensifies and Leviathans surface.

The investing strategies that sustained wealth for four decades were built for Goldilocks’ calm seas and presumed at least some semblance of property rights. But Goldilocks was the aberration—an artificial stability purchased with monetary alchemy that has now reached its limit—and the investment strategies built for her world assumed away the very risks now materializing before us.

We find ourselves in uncharted waters, facing risks few living investors have ever confronted—or if they did, only briefly, and never at this scale. We must invest accordingly.

Next: The Vampire Economy

Series Table Of Contents

No Country For Young Men

For most of America, the headlines trumpeting a “strong economy” and “stocks at record highs” land like a cruel joke. ’s recent series My Life Is A Lie attempted to quantify the economic devastation felt by the majority of the country these many years. This carnage has been sanctified by our technocrats—an Aztec priesthood invoking sacred economic statistics as celestial omens to justify the ritual sacrifice of society on the altars of GDP and the S&P 500.

Green, an investment industry insider, gave voice to the Forgotten Man:

Predictably, the priesthood declared heresy. Economists, journalists, thought leaders, think tanks, and other fellow travelers circled the wagons, tearing apart Green’s numbers, splitting hairs, and nitpicking his methodology.

That is a grave mistake.

Fiddling While Rome Burns

This sort of wonkish debate—whether the poverty line is $30k or $140k, whether CPI is 2% or 4%—exemplifies the scientism enabling our national dissolution: the religious belief that the statistical map is more real than the economic territory. Perhaps such effete technocratic sophistry could be tolerated—even indulged—were the body politic unified. But it is a fatal conceit in such a Balkanized powder keg of a nation.

Into this highly combustible environment, Green’s essays landed like an errant spark. If nothing else, Green forced a long-overdue reckoning with a reality that the credentialed class has steadfastly refused to acknowledge: that they themselves have spent decades drowning the American Dream in a flood of ruinous policy, even as they now insist that the water level is perfectly fine and that Americans are simply bad swimmers.

Such an acknowledgment, however, would be tantamount to confessing that their entire worldview—the long Postwar Consensus—rests on a meticulously constructed lie. That the intellectual facade of modern finance and economics, the modern monetary system and central banking, fiscal and monetary policy, financialization, globalism—all of it—has strip-mined the nation and fracked the American bedrock, leaving behind a slag heap of poverty, misery, and rage in place of the prosperity it promised.

That their own lives have been a lie.

From Picket Fences To Shoebox Micro-Apartments

The party told you to reject the evidence of your eyes and ears. It was their final, most essential command.
—Winston Smith

Whether Green’s numbers withstand academic scrutiny is altogether beside the point. His essays struck such a visceral nerve because Green—as someone with institutional investment credentials—put numbers to what millions have experienced firsthand for decades. And he did so at precisely the moment when their long-simmering rage is boiling over.

And then the Minnesota headlines broke.

If Green’s essays were a stray spark drifting toward the powder keg, these revelations of fraud represented a blazing torch hurled straight at it. Billions have been bled from the American middle class—those who can barely afford their own children—to bankroll the imaginary children of fraudsters.

But the scale of the plunder extends far beyond one state:

The populace’s rage, therefore, springs from a well far deeper than Green’s economic statistics—or any one else’s, for that matter—could ever fully plumb. Understanding this fury—and its implications for both our civilization and our portfolios—requires returning to an existential question we posed five years ago: how did we devolve from the society depicted in the New Yorker’s 1957 Christmas cover (left) to that depicted in its 2020 Christmas cover (right)?

These two contrasting images—set six decades apart—bear witness to a birthright betrayal so absolute that it defies measurement. The transformation seems inconceivable: in the course of a single lifetime, how did the most prosperous civilization in history come to cannibalize its children's futures?

Asked differently, how could prior generations buy houses, raise families, and afford healthcare on a single income—and then retire—while younger generations drown in debt, face bleak job prospects, are cursed to rent forever, risk financial ruin from hospital visits, and accumulate pets rather than rear children?

Why do so many feel worse off than even a decade ago, despite record asset prices and strong GDP growth? And why has this malignancy metastasized simultaneously throughout the Western world—the US, Europe, Canada, Australia?

The answers won’t be found in economic textbooks, models, and policy papers that led us here in the first place. Nor will they emerge from the clerisy who authored them:

But answer these questions, and the chaos of our age suddenly resolves into clarity: not only the financial stress, but the seething rage erupting across Western nations worldwide. The collapse not merely of institutional trust, but of societal trust writ large. The rise of populism and politically motivated violence. The pervasive sense that the very fabric of civilization—if not reality itself—is being torn apart at the seams. The gnawing feeling shared by ordinary people that they are struggling to survive a precarious interlude before some major cataclysm strikes.

Mr. Market’s Schizophrenic Break Of 2020

The madness of the 2020-2021 COVID era was apocalyptic—literally a lifting of the veil: governments induced a global economic coma yet asset prices—the economy’s vital signs—registered euphoric highs. It was as if a comatose patient's monitors indicated an Olympic athlete in peak condition—the clearest illustration of what Green is now attempting to quantify.

Meme stocks, fake currencies, and bankrupt companies—indeed all assets—went parabolic even as the economy flatlined.

We call this period Mr. Market’s Schizophrenic Break, the absurdity of which was perhaps best encapsulated by David Portnoy (aka “Davey Day Trader”) picking stocks out of a scrabble bag on Twitter and CNBC—a strategy that consistently worked!

The Financial Matrix

Portnoy himself saw through this surreal facade during the height of the COVID market mania:

The good news is I know it’s rigged. The government is [saying] don’t worry we’re just gonna create a trillion-billion-zillion dollars. It’s fantasy land. It’s Schrute Bucks [fake money from a popular TV show]. It’s the worst coronavirus day in a while and the government is saying don’t worry about it cause we’re gonna print a quadrillion dollars and the market sky rockets. The stock market is disconnected from reality. The whole thing is a pyramid scheme. We’re living in the Matrix.

Portnoy wasn’t merely ranting, however—he had unwittingly laid bare the central economic mystery of our age, one that somehow eluded our credentialed classes: that the numbers and charts streaming across Bloomberg terminals had become utterly divorced from the reality of everyday life.

In this inverted Bizarro World, bankruptcy was bullish, currencies invented as a joke were enormously valuable, and picking stocks from a Scrabble bag was a wise investment strategy.

With a degenerate gambler’s uncanny intuition for detecting rigged games, Portnoy had stumbled onto a profound truth: that financial reality had somehow been replaced with an elaborate, videogame-like simulation—the Financial Matrix. This self-contained universe was governed by its own laws and utterly indifferent to the world it was supposed to represent.

The 2020-2021 COVID madness represented the reductio ad absurdum toward which the entire post-War policy consensus had been hurtling—the culmination of decades of pathology that had metastasized to such absurd extremes that it became impossible to ignore even for laymen like Portnoy and his “degen” followers.

But while Portnoy had correctly identified the symptoms, he had not diagnosed the underlying disease. Five years ago this month—amidst the heights of the COVID market mania—we set out to identify the cancer at the heart of the global financial system, to understand how virtual reality had replaced reality, and to assess the implications for investing.

The result was The Sorcerer’s Apprentice & The Man Who Broke The Markets. In Sorcerer, we traced the vectors of metastasis—monetary, memetic, algorithmic—that had spread through the global financial system, mapping the ways this cancer would ultimately upend markets, economies, and societies worldwide.

We originally published Sorcerer privately in January 2021. However, as the pathologies we diagnosed then have only intensified in the interim, we felt compelled to expand and update the work for a public audience. This growing urgency also explains why Green’s recent series resonates so deeply now. The economic cancer we diagnosed in late 2020—having metastasized invisibly for decades, revealing itself only in occasional paroxysms, as in 2008—finally became impossible to ignore when the COVID policy response devoured economic reality itself in 2020-2021, and then in 2022 ignited the worst inflation in five decades.

The Day Is Come

The COVID years—and beyond—mark the fulfillment of Francisco d’Anconia’s prophecy. He exhorted us to watch the money—to read it as the barometer of a society’s virtue. He warned of the day when ‘money is flowing to those who deal, not in goods, but in favors’ and when ‘men get richer by graft and by pull than by work.’

Look around. That day is not coming; rather it is already here. Green’s essays and recent news headlines merely crystallized the gnawing suspicion that has haunted the American subconscious since at least the 2008 Crisis: that for decades the productive American citizen has been taxed and inflated into serfdom—forced to finance their own dispossession and the demolition of their way of life. Americans have been reduced to human batteries whose life force powers the Financial Matrix.

It is even now dawning on the citizenry that the “strong economy” and “record-setting stock market” are merely mirages conjured by the Financial Matrix—phantom metrics generated by and for the simulation. Meanwhile, in the ‘desert of the real,’ the productive have been treated as enemies, and “those who deal in favors” preside over a Witches’ Sabbath wherein swindlers parade as sages and vice dons the robes of virtue:

Here, corruption is rewarded and honesty has become a self-sacrifice—the laws no longer protect you against them, but protect them against you: “for my friends, everything; for my enemies, the law.”

Up Next: The End Of Illusion

In Part II: The End Of Illusion, we will examine the pincer now closing in on American—if not global—capital: the overt collectivism rising in major cities like New York and the command-economy dictates descending from Washington. As it becomes increasingly unwieldy to maintain the Financial Matrix’s illusions, those operating it—as well as those opportunists exploiting the mounting chaos created by the system—are abandoning the pretense of market mechanisms for more naked political control.

Whether the Financial Matrix can sustain ‘record highs’ in the stock market—at least in nominal terms—should now be of secondary concern.

The era of investing primarily for ‘Return on Capital’ has ended. The primary objective must now be ‘Return of Capital’—quite literally.

The investment ‘truths’ of the pre-COVID ‘Goldilocks years’ were a digital mirage, sustained only by the artificial logic of the Financial Matrix. Now, however, the code is glitching. As the simulation crashes headfirst into the volatile reality of Multiflation, rigid adherence to these old certainties is becoming a dangerous liability.

The pincer crushes what is fixed, yet cannot grasp what is fluid.

Be Water.

Next: The End Of Illusion

Previously: Enter The Financial Matrix

Markets exist to coordinate human action in accordance with reality. Instead, they’ve increasingly come to replace reality.

The ETF wrapper has usurped its contents. The derivative matters more than the underlying. Derivatives move wrappers that move underlying stocks, which spawn narratives amplified by social media and AI, which generate additional trades by humans and machines. The tail is wagging the dog—financial markets have morphed into surreal, nested layers of abstraction that feed on one another in a closed, self-referential loop.

The companies exist somewhere underneath, of course, but the market—and capital flows—are now governed by representations rather than reality, by shadows rather than substance.

Welcome to the Financial Matrix: a hyperreactive simulation of markets dominated by vibes, memes, ETFs, AI, and machine logic. We’ve been documenting this transformation in our long-form series The Sorcerer’s Apprentice & The Man Who Broke The Market.

Inside The Grow House: From Seed to…What, Exactly?

Of all the places to glimpse the Matrix’s code laid bare, a $600 million cannabis ETF seems an unlikely candidate. AdvisorShares Pure US Cannabis ETF (MSOS) isn’t particularly noteworthy in and of itself—cannabis is a trivial corner of the economy and MSOS is a rounding error within the ETF universe.

To the casual observer, MSOS appears to be the simplest and cleanest way for wealth managers and retail investors to bet on U.S. marijuana reform, or at the very least to gauge how others are betting. As the largest cannabis ETF to survive the COVID-era ‘weed bubble’—one facet of the all-encompassing market mania documented in Mr. Market’s Schizophrenic Break—MSOS has become the definitive scoreboard for the cannabis industry.

Millions of shares change hands every day. It has a full options chain. It boasts pages of “institutional holders” on Bloomberg. MSOS is the “easy button” for trading cannabis: why research dozens of operators scattered across obscure Canadian exchanges, navigate state-by-state regulations, and decipher an industry operating in legal limbo when you could simply buy the ticker imprinted with “U.S. marijuana” on the label?

The problem is that the scoreboard is so broken that we no longer even know what game we are playing—and what’s true for MSOS is increasingly true for the financial system itself.

MSOS is simply one corner of the markets in which the scrolling neon green code animating the Financial Matrix becomes legible. As with Volmageddon, the simulation only reveals its true nature when you zoom in closely enough to see the glitches. Once you spot the pattern in truly dysfunctional markets like MSOS, you’ll recognize the same fractal repeating throughout the Matrix—even in seemingly functional markets operating at trillion-dollar scales.

Reefer Madness

There’s something deeply wrong with MSOS. Not wrong in the “ETF is badly managed” sense or the “temporary underperformance” sense, and not even in the “weed is uninvestable” sense.

MSOS is a simulation of exposure to “cannabis” that has become the primary reality market participants respond to—the type of financial hyperreality that we’ve been writing about in the Sorcerer’s Apprentice. When MSOS rallies, the narrative becomes that “cannabis is back”. When it sells off, “the sector is dead.”

All participants in weed stocks—retail traders, trading algorithms, dealers, promoters, media—now react to the price of MSOS itself, which moves the underlying stocks, which validates the reaction to MSOS as “fundamentally true”.

A Simulation That Has Become Real

Yet few investors and observers understand how inverted the MSOS “reality” really is. For starters, it doesn’t even own stocks in the companies whose performance it allegedly measures. In fact, it cannot—U.S. law prohibits conventional ETFs such as MSOS from directly holding plant-touching cannabis operators because these firms remain illegal at the federal level. Indeed, that’s precisely why the ETF exists in the first place.

So instead, MSOS owns something else entirely: indirect IOUs on cannabis stocks. And the managers of MSOS actively trade these synthetic positions like a hedge fund rather than passively tracking a known basket or index. Its performance therefore reflects the fund manager’s own trading decisions as much as the industry performance itself. The investor who thinks they’ve bought a simple index fund has unknowingly handed their capital to an active manager making discretionary swap trades, while dealers and intermediaries scalp the flows and extract fees at every layer.

If you peruse the MSOS holdings list, you won’t find “Green Thumb” and “Curaleaf,” but rather “Green Thumb Swap,” “Curaleaf Swap,” “Derivatives Collateral – Dealer X.” MSOS owns a stack of paper promises from counterparties who are running their own (likely hedged) book against the same names. It posts collateral, and in exchange receives the economic performance of a basket of cannabis names (after subtracting out hefty fees). The banks hedge their exposure as they see fit, often by trading the same names in Canada and OTC markets.

What started as a workaround for regulatory restrictions has metastasized into one of the most dysfunctional trading ecosystems in the Financial Matrix. The swap structure that regulatory constraints force upon MSOS makes it a better vehicle for quants and dealer trading books than patient capital. That dealer dominance warps the trading patterns—premiums, discounts, short interest, volume. Social media and retail interpret the chaos as manipulation or hidden signals, generating narratives that feed back into flows. And the volatility itself becomes the product, attracting promoters who extract value while amplifying the circus.

MSOS is a microcosm of a broader pattern in the Matrix: wrapper products that morph into scoreboards more real than the underlying game, in which social media narratives and trading flows matter more than the actual companies’ fundamentals (such as they are). Like the Bitcoin Treasury Companies, the MSOS ecosystem benefits everyone in the value chain—dealers, brokers, promoters, intermediaries—except for the investors who actually own it.

Social Media Circus

What makes MSOS particularly fascinating is how tightly the social media feed, the ETF tape, and trading algorithms have become intertwined, much as we discussed in Enter The Financial Matrix. Dealers move prices in response to flows and hedges. The social media and algorithmic feed interprets every move as a storyline—shorts attacking, reform coming, insiders buying, manipulation, whatever. Retail and trading algos pile in or bail out based on that narrative, which feeds back into flows, which feeds back into dealer behavior, which creates new narratives.

The managers of MSOS benefit from fees when assets under management explode during these rallies. Indeed, nearly everyone profits from the volatility itself, in both directions, regardless of whether cannabis reform—or any fundamental improvement, for that matter—ever actually happens. The only people who don’t profit from this circus are the retail “bag holders” getting churned by fees and long the ETF and stocks when the music stops.

Every few months, another newsletter author or influencer hypes an imminent “cannabis reform trade” to their followers or that they are seeing “massive inflows” into MSOS. Money piles in, the stock moves, and the promoter (allegedly) exits—using retail as exit liquidity—while continuing to post bullish takes. Then radio silence, until another “my sources tell me” setup begins.

It’s penny stock promotion 101—a playbook that dates back at least to the South Sea and Mississippi Bubbles, now relocated from Exchange Alley to Twitter and supercharged by algorithms that amplify every move. Reporters and social media amplify every rumor because it drives traffic. Lawyers and policy experts position as neutral referees while talking their books. Influencers trying to “unite the community” create drama for engagement.

Despite what retail investors think, the dealers running swap books and arbitraging premiums aren’t the true villains here—they’re providing liquidity for a broken structure created by the intersection of regulatory constraints and retail’s own FOMO/YOLO greed. The intermediaries’ incentives are transparent: extract fees, manage risk, facilitate trades. The bad actors tend to be the ones pretending to be on retail’s side while operating with completely opposing incentives—for example, “community leaders” who position themselves as selflessly guiding newcomers through the space.

Retail Red Herrings: “Institutional Owners”

Retail investors—and even some professionals—scroll through the MSOS holders list and see validation: real money, serious allocators, patient capital. The reality is almost the opposite: what appears to be ‘ownership’ is actually ‘inventory.’

A grocery store holds thousands of apples, but they aren’t ‘long apples’—they are warehousing them for turnover. Similarly, by our rough estimates, up to three-quarters of MSOS float sits with dealers, brokers, market-making desks, and authorized participants warehousing creation units and running inventory.

MSOS ‘institutional ownership’ is predominantly just professionals managing their own risk. They’re long it here, short it there, long calls, short puts, short the ETF against a custom basket, leaning short to arb a premium or leaning long to cover a discount—the visible positions are just stale fragments of hedged, multidimensional strategies, similar conceptually to what we discussed in our recent piece on the 12D Chess of 13Fs.

The remaining quarter of the MSOS float, give or take, represents the “real” investor base: a handful of small funds and advisors with mandates flexible enough to tolerate “federally illegal” exposure—often with strict position limits and requiring offsetting hedges—plus retail investors and wealth managers who use MSOS because there isn’t a better alternative.

In short, few—if any—of the institutional holders are providing patient long-term capital with a positive disposition to industry fundamentals; rather, they generally see MSOS as just another token to be passed around, hedged, and arbitraged.

The trading patterns confirm this interpretation. On a typical day, MSOS trades multiples of the combined volume of several of its largest underlying holdings. The options market amplifies this further—tens of thousands of contracts flipping back and forth, creating millions of shares of synthetic exposure layered above the ETF’s base.

Then there are the satellite ETFs orbiting the same universe: MSOX, essentially a leveraged version of MSOS that amplifies its volatility and forces more hedging activity back into the underlying names; YOLO and TOKE, which add global cannabis exposure but still channel flows into the same small pond of operators and swaps.

Each additional wrapper and derivative multiplies the amount of synthetic flow hammering a very limited number of actual companies. The result is an ecosystem where the wrappers and their derivatives have become more meaningful than the underlying businesses they indirectly own. Yet the price of MSOS has become the authoritative signal that everyone watches to “see how cannabis is doing”: retail traders, cannabis podcasters, newsletter writers, even institutional allocators treat the ETF’s movements as the primary reality.

Retail Red Herrings: The Phantom Menace

The chaos in MSOS trading patterns generates endless speculation among retail investors, but what looks like conspiracy is usually just the mechanical reality of how swap-based ETFs actually function.

When retail sees MSOS trading at a premium to its net asset value, they interpret it as bullish demand or “smart money” positioning. When it trades at a discount, they see capitulation or dealer games. In reality, premiums and discounts in MSOS behave nothing like those in normal equity ETFs.

In SPY, arbitrage mechanisms keep premiums and discounts microscopic—authorized participants simply create or redeem shares against the underlying basket until any gap disappears. But MSOS can’t do that because its basket is mostly swaps, not actual shares. So premiums and discounts swing wildly based on dealer risk appetite, hedging flows, and the cost of maintaining synthetic exposure. These aren’t esoteric signals about the future of cannabis reform, but rather signals about the internal plumbing of the ETF structure itself.

The same confusion surrounds short interest. Retail investors see high reported short interest in MSOS and conclude that “shorts are attacking” or that a squeeze is imminent. But most of that short interest is almost certainly dealers hedging their own exposure—shorting the ETF to arbitrage a premium, hedging sold call options, or running relative-value trades between MSOS and other cannabis products.

There’s no cartoon villain or “Sith Lord” naked shorting or paying punitive borrow costs to crush retail dreams. There are, however, sophisticated counterparties with access to swap desks, internal inventory, and synthetic shorting mechanisms that don’t require the usual friction of stock borrow or the uptick rule. What retail interprets as coordinated manipulation is mostly just professionals playing an entirely different game with different objectives and tools available to them.

Conclusion: A Scoreboard Untethered From The Game

MSOS is a casino—a derivatives structure built primarily for the benefit of intermediaries—where the scoreboard has become disconnected from, and yet directly influences, the underlying reality it supposedly represents. We barely remember what game we were supposed to be playing in the first place—reality is whatever the last trade and the last Tweet said it was.

The toxicity of the marijuana space—rivaled only by crypto, and attracting the same breed of degen speculators—is hardly an accident. It is the inevitable result of mixing drug culture with gambling mechanics. The MSOS structure is a perfect trap: the seductive story of “inevitable legalization” hooks the believers, while the friction of transaction costs and fees bleeds them dry.

None of this makes it impossible to profitably trade the marijuana space. It does mean, however, that retail investors in particular need to understand the real game that is being played, not the one advertised on the label. You’re not investing in cannabis. You’re speculating on an actively-traded, swap-based wrapper designed to enrich intermediaries and leave you holding the bag. MSOS is a trading sardine, not an eating sardine.

But MSOS isn’t merely a cautionary tale about a broken weed ETF. The uncomfortable red pill is that MSOS is hardly an outlier. The same code is running everywhere in the markets, and the same fractal pattern recurs throughout the Financial Matrix. We see it in Bitcoin Treasury Companies, volatility products, meme stocks—even plain vanilla equity and bond ETFs—all exhibit variations of this Alchemy of Risk.

The Financial Matrix seems real only because you haven’t fully unplugged yet, and because the simulation perpetuates itself until reality forces a reconciliation. For MSOS, the only likely scenario that can break the spell is Federal reform, which would allow plain vanilla ETFs to own the stocks instead of swaps.

For the broader market, however, a crisis will likely be required to force the simulation to reconcile with reality, for example when everyone tries to redeem their paper IOUs at once and discovers how many layers of abstraction separate them from reality.

In the meantime, remember: you’re not in the market—you’re in the Matrix. And the Multiflation Method decodes how to navigate this treacherous investment environment.

The FT posed a timely question this week:

But we believe a more existential question is at stake for investors, economists, and society: do prices themselves—let alone stock market valuations—still hold genuine meaning when central banks, passive flows, algorithms, and AI dominate their formation?

Prices As Performance Art

Crypto pranks like the Shiba Inu price chart above raise deeply unsettling questions about the infrastructure underpinning our non-crypto markets. What do the prices of items that actually matter to our lives—such as the stocks and bonds flashing on our screens, or the prices we pay for goods on Amazon—actually mean when algorithms and AI systems increasingly determine their values within a monetary system dominated by activist central banks?

QE + ETFs + AI + Algos = HyperPrices

What appears to be a healthy market is in fact riddled with insidious “HyperPrices”—synthetic signals that mimic authentic market prices but carry none of the vital information that allows us to coordinate society and the economy. Our Hyperreality and Skynet series traced how these corrupted price signals emerge from the intersection of fiat money, algorithmic trading, passive flows, and artificial intelligence.

When central banks manipulate money and interest rates, quantitative easing (QE) policies flood markets with liquidity, passive exchange-traded funds (ETFs) buy indiscriminately, and algorithmic trading converges with AI and social media, prices increasingly resemble HyperPrices. Each layer of modern ‘market’ infrastructure strips away another connection between prices and reality.

Psychedelic Prices

The chaos is not limited to trading floors and the financial markets, however—it is increasingly infecting our pocketbooks and corporate boardrooms:

We are rapidly approaching the point where “$10 for a banana” stops being a punchline:

From Dead Internet Theory To Dead Price Theory

Photos, videos, articles, and social media posts increasingly blur the line between authentic and artificial content. Deezer, for example, recently revealed that 28% of music uploaded to its platform is already fully AI-generated. The trajectory of this trend—what some call the “dead internet”—is clear:

Just as AI-generated music floods streaming platforms and bot “slop” content overwhelms social media, artificial price signals are drowning out authentic market information. The resultant HyperPrices are economic pollution that mirrors what's occurring across the broader digital landscape. Financial markets and the economy are becoming equally contaminated by corrupted prices that blind us economically.

This corruption is even now metastasizing imperceptibly through the entire economy, undermining our collective ability to coordinate society, understand reality, plan for the future, and sustain progress—including for AI itself.

Most of the resulting chaos remains hidden beneath the surface, visible only in its most spectacular eruptions: flash crashes and meltups that evaporate or conjure trillions in seconds, meme stocks commanding billion-dollar valuations based on bot-amplified social media chatter, bubbles in “bankruptcy stocks,” and prank cryptocurrencies like cryptokitties and Fartcoin that somehow justify market capitalizations rivaling major corporations. But this vicious feedback loop, whereby decisions based on corrupted data generate even more synthetic signals—represents what we might call 'Dead Price Theory' as the economic parallel to dead internet theory.

HyperPrices & Ant Death Spirals

In short, our economy and financial markets are increasingly guided by artificial signals that have lost connection to reality. This mirrors the eerie "ant death spiral" we explored in our piece on Volmageddon, wherein army ants—separated from their colony—follow each other's pheromone trails in an endless circle until they perish from exhaustion.

When an individual loses the ability to distinguish reality from fabrication, we call it psychosis. But what happens when this detachment from reality occurs on a societal scale?

If we can no longer trust prices to guide society, the very foundation of our economy must be called into question. Read our essay The Price Of Everything & Value Of Nothing (link here) to understand how Skynet’s trading algorithms are digitally remastering history's greatest economic debate—and how decentralized HyperPrices risk the same blindness that doomed centrally planned economies like the USSR.

Forty years of Goldilocks conditioned an entire generation to see asset markets as “Perpetual Money Machines” through what amounted to Pavlovian technique.

When any trouble surfaces, buy the dip, safe in the knowledge that the Fed will intervene and markets will quickly recover to new highs. Each successful rescue reinforced the gospel that faith in the Plunge Protection Team would inevitably be rewarded:

In such a simulated Financial Matrix, it makes perfect sense to delegate investment decisions to "dumb" passive ETF algorithms and "smart" AI algos—both trained on decades of BTFD data. Eventually, the logical result is crypto price charts drawn in the shape of a Shiba Inu dog and the chaotic flash crashes and price spikes we've explored in prior essays—the most conspicuous ripples atop the surface of a more pervasive phenomenon. Underneath, Skynet’s trading algorithms are not only generating the occasional dog price charts and the artificial chaos of flash crashes, but rather continuously weaving an artificial order throughout the markets—a constant, subtle restructuring of financial reality itself.

Most of the time, this manifests as an eerie stability, yet this very stability breeds instability. When one thread in the algorithmic tapestry snaps—perhaps from nothing more than the mounting tensions that emerge from countless algorithms weaving among themselves—the whole fabric unravels, briefly slipping its mathematical mask and exposing its artificial nature through flash crashes and “impossible” prices.

Read the full Skynet Part VI on our site (linked here):

With enough data, the numbers speak for themselves.

—Chris Anderson, Wired

The numbers that speak for themselves have become numbers that speak to themselves.

—Kevin Slavin, MIT Media Lab

Several weeks ago, we wrote about a “crypto bro” who gave new meaning to the phrase “painting the tape” by using the price system as a literal drawing pad—creating performance art through price manipulation:

This week brought a copycat who launched a new coin and meticulously drew an image of a Shiba Inu dog as the price chart:

While these are obviously jokes and publicity stunts from crypto’s Wild West frontier, they nonetheless raise unsettling questions. What do the prices of stocks and bonds flashing on our screens—not to mention the prices we pay for goods on Amazon—actually mean when algorithms and AI systems increasingly determine their values?

Read the full Skynet Part V on our site (link here):

Man Group just announced that AI is now creating its own trading strategies—and several dozen signals have already passed their investment committee.

The Skynet series has been exploring what happens when AI and algorithms interact in the capital markets and economy: what do computer-mediated prices even mean?

Part I introduced HyperPrices through a thought experiment set in an imaginary Costco.

Part II thrust us into the unsettling reality of HyperPrices in our own world—from a $24 million Amazon book to a chaotic penny-pricing debacle.

Part III revealed that Skynet is already online in the financial markets, and humans are in retreat: our semi-autonomous digital decision-makers increasingly sideline human judgment.

Part IV reveals how the 2010 Flash Crash was just the beginning—a glimpse into the world of HyperPrices, Flash Crashes, Meltups—where $1 trillion can vanish and reappear in minutes based on nothing but code.

Read the full Part IV Black Box Bedlam on our website (link here):

Series Table Of Contents

Previously: Rise of Skynet II

The headlines from this past week tell a story that would have seemed like sci-fi only a few years ago. Bloomberg’s Matt Levine reported on AI tradebots that taught themselves to collude, fixing prices and hoarding profits (link here), and Bloomberg published an additional article exposing the proliferation of tradebots in the bond markets (link here). Today, the FT examined how pricing algorithms are being used to determine people’s wages:

The impact of algorithmic prices we’ve been writing about over the past five years is now becoming a mainstream topic—yet the full implications for the price system that coordinates our economy and markets remain poorly understood.

Part I of our SkyNet series introduced the concept of HyperPrices through a thought experiment set in an imaginary Costco where ChatGPT dynamically set prices for everything in the warehouse.

Part II thrust us into the unsettling reality of HyperPrices in our own world—including algorithmically driven Flash Crashes, Melt-Ups, and other glitches (link here) in the Financial Matrix. From a “crypto bro” literally using prices as his easel to “paint the tape”, to an algo price war that resulted in a $24 million Amazon book:

These extreme cases reveal a profound truth: HyperPrices permeate our entire economic landscape. Beyond the sensational outliers, the tendrils of algorithmic pricing have infiltrated virtually every corner of our economy, and are increasingly warping the fabric of the price system itself.

Like Mickey Mouse enchanting brooms in the Sorcerer's Apprentice, we’ve conjured forces that operate beyond our full control or comprehension—and unleashed them in the heart of our financial markets and economy. The prices flashing across our screens represent...what, exactly?

Read the full Part Three on our website, here:

Series Table Of Contents

Previously: Rise Of Skynet

In Skynet Part I (here), we embarked on a surreal odyssey through the algorithmic underworld, venturing into an imaginary Costco where “HyperPrices™” flickered and fluctuated with manic intensity. These ephemeral numerical phantoms—untethered from reality and more akin to feverish hallucinations than meaningful economic signals—offered a glimpse into a world where the very concept of price had lost all meaning.

This week, reality caught up with our thought experiment. As if making our point for us, an anonymous crypto bro gave new meaning to the phrase “painting the tape”. He used the price system as a literal drawing pad—creating performance art through price manipulation:

This isn't just a clever marketing stunt. It reveals something fundamental about modern markets: prices increasingly exist as symbols that refer only to themselves, not to any underlying economic reality. The crypto artist understood intuitively what algorithms have been doing for years—creating price movements that respond not to fundamentals but to other price movements, generating endless feedback loops of artificial signals.

Costco HyperPrices aren’t merely a thought experiment—they increasingly mirror real-world phenomena. As algorithms weave their sorcery across the landscape of the economy, they are warping the fabric of finance and reshaping markets—if not society itself—in ways both subtle and profound. As we navigate the Financial Matrix, we’re forced to question the very foundations of our economic reality.

Read the full Part Two on our website, here:

Series Table Of Contents

Previously: Silicon Shadows II

Bloomberg’s published a piece yesterday (archive link here) about a 2023 research paper documenting AI trading bots spontaneously learning to collude without being programmed to do so. The study found that through reinforcement learning, these algorithms naturally converged on cooperative strategies that amount to market manipulation—simply because it's more profitable than competing:

It’s a regulator’s nightmare: Hedge funds unleash AI bots on stock and bond exchanges — but they don’t just compete, they collude. Instead of battling for returns, they fix prices, hoard profits, and sideline human traders.

Now, a trio of researchers say that scenario is far from science fiction.

Bloomberg followed up this morning with another story on Bond Trading Bots, their prevalence in fixed income trading, and how they are allegedly “safer” now:

Reading the two Bloomberg articles, we're struck by how directly they validate the broader patterns and themes we explored in our Sorcerer’s Apprentice white paper in early 2021. Since those ideas and dynamics are now front-page financial news—and having welcomed so many new subscribers recently—this seems like an opportune time to begin re-publishing our Rise Of Skynet series along with other relevant pieces from our Sorcerer’s Apprentice archives over the coming weeks.

The Sorcerer’s Apprentice predated the AI revolution of 2022-2023. From the vantage point of mid-2025, our exploration of algorithmic finance and market structure might initially appear quaint. However, the emergence of ChatGPT-3.5 and its successors has only amplified the relevance of these ideas in the interim. The questions we grappled with four years ago—probing the nature of modern prices, the autonomy of digital systems, and the future of finance—have only grown exponentially more pressing and complex. As AI relentlessly reshapes our world, the challenges to our understanding of markets, money, and reality itself have grown increasingly urgent.

Part of the Sorcerer’s Apprentice series, originally published privately on January 13, 2021. Updated, revised, and expanded for public release on October 4, 2024. New to the Sorcerer’s Apprentice? Start with our foundational posts on Hyperreality and the Financial Matrix for essential context, or explore the full Table Of Contents.

In Silicon Shadows Part I, we explored how the digitization of money and markets—coupled with the abstraction created by digital interfaces—severed the connection between our actions in the financial realm and their real-world consequences. In Part II, we examined two even more profound developments spawned by digitization: the accelerating elimination of human judgment from finance, and our newfound ability to encode our ideas directly into the digital fabric of the Financial Matrix.

Like Mickey Mouse enchanting brooms in the Sorcerer's Apprentice, we’ve summoned forces that now operate beyond our full control or comprehension. While society’s user interface remains seemingly unchanged, these forces have fundamentally rewritten its operating system and birthed the Financial Matrix—a system in which the prices flashing across our Bloomberg terminals and Robinhood apps represent...what, exactly?

Ten Milestones On The Road To Hyperreality: Contents
1.	The Metamorphosis Of Money 
2.	Keynes' Kaleidoscope 
3.	Central Banks’ Money Printer Go BRRRR 
4.	Silicon Shadows 
5.	The Rise of Skynet <== YOU ARE HERE 
6.	The Institutionalization Of Finance 
7.	The Symbolic Alchemy Of Risk 
8.	“We’re All Quants Now” 
9.	Social Media & “The Ecstasy Of Communication” 
10.	The Consumerification of Finance

When Prices Become Hyperreal

In 2010, financial markets briefly entered the Twilight Zone. Within minutes, the stock market plummeted nearly 10% before rocketing back up—all without human intervention. This “flash crash”—triggered by automated trading algorithms run amok—saw blue-chip stocks like Procter & Gamble whipsaw between a penny and $100,000. Though the resulting trades were soon voided and the insane gyrations halted, the incident revealed how untethered from reality prices could become in our digital age.

HyperPrices At Costco

Now, imagine such madness infiltrating your local Costco. You enter for a routine shopping trip. The familiar warehouse stretches before you, but something’s amiss. Sleek digital price tags flicker on every shelf, their displayed prices in constant flux.

An organic apple: $8,947.23. A wheel of artisanal cheese: $0.75. A 4K TV: $12.01. A case of water: $3,333.33—no, wait, now it’s $1.99, now $500, now negative $3.

Disoriented, you grab the apple and approach a store manager. “Excuse me,” you stammer, “why is this apple nine thousand dollars?”

The manager smiles politely. “That’s the current price” he replies.

“Yes, I can see that. But how are these prices determined?” you press.

“They’re just prices,” the manager responds with a shrug. “You know—numbers assigned to items by corporate HQ. The only difference today is that corporate is pilot testing the newest machine learning system called HyperPrice, which sets prices in real-time using ChatGPT7.”

Heart racing, you grab a few items with seemingly reasonable price tags—bread for $0.99, and that suspiciously cheap TV. At checkout, the display flashes: “$25,156.89.”

“That's impossible!” you exclaim. “A minute ago the bread was under a dollar! The TV was twelve bucks!” The cashier nods sympathetically. “The machines adjust prices up and down in real-time now.”

Dazed, you hand over your credit card. As you exit, clutching your receipt, a chilling realization dawns on you: these aren’t prices anymore—not in any meaningful sense of the word. The problem isn’t that they are high or low, expensive or cheap—those concepts no longer apply. Prices are just...abstract numbers now, floating freely in the ether. Your paper receipt is a snapshot of these digital phantoms—a frozen moment in time capturing arbitrary artifacts of an AI's inscrutable calculations.

HyperPrices In The Financial Matrix

While today’s economic and asset market pricing mechanisms have generally not reached the extremes of our imaginary Costco, they do share many unsettling parallels—and in the next installment we will explore additional real-world examples, such as a glitch with Amazon book prices. Even as we edit this essay in 2024, we’re seeing ongoing instances of algorithmic anomalies in the financial system: Bank Of America customers are experiencing a snafu that sets their bank balances to $0:

On the surface, asset prices retain their familiar form; the flickering numbers on our screens appear the same as always, and the ritual of obtaining stock and bond quotes has remained fundamentally unchanged for decades. However, beneath this veneer of normalcy, a profound transformation has taken place. While these prices masquerade as meaningful, they have steadily devolved into mere facades—shedding their ancestral role as bearers of meaning to become more akin to the phantasmal HyperPrices in our imaginary Costco.

Algorithmic Meme Magic

The digitization of finance has enabled us to create virtual agents (algorithms)—disparagingly nicknamed SkyNet from the Terminator movie series by some—which we set loose in an attempt to automatically execute our wills and ideologies within the purview of our hyperreal Financial Matrix.

Algorithms—sequences of instructions that tell a computer what to do— have become ubiquitous yet often invisible forces shaping our world. These “black boxes” are far from neutral. Each algorithm’s implementation requires its creator to make certain choices that inevitably reflect—consciously or not—his assumptions, values, and ideologies.

By imbuing these digital constructs with our worldviews, we cast them in the role of Max Weber’s “railway switchmen”, subtly determining the tracks along which society is molded. Algorithms are digital spells. Once unleashed, they ripple through our world, bending it to their logic—even as they remain hidden in the shadows. Once we infuse our digital Sorcerer’s Brooms with particular ideology—our “railway switchmen” digitally encode a “track” in the Matrix—we reify these memetic worldviews into the fabric of our reality.

A key point to remember is that algorithms themselves function as memes and wield their own form of “meme magic”—transmuting ideas into tangible reality. We ourselves used algorithmic “meme magic” to create the image on the cover graphic on this report. [Editor’s note: this was published before DALL-E, Stable Diffusion, etc.] Similar “meme magic” can be used to create “Deepfake” videos that extremely convincingly mimic reality—such as the following video of Barack Obama delivering a PSA about fake news:

The capabilities of deepfakes were further showcased in the recent viral video “Sassy Justice” by the creators of South Park, in which a Donald Trump likeness stars as a sassy reporter, and Mark Zuckerberg cameos as a dodgy dialysis center owner.

There are even AI algorithms such as “dank learning” that are designed to artificially create their own memes, as well as an entire field of computer science devoted to “program synthesis” in which algorithms write their own algorithms [Editor’s note: this now seems quaint in light of ChatGPT, Claude Code, and Cursor].

Algorithms enmesh themselves into our world, and shape it in myriad unseen ways. This is metaphorically what Najjar was attempting to capture in his artwork of financial mountains shaped by algorithms—“math we have written but can no longer read…math that is no longer derived from nature, but rather…rewrites nature”. Humans create algorithms, which in turn affect reality for humans, who then create additional algorithms that affect still other algorithms, and so on ad infinitum in a recursive feedback loop that propagates in unpredictable and chaotic ways.

Most recently, we’ve seen the power of Twitter and Facebook algorithms to create reality: they curate news and social media posts—and also altogether censor certain information and users. Even celebrity comedian Rowan Atkinson (Mr. Bean) recently weighed in on this topic: “The problem we have online is that an algorithm decides what we want to see, which ends up creating a simplistic, binary view of society. It becomes a case of either you’re with us or against us.”

Other algorithms determine election results (!), search results on Google, recommendations for what movies to watch on Netflix or songs to listen to on Spotify, pricing information for sites like Amazon and eBay, credit availability (FICO scores), real estate valuations (Zillow Scores), how businesses manage their global inventories and supply chain, and—most importantly for our purposes here—algorithms directly impact financial markets as well.

Up Next:

As we penetrate deeper into the Financial Matrix, we’ll examine the chaos unleashed by our digital brooms at the core of our markets.

Previously: Symbolic Alchemy

From Versailles To The Eccles Building

In Part I, we explored how John Law pioneered the first systematic experiment in financial alchemy. Law's experiment collapsed spectacularly, but the ideas behind it survived and metastasized. As John T. Flynn observed nearly a hundred years ago: "If you would see [John Law’s] monument, look about you."

What Law pioneered through crude paper instruments at Versailles, our modern Sorcerer’s Apprentices have perfected with digital precision and automation on a civilizational scale from the Fed’s Eccles Building. They’ve embedded Law’s alchemy into the foundational architecture of global 21st-century finance, giving birth to the Financial Matrix—markets that function like a videogame simulation.

This journey through financial alchemy's evolution will reveal the 2008 Crisis not as a “black swan” or a one-off “market failure” caused by a few years of subprime and CDO excesses, but rather as the inevitable culmination of decades spent perfecting the dark art of risk transmutation. More troubling still, our alchemists have doubled down on these same transmutational principles since 2008—constructing an ever more elaborate apparatus for obscuring systemic fragility while amplifying it to scales that dwarf the leadup to the 2008 crisis.

Ten Milestones On The Road To Hyperreality

1.	The Metamorphosis Of Money 
2.	Keynes' Kaleidoscope 
3.	Money Printer Go BRRRR 
4.	Silicon Shadows
5.	The Rise of Skynet 
6.	The Institutionalization Of Finance
7.	The Symbolic Alchemy Of Risk <== YOU ARE HERE  
8.	“We’re All Quants Now” 
9.	Social Media, Memes, & Machines 
10.	The Consumerification of Finance

The Deluded Speculators’ Tower of Babel (1720)

The engraving below—created in the aftermath of Law's experiment—eerily prefigures the 2008 crisis and today's even more precarious system:

The Great Mirror of Folly’s Tower Of Babel shows financial alchemy's grotesque endpoint: speculators suffer from diarrhea after gorging on “stock cakes”—a metaphor for dubious, fraudulent, or inflated financial products—and use their now-worthless certificates as toilet paper. John Law is seated on the bottom left, actively issuing and signing shares; the Tower of Babel rises in the background, symbolizing the hubris of this alchemical endeavor.

On the right side, a vendor—likely a personification of English financial fraud, and possibly representing Sir John Blunt—cooks deceptive stock cakes labeled ‘Smoke,’ ‘Wind,’ ‘Bad Shares,’ and ‘English Shares’. While some interpretations identify this figure as John Law, the labeling suggests a stronger alignment with the South Sea Bubble and English speculation, making Blunt the more likely symbolic target.

Above the chaos, Fortune—a blindfolded woman—rises from smoke while Wisdom exposes Fraud by pulling away her dress to reveal clawed feet. Financial predation is symbolized by a hawk killing a smaller bird, while a ruined investor throws himself from a window in despair.

The banner at the top reads:

Greed drives many souls to ruin chasing profit,
Who, blinded by love of illusory wealth,
Lose their work, clothes, and even their very status.
All is lost. Let those drowning in debt take warning:
What they found in shares was mere air and wind—
Empty shadows, never touched by substance.

Below the scene is a poem in four columns (our full translation here):

Today we have erected our own global investment Tower of Babel, ascending to heights far grander than anything Law or Flynn could imagine. Our modern Tower was built upon four foundational layers: first, money itself had to be transmuted from substance to symbol. Then government debt had to become 'risk-free.' Next, housing and mortgages had to be transformed into liquid, nearly ‘risk-free’ investments as well. Finally, all of this risk to be packaged into money-like instruments that could circulate globally.

Each layer enabled the next—and led inexorably to the 2008 collapse. Since the Crisis, our alchemists have stacked additional layers on top, constructing the Financial Matrix—an even more precarious system that we'll examine in the next chapter.

Metamorphosis Of Money: From Substance To Symbol

Our alchemists began by transmuting money from substance to symbol, declaring that money is whatever the State says it is and replacing a tangible asset with paper debt—IOUs from the Federal Reserve system.

For the first time in history, all of civilization became enmeshed in a kaleidoscopic, self-referential global monetary system. The severance of money from physical reality laid the foundation for our Tower Of Babel, creating the necessary precondition for every subsequent alchemical experiment, and initiated our modern age of financial sorcery.

Transmuting Treasuries: The Spreading Enchantment

Having severed money from physical reality in 1971, the alchemists faced their next challenge: extending their transmutation powers beyond currency itself to the broader universe of financial assets. They needed a proof of concept—a demonstration that they could weave a spell over any instrument they chose to enchant.

The alchemists turned to US Treasury bonds—the type of government IOUs that throughout history had regularly defaulted, leaving investors wiped out through debasement and repudiation (including at least three episodes in U.S. history that arguably qualify as technical defaults). Through academic theorizing, regulatory embedding, and the global demand created by dollar reserve currency effects, the alchemists achieved something that would have made John Law weep with envy: they entranced the entire world into believing that these government promises had been symbolically transformed from risky IOUs into "The Risk-Free Rate."

Not content with creating money from nothing, our alchemists had now created safety from risk, certainty from uncertainty. The very meme "Risk-Free Rate" became the foundational axiom of Modern Finance, embedded so deeply in orthodoxy that questioning it became almost unthinkable.

By the 1990s, regulatory bodies and institutions had woven Treasury-based calculations into the fabric of banking, investing, and financial ‘compliance’. Basel banking accords granted Treasuries privileged status—giving banks an incentive to load up on government debt versus other more productive assets. Until relatively recently, ratings agencies consecrated Treasuries with the highest possible rating—AAA.

Treasuries began to function as the baseline against which all other risks and returns are measured. The "Risk-Free Rate" became the gravitational center around which all other financial assets would orbit, serving as the base input for everything from the Capital Asset Pricing Model (CAPM) to Modern Portfolio Theory (MPT) to options pricing formulas.

This wasn't merely an academic exercise—this single meme became the foundational fiction supporting global financial alchemy. An entire civilization now priced assets and measured risk based on the ahistorical premise that a government—specifically the US government—never defaults.

But the transmutation of Treasuries served a far more important purpose than merely creating an illusion of safety that allowed the government to borrow more cheaply than it otherwise would. It established the methodology that would later be applied to subsequent alchemical experiments: symbolic transmutation, academic legitimization, regulatory capture, institutional embedding—backstopped by central banks—could memetically transform any asset into whatever symbol the alchemists needed it to become.

The Alchemy Of Housing

The alchemists’ next target emerged out of necessity. After their Dotcom bubble crashed in 2000, central bankers were left scrambling for a replacement bubble to paper over the wreckage they themselves had created. They needed an asset that was far more pervasive than tech stocks—a market that could absorb massive leverage while touching every American household:

2008’s Deeper Roots: Government Sponsored Mortgage Alchemy

Conveniently, all the infrastructure required to inflate this bubble had already been in place for decades—and indeed had already been inflating housing prior to the subprime boom. The roots of the financial crisis extend far deeper than the subprime lending and Collateralized Debt Obligation (CDO) boom that dominated headlines.

The true foundation was laid during FDR’s New Deal, in response to the Great Depression. Like the 2008 crisis, the Fed’s reckless monetary policies during the “Roaring Twenties” helped fuel a speculative stock bubble cthat burst in 1929, triggering widespread economic collapse. By 1933, a quarter of all American homeowners had lost their homes in the resulting Great Depression.

After his reverse alchemy turned money from gold into paper, FDR applied the same symbolic alchemy to housing—establishing the precedent that homes deserved continuous government support as a cornerstone of economic policy. The New Deal created Fannie Mae in 1938 as one of the first major Government Sponsored Enterprises (GSEs) that would come to reshape American housing finance.

The GSEs and the mortgages they touched came to be seen as nearly as safe as Treasuries. The alchemical logic was elegant: because government bonds were risk-free, a mortgage (implicitly) backed by the government also became (nearly) risk-free, creating a transitive property of safety.

Fannie transitioned from a government agency to private shareholder ownership in 1968. Two years later, Congress created Freddie Mac to provide competition to Fannie and additional liquidity to the secondary mortgage market. Not long after the Nixon Shock finished off what had remained of the gold standard in 1971, Freddie issued its first mortgage-backed securities (MBS); Fannie followed suit in 1981.

The GSEs purchased mortgages from lenders and packaged them into MBS, freeing up capital at the banks, enabling banks and other loan originators to issue far more housing loans than were previously possible. Securitization allowed Wall Street to sell mortgages to investors as a virtually “risk free” commodity at enormous scale due to the implicit government guarantee of the GSEs. This alchemy of housing risk translated directly into easier access to loans and lower mortgage rates for borrowers, which in turn artificially inflated housing demand—and therefore prices—by increasing buyers’ purchasing power relative to their salaries.

Both GSEs expanded operations dramatically in the 1980s and began to standardize the securitization process. This connected home lending to global capital markets, vastly increasing the supply of mortgage funding; a hedge fund or foreign investor might now own your mortgage rather than your local banker.

The MBS market turned the incentive structure of mortgage lending on its head. By creating a liquid secondary mortgage market for the first time, lenders could now make loans and immediately sell them rather than being forced to hold them long-term, severing the connection between those making loans and those taking the risk the loan might not be paid back. Profits were now tied to loan volume rather than loan quality, and underwriting standards began to deteriorate as there was less “skin in the game”—the profits were privatized, but any losses were socialized thanks to the government backing.

This alchemy fundamentally transformed the housing market. What had traditionally been a local, relationship-based market rooted in community banks' intimate knowledge of their borrowers became a national commodity. Government backing of mortgages and Wall Street’s MBS machine flooded the market with virtually unlimited cheap credit.

In particular, following the collapse of the Northeast and California real estate bubbles in 1991—during the most precarious period for banks and S&Ls—Fannie Mae and Freddie Mac began to aggressively expand their balance sheets in an apparent attempt to paper over those crises.

The GSE’s enabled gold to be fabricated from drywall and debt—transforming the American Dream into the raw material for financial elixirs sold the world over, as Margot Robbie memorably explained in The Big Short:

The Great Symbolic Inversion: From Shelter to Speculation

By the time Paul Krugman recommended that Greenspan’s Fed inflate a housing bubble in 2001-2002, therefore, Fannie and Freddie had already spent decades perfecting the transmutation of mortgage risk into “safe” securities. The Fed and GSEs’ implicit backing of mortgage credit had radically altered market risk perceptions for housing and mortgages beginning as far back as the 1980s.

The profitability of this arrangement was evident early on: Peter Lynch famously declared Fannie Mae "the best business, literally, in America" in 1986, marveling that the company employed a quarter of Fidelity's workforce while generating ten times the profits. Financial alchemy, it turned out, was remarkably lucrative.

As result of the GSEs, houses and mortgage debt were symbolically transformed into “safe asset classes” unto themselves. Operating as shadow quasi-central banks alongside the Federal Reserve, Fannie and Freddie quietly fueled the nationwide—and arguably global—housing bubble that emerged in the 1980s and gained momentum throughout the 1990s.

In the process, the GSEs created the template that private markets would later amplify through increasingly exotic instruments during the subprime securitization boom of the early 2000s, including the mathematical models, market-making infrastructure, and “credit enhancement” mechanisms—such as guarantees against mortgage default implicitly backed by the U.S. government.

The methodology mirrored the alchemists’ Treasury playbook: symbolic transmutation, academic/mathematical models replaced economic reality, regulatory blessing replaced market discipline, and ratings agencies sanctified the alchemical process for fees.

Basel Accords again provided a spellbook, treating mortgage debt preferentially and creating another profound distortion in banking incentives: financing suburban real estate speculation became more profitable than lending to businesses actually creating goods and services. Ratings agencies again sanctified the alchemical process for fees, stamping "AAA" ratings on securities backed by risky mortgages.

Other countries such as Sweden, Canada, and Australia adopted similar alchemical playbooks to support their own housing markets, and the “moneyness” of housing and mortgage debt attracted global capital flows. As a result, the middle class across the globe was drawn into a game of asset inflation or stagnation—buy now or forever be left behind.

Wall Street reveled in its ability to alchemically convert an endless torrent of risky mortgage loans into perceived safe and liquid securities through a daisy-chain of explicit and implicit guarantees—GSE backing, credit insurance, liquidity agreements, and an expansive derivatives marketplace—all ultimately supported by faith in the Fed and Treasury.

Evolving insidiously over time, this alchemical liquidity helped fuel successive leveraged bubbles—including tech stocks in the 1990s, and later housing and consumption in the 2000s.

Fannie and Freddie were the hidden architects behind the transformation of homes and mortgages into the world’s most important (and leveragable) speculative commodity. What appeared to be genuine prosperity was John Law-inspired alchemy masquerading as economic growth, making collapse inevitable once the liquidity slowed in 2007-2008. Even without the added fuel of subprime lending and CDOs, this system would have eventually collapsed under its own contradictions.

The Symbolic Alchemy Of CrediCash

Meanwhile, demand exploded for debt issued by Fannie and Freddie themselves; this so-called agency debt was issued to fund their mortgage purchases and the mortgage-backed securities they created. There was insatiable demand for these IOUs; agency debt, mortgages, and MBS became core holdings throughout the global financial system, including in cash management and “money market” funds.

This created what we call CrediCash—a highly liquid, “safe” instrument that circulates as if it were money due to perceived liquidity and government guarantees. The agencies were able to issue virtually unlimited quantities of new IOUs—agency debt and mortgage-backed securities— with no deleterious impact on the market’s perception of their money-like status because of their implicit government backing.

Our alchemists wove this disguised housing risk into the very fabric of the global monetary system; speculators then used CrediCash to cheaply fund real estate and other asset market bets globally. Investors believed they can get their “money” out anytime—until the moment that trust evaporates, the underlying risks are exposed, and the whole system seizes up.

The 1990s were the heyday of check-writing from Money Market Funds (MMFs) and “sweep accounts”, both of which reinforced the illusion that credit was as liquid and risk-free as cash. These MMFs grew into massive funding vehicles; a large share of their assets was invested in short-term debt issued by GSE-related debt and mortgages, effectively channeling trillions into the housing market. This created a powerful feedback loop: sweep accounts fed MMFs, MMFs funded GSEs, and GSEs pumped credit into housing—driving up home prices and spurring even more borrowing.

The easy flow of credit extended far beyond housing markets. Rising home values bolstered consumer confidence and provided additional collateral, which fueled increased consumption and stock market investment. Simultaneously, low interest rates and abundant liquidity drove investors to seek higher returns, inflating stock prices in tandem with real estate values. The seemingly limitless profit potential in these markets ensured that both real and financial assets captured the vast majority of available lending and finance. In this environment, the finite universe of productive investment opportunities struggled to compete for lender attention against the allure of appreciating—and increasingly inflated—asset markets.

2008 Was Not A Subprime Crisis

Thanks to popular media accounts of the crisis such as the Big Short, the public focuses on esoteric instruments such as subprime and CDOs. This obscures the deeper alchemical process that took place, as these now-infamous instruments were merely the most visible symptoms of a systematic symbolic inversion that began with Money’s Metamorphosis and Treasuries’ Transmutation.

The fixation on these specific mechanisms also blinds observers to similar alchemical processes in other assets and geographies that don't exhibit the particular American pathologies of 2002-2006. For example, it creates a false sense of immunity regarding the arguably worse housing bubbles in markets like Sweden, Australia and Canada, where the same fundamental alchemical processes unfold through different instruments, channels, and institutional contexts.

The Great Financial Crisis was not primarily the result of new derivatives, a few reckless lenders, or regulatory failure as the conventional narrative suggests. The crisis was the inevitable consequence of a broken monetary system and the systematic alchemical transformation of government debt, housing, and mortgages.

The spell worked exactly as Paul Krugman and other economists intended—channeling trillions of dollars into speculative bidding wars over condos and suburban real estate in order to “replace the Nasdaq bubble” with an even bigger housing bubble. The Crisis was the result of a generalized credit bubble, not simply a subprime bubble; the result of the credit bubble was a feedback loop wherein credit creation drove asset inflation, and inflated assets justified more credit—pushing both housing and equities into twin bubbles. When reality finally reasserted itself, the transmutation briefly reversed with devastating speed—before our alchemists again doubled down on alchemy to paper over the crisis.

Up Next: Part III, The Everything Bubble

John Law proved that paper could temporarily become gold through State backing and mass memetic conviction. Today's alchemists have erected Law's vision on such a scale that the entire world must participate in the experiment—whether they choose to or not.

The spell is breaking; after decades of illusion, financial reality is beginning to reassert itself and the shifting ground beneath our civilization is now impossible to ignore. Multiflation is here—a historic reordering of the global socioeconomic system that will define the coming decade.

Despite the “Mandate of Heaven”—Trump's presidential victory, Republican control of both the House and Senate, and bipartisan support for fiscal responsibility—the government has failed to reduce its deficit by even a single dollar, prompting another US Treasury downgrade:

The much-heralded fiscal strategy—tariffs to drive revenue and growth, AI-driven efficiency through DOGE for expense cuts—appears to have collapsed at first contact with political reality. Such fiscal recklessness—not only in the US, but amongst nearly all developed nations—sets the stage for the dénouement of the greatest monetary experiment in the history of mankind—the final act of an economic drama whose prologue played out in Versailles three centuries ago.

Series Table Of Contents

Ten Milestones On The Road To Hyperreality

1.	The Metamorphosis Of Money 
2.	Keynes' Kaleidoscope 
3.	Money Printer Go BRRRR 
4.	Silicon Shadows
5.	The Rise of Skynet: The Algorithmization Of Finance 
6.	The Institutionalization Of Finance
7.	The Symbolic Alchemy Of Risk <== YOU ARE HERE  
8.	“We’re All Quants Now” 
9.	Social Media, Memes, & Machines 
10.	The Consumerification of Finance

The Philosopher’s Stone

Alchemists of old sought the Philosopher's Stone—a mythical substance capable of turning base metals into gold. But John Law—the audacious Scottish exile who first caught the eye of French nobility in an 18^th-century Parisian gambling den—would later show the royal court something far more powerful, and stake the entire kingdom on his grand bet.

Through his Mississippi Company, Law was granted control of the kingdom's fiscal and monetary apparatus. Some consider Law to be the world's first proto-Keynesian, because he argued that metallic money was unreliable, and—like modern economists who compare the economy to a car—that credit issued and managed by a proto-central bank would remove the “brakes” on the economy.

Law’s ‘System’ issued state-backed paper money, monetized government debt, exerted control over minting, influenced taxation, and attempted rudimentary monetary policy—making it the first fusion of central banking, fiscal authority, and financial alchemy in European history; in the process he created a collective fever dream that held the nation spellbound.

The delirium transcended national boundaries: the years 1719-1720 witnessed intertwined financial bubbles across France, England, and the Dutch Republic. The fever finally broke in arguably the world's first international stock market crash—one whose economic shockwaves reverberated across Europe for decades to come.

In England, a ballad captured the fervor surrounding the South Sea Company:

In London stands a famous pile, And near that pile an Alley,
Where merry crowds for riches toil, And wisdom stoops to folly.
’Tis said that alchemists of old Could turn a brazen kettle,
Or leaden cistern into gold; That noble tempting metal.
Our cunning South Sea like a god, Turns nothing into all things…
Few Men, who follow Reason’s Rules, Grow fat with South Sea Diet,
Young Rattles and unthinking Fools Are those that flourish’d by it.
Five hundred Millions, Notes and Bonds, Our Stocks are worth in Value,
But neither lie in Goods or Lands, Or Money let me tell ye.
Yet tho’ our Foreign Trade is lost, Of mighty Wealth we Vapour;
When all the Riches that we boast Consists in Scraps of Paper.

Where Paris’s Rue Quincampoix was engulfed by Law’s Mississippi Bubble frenzy, London’s Exchange Alley—referenced in the ballad above—served as the beating heart of South Sea speculation.

Exchange Alley was the proto-physical equivalent of Bloomberg Terminal, Instant Bloomberg chat rooms, r/WallStreetBets, the London Stock Exchange, and Robinhood combined—all rolled into a handful of rowdy coffee houses like Jonathan’s. Equal parts trading floor, rumor mill, and theater, these cafés functioned as unofficial stock exchanges where traders, merchants, and opportunists shared tips, fueled speculation, and chased get-rich-quick schemes.

Broadsheets like Castaing’s tacked to walls listed breaking news and stock prices; rumors, tips, and speculation passed hand to hand or table to table; and deals were struck on the spot amid the din. That included not just shares, but also informal options ("time bargains") and forward contracts—early derivatives used to bet on future movements in stock prices or commodities.

The alley attracted a mix of insiders and eager amateurs, and the action was driven less by fundamentals than by frenzied appetite for risk—the FOMO/YOLO of its day. Merchants, clergymen, and farmers with mud still on their boots piled into the action at these “penny universities” centuries before meme stocks had a name.

There was even a proto-SPAC boom—infamously satirized by “a company for carrying out an undertaking of great advantage, but nobody to know what it is”. Capital flooded into ventures with no clear business—just lofty claims and “vibes”—driven by the same blind faith in promoters and upside that fuels modern “blank-check” manias.

While the Dutch Republic experienced its own speculative fever—a windhandel, literally, “wind trade”, because investors were essentially buying and selling air—it was more restrained than the full-scale national manias that gripped France and England, and less economically damaging than its counterparts.

The Great Mirror Of Folly

Artists and satirists of the era, stunned by the onset of this pan-European collective madness, created The Great Mirror of Folly—a compendium of satirical writings and engravings—as a "warning for posterity". It was their attempt to make sense of the hyperreality of the transnational "share, bubble, and wind trade in France, England, and the Netherlands," and to ensure history would not repeat itself.

The reason we turn to The Great Mirror of Folly—and the reason it remains so compelling—is that it transcends its early eighteenth-century origins to illuminate universal patterns of human behavior. True to its name, it provides a mirror through which to understand our own contemporary folly, revealing the same patterns within our own Financial Matrix.

The Witches’ Sabbath

Today, economic historians typically argue that asset bubbles arise when prices exceed their fundamental value, often driven by “irrational exuberance”. The Great Mirror of Folly, however, offers a more textured, allegorical critique. Rather than focusing solely on what Mackay later called the “madness of crowds”, it satirizes a world enchanted by illusion and chronicles the dissolution of society through financial alchemy.

The Folly collection's genius lies in its recognition of society's descent into hyperreality—where symbols supplant the substance they were supposed to represent, leaving citizens as disoriented as Alice in Wonderland. It echoes Thomas Mann's short story that we explored in The Flight Into Fake Values: just as Mann saw the Weimar hyperinflation as a “a witches’ sabbath that vanished, leaving nothing behind it but headaches and regrets”, Folly drew from a shared vocabulary of the diabolical—invoking witches, Mephistopheles, Baal, and the Devil:

Baal, or The World in Masquerade searingly depicts the original Financial Matrix: a society turned upside down, where folly parades as wisdom, and vice wears the robes of virtue. The image unfolds in a grand ballroom teeming with revelers, each a symbolic archetype of societal inversion and moral collapse. Every station of society is represented, cloaked in illusion and deceit; atheists masquerade as bishops, courtesans don the mourning garb of virtuous widows, swindlers parade as noblemen and sages. Presiding over this corrupted pageant is Baal, the demonic patron of false appearances and moral inversion.

Folly delivered a profound critique of prevailing economic 'reason', revealing how contemporaries understood society’s enchantment not so much as bubbles fueled by “irrational exuberance”, but as fractures in reality itself.

Here one sees with the eye of understanding / Life as a wide hall full of illusions…
But when the masks are off, the game is over, / Then the world, and the turmoil, is mourned.

A witness to the chaos described how under Law’s System—like our current hyperreality, and the one described by Thomas Mann—ideas and words themselves seemed to lose all meaning:

By an all new secret magic, words assembled…that no one comprehended, and the air was filled with obscure ideas and chimeras.

As one contemporary observer noted, constant changes of monetary values and reversals of policy had produced "the desired effect, that of so upsetting all principles, obfuscating all lumieres [i.e., enlightenment, reason], changing all notions [established ideas or shared understandings], that one no longer knew what to hold on to [what beliefs, values, or frameworks remained stable or trustworthy]."

Symbolic Alchemy & Memes

Alchemical imagery saturates these works, alluding to the severing of some essential bond between representation and reality. Folly documents a society lost in delusional reverie—bewitched by enchanted paper, seduced by symbols, signs, and memes. The collection's most penetrating insights emerge from its recognition that financial alchemy operates not just on financial instruments and risk, but on human consciousness itself; what begins as financial alchemy evolves into something far more profound—a rehaping of collective consciousness that alters how whole societies conceptualize themselves and the world around them.

The Mirror's creators implicitly understood that this was an epidemic outbreak of what we would now call "memes"—speculative viral ideas that found their ideal growth medium in a financial system creating claims to wealth out of thin air. The core insight remains constant across centuries: when societies believe they can conjure wealth through symbolic alchemy—whether Mississippi Company shares, houses, mortgages, ETFs, private equity, private credit, or memecoins—when they sell vibes and memes to one another in ever more elaborate circular exchanges, the consequences extend far beyond financial markets to upend society itself.

Symptoms of this epidemic abounded. Securities and financial jargon transformed into mystic talismans; exchanges became fairgrounds of fraud (or, as so eloquently puts it, the “Golden Age Of Grift”) and carnivals of deception; the masses, spellbound—like the cartographers in Borges’ story—traded reality for theater, substance for spectacle in a grand “Masquerade” of illusion.

Arlequin Actionist

Central to this theme of illusion in Folly was the idea of creating value from "nothing." Law's banknotes and company shares seemed to conjure "unfathomable riches" from the transmutation of air into treasure:

Behind theater curtains that underscore the hyperreality of the scene, John Law and stock promoters are feeding gold coins to a man through a funnel. In an inverted alchemical process, the squatting man then expels excrement—papers representing “wind” or speculative schemes into the eager hands of the crowd below.

This scatological act is a crude but powerful way to show their utter worthlessness and the deceptive, fraudulent nature of the entire enterprise, transforming real money into literal waste. The print also features other figures explicitly "breaking wind" labeled “South Sea” and “Mississippi”. An owl—traditionally a symbol of wisdom—perches solemnly between curtains, but subverts expectations by passing gas in the form of a banner declaring "Actie zonder Waarde" ("Shares without value").

Over three centuries later, the mechanics remain intact—only now the expelled wind has a ticker symbol and is listed on major crypto exchanges:

Monopoly Of Winds

“The Monopoly Of Winds”, too, bitingly satirizes the wind trade:

At the heart of this scene stands the central figure, a lavishly dressed “wind-merchant”: an allegorical personification of both John Law himself and the grand illusion he so skillfully wove. The windmill crowning Law's head marks him as a "project maker"—someone akin to “Helicopter Ben” and “JPOW” who could conjure apparent wealth from nothing but "wind, a promise, a plan.”

The windmill, used to manufacture paper at the time, visually represented the entire "wind trade"—the creation of paper financial instruments from nothing, which were then inflated into a speculative bubble by its spinning blades blowing hot air.

Much like modern memes featuring The Bernank showering paper dollars from helicopters, or anime girls gleefully dancing before Powell/Kashkari’s roaring money printers—satirizing modern monetary excess with the phrase “Money Printer Go Brrr”—Folly used humor as a scalpel, cutting through the alchemical abstractions of finance to reveal their underlying absurdity.

In Monopoly of Winds, Law is perched precariously on a swirl of ethereal clouds blown by an angel, quite literally trafficking in air as he dispenses worthless share certificates and prospectuses. Speculators cry "Grab it, I have it!" and recite the proto-YOLO gambler's motto "Who dares nothing, wins nothing." "Shares by Baal" condemns the speculative frenzy as both financial idolatry and a total inversion of moral and economic order. Behind Law, a man holds a candle that burns his fingers, representing the consequences of the risky speculation.

Symbols & Shadows

The accompanying sardonic inscription, "He who tries to reason is led astray. One finds the Philosopher’s Stone only by speculation and chance," equates the pursuit of wealth through speculation with the alchemist's elusive dream and—like the South Sea Ballad—highlights the futility of any rational approach in such a hyperreal environment. The chaotic, irrational scene depicted is, paradoxically, the "correct" way to understand and navigate this new financial world, a lesson that resonates across centuries, as evidenced by this infamous tweet:

Beneath the Monopoly engraving, a poetic indictment unfolds:

The wind is my treasure, cushion, and foundation.
Master of the wind, I am master of life,
And my wind monopoly becomes
Straightway the object of idolatry.
I manipulate symbols and shadows,
Making the foolish see riches in clouds.
I inflate bubbles, so light yet so tall,
And with every gust, the gullible fall.
This is the secret: I sell illusions,
And buyers thank me for their delusions.
The wise man keeps his coin inside—
The fool sees gold in every tide.
The game is chance, the hope is gain,
But all is wind, and loss, and pain.

The Maestro

The Monopoly Of Winds can be understood as a mock-apotheosis. Whereas traditional apotheosis scenes depict heroes or rulers ascending to godhood, often amidst clouds and divine attributes, here Law's elevation is not to a divine realm but to a kingdom of air and illusion. The "[stock] shares full of calamities" are a perversion of divine blessings or royal largesse.

This satirical enthronement highlights the illusory nature of Law’s financial "System" and critiques the "mass idolatry" that had, for a time, elevated him to a position of immense power and perceived financial wizardry. The satire thus targets not only Law's schemes but also the public credulity that enabled them—a credulity we see repeated today in the mythologizing of modern central bankers like Greenspan, Bernanke, Powell, Lagarde, and Draghi, whose financial alchemy is similarly sanctified by contemporary media:

Bestiary Of Folly

Surrounding Law is a bestiary of allegorical animals and figures, each embodying a particular human folly or corrupting influence within the chaotic carnival of illusion. Perched in a withered tree, a monkey observes a flying cat through a telescope—a parody of human analysts futilely tracking speculative assets. The rhetorical question “Who can see the end?” hovering above the monkey's head emphasizes the folly involved.

The cat floating on balloons is the avatar of Fartcoin-like inflated assets, while the man blowing air through bellows symbolizes the forces that artificially inflate them. The duck bearing a barrel approaching the chest of speculative papers is a Dutch pun symbolizing the public left carrying the financial burden after the collapse of the bubble; the phrase beneath it, “Eend draagt de last” (“the duck bears the burden”), marks an early visual metaphor equating the duck with the bagholder of the bursting bubble economy.

Mice crawl over the papers, signifying the presence of deceit, fraud, decay, corruption, and the insidious undermining of value—suggesting that the paper assets are not only worthless but also tainted by fraud.

Behind the chest, a toad confronts an ox—a nod to Aesop's fable where a toad puffs itself up to match an ox's size—symbolizing overambitious speculators who inflate themselves with false promises and empty assets, vainly attempting to rival genuine wealth.

Proto Meme Ledger

To the right of Law in Monopoly floats a scroll that operates as a proto-meme ledger, mocking the inventory of financial jargon—such as options trading and promises of outsized yield—that fueled the speculative delirium. Markets had been reduced to carnival barking—where fortunes were made not by selling substance, but by hawking abstract financial symbols and manipulating memes and jargon.

The Monopoly of Winds feels startlingly contemporary. Replace Law's floating papers with modern financial jargon, and the result would be an equally apt satire of today's financial theater. Much like today's memes and financial buzzwords—ETFs, 0DTEs, the “bankruptcy bubble”, memecoins, Apes, SPACs, yield farming, Quantum Computing, CLOs—often sell “hot air” by wrapping it in convincing language and memes to create the illusion of sophisticated investment opportunities. The set pieces may have evolved—from windmills to “Money Printer Go Brrr”, “Number Go Up”, and 🚀 rocket ship emojis—but the underlying dynamics remain remarkably consistent.

Money Magician

The ideas that financially destroyed France would metastasize. Refined and reimagined over time, they eventually became the foundation of modern money and finance. Writing in the 1940s—long before Quantitative Easing made “Money Printer Go Brrrr” a meme—John T. Flynn had even then recognized in Men Of Wealth: Money Magician how thoroughly our own society had absorbed Law’s alchemical teachings:

John Law exploited the eagerness of men to grow rich by making their profit, not in producing goods or creating utilities, but gambling on the changes in the price of investment certificates. He perceived also the uses of the bank as an instrument for creating an immense reservoir of savings funds as well as an instrument for actually manufacturing money—bank credit.

It would be a long time before the full possibilities of these weapons would be realized by the acquisitive man. Indeed it would not be until our own time that this would be done. But it has been done…

Oddly, two hundred years after John Law, the gambler-philosopher, wrought upon society, one may see everywhere the…fruits of his brief adventure permeating our whole economic edifice…If you would see his monument, look about you.

But even Flynn and Law could not have imagined how far beyond those primitive French monetary conjurations the world would venture. Today's central bankers and financiers have truly perfected Law's dark arts, weaving transmutations that would have left even that master alchemist speechless.

Where Law wielded crude paper instruments, our modern Sorcerer’s Apprentices conjure digital money from the ether with a keystroke; ETFs, trading algos, and derivatives then spawn like self-replicating incantations, cascading endlessly through markets with the relentless determination of Mickey's enchanted brooms—automatically amplifying and channeling this conjured "wealth" until it weaves itself into a vast Financial Matrix that pulses beyond Mickey’s control.

What medieval mystics sought in their Philosopher's Stone pales before this achievement: we stand witness to the most brazen monetary experiment in human history, one that reduces John Law's Mississippi Bubble to a quaint provincial sideshow.

Next: The Symbolic Alchemy Of Risk Part II: Metastasizing Monetary Mirage

Next: Tower Of Babel

From Versailles to the Eccles Building—how Law's symbolic alchemy became the foundation of modern finance.

Just one week after Satoshi descended like Prometheus from Mount Olympus—stealing Bitcoin’s fire from the monetary gods to both illuminate and immolate the Fiat Age—a sobering warning echoed through an obscure cypherpunk listserv: even perfect code cannot fix imperfect politics.

While Satoshi has long since vanished, that central conflict between power and protocol continues to cast a long shadow. Indeed, it is the ancient fault line underlying every monetary debate—how money was born, the ways in which it mutates, why it dies, and what might be done to fix it.

Did The Telegraph Break Money?

For centuries, the first monetary protocol—precious metals—imposed a rough constraint on power. Lyn Alden’s Broken Money sits on our bookshelf—and our recommended reading list—because it charts that saga with rare clarity. In Chapter 8, Lyn presents gold’s failure—and the ascent of today’s “broken” fiat monetary system—as the unavoidable toll of technological progress. In short, the telegraph broke the monetary system—and only a technological breakthrough of equivalent magnitude can mend it.

We Agree With Lyn—And The Stakes Are Civilizational

If technology broke money, the fix is technical. But if people broke money, then only people can fix it.

We broadly align with Lyn’s historical framework and her account of the confluence of factors that brought us to today’s “broken” monetary system. We stand on Lyn’s shoulders, and point to an even deeper fault line than the telegraph: whereas Lyn foregrounds technology as the primary engine of monetary evolution, we foreground ideas and human action.

The two are interwoven, and the distinction may seem subtle at first glance; a matter of emphasis. But beneath the surface lies a nuance—one with far-reaching implications for the future of money, gold, Bitcoin, and freedom itself. Money is society’s operating system—it shapes our civilization at every level. The stakes, here, therefore are not academic—they are existential.

If we believe that broken money emerged primarily due to technology, we’ll try to out-engineer fiat with better technology—and risk becoming complacent when we succeed, presuming victory to be a foregone conclusion.

But if money broke primarily as a result of human action—rooted in ideology, shaped by incentives, hardened into policy, and wielded through social institutions—then only continuous human will and vigilance can repair and maintain it.

On Technological Inevitability

In Chapter 8 of Broken Money, Alden crystallizes her technological determinism thesis:

“Political decisions affect things locally and temporarily, while technological changes affect things globally and permanently.”

Lyn sees gold’s demonetization—and the rise of our fiat monetary regime, and later Bitcoin—as a technological inevitability (Broken Money, p. 105):

If we were to run this period of human development back a hundred times…every time we would end up in a similar place in terms of money, due to the path dependence of technological development itself…once telecommunication systems were invented.

Our current “broken money” system was ushered in and primarily shaped by the communication technologies of the era:

“The dawn of the telegraph era is where money started truly becoming broken.”

For Lyn, the telegraph severed the historic link between transaction speed and settlement finality; as messages began to move faster than gold, societies were forced to fill the gap with IOUs and centralized ledgers. The populace increasingly accepted and relied on these abstract, ledger-based systems, which were then inexorably absorbed into state-controlled fiat systems:

This is the only time in history where, on a global scale, a weaker money won out in terms of adoption over a harder money. And it occurred because telecommunication systems introduced speed as a new variable into the competition.

Lyn sees Bitcoin—another breakthrough technology of comparable historical magnitude to the telegraph—as once again altering the path-dependent trajectory of money and emerging as a meaningful alternative to our broken fiat system.

Ideas, Not Infrastructure

We appreciate the elegance of Lyn’s technology-driven model, and—to be clear—she does not ignore the influence of non-technological forces such as politics and war. Indeed, she describes many of the same historical events and complex dynamics that we do, often in similar terms.

But technological determinism subordinates human agency and politics to technology, an inversion that may inadvertently risk clouding our understanding of the deeper ideological issues we face as a civilization. In our view, it’s critical to emphasize that people broke money—and not just people collectively but, very often, specific individuals whose political decisions are a matter of historical record.

By focusing on technology, we risk underemphasizing the root cause of monetary malfunction—shaped less by bandwidth advances and more by the collision of ideas, worldviews, incentives, geopolitical imperatives, self-interest, and power.

Memetic Monetary Theory

Is technology a railway track—or the railway switchman—that determined the course of monetary history? In the Metamorphosis of Money series, we propose an alternative to technological determinism: Memetic Monetary Theory—not to be confused with Kelton’s Modern Monetary Theory (itself a virulent monetary meme), though we do hope to reclaim the acronym, MMT.

Think of monetary memes as the competing ideas about what money is, what gives it value, who should control it, and how it ought to function. These range from the memetic power of gold as synonymous with ‘sound money’, to the web of ideologies justifying state-issued fiat currency, or the revolutionary principles underpinning decentralized digital money like Bitcoin.

Monetary systems are primarily shaped not by technological inevitability, but by these ideas—and the actions people take to realize them. As we wrote in the Keynesian Kaleidoscape:

Max Weber illuminated how our memetic worldviews act as invisible forces that steer the course of history. He likened these “world images” formed by our ideas to “railway switchmen”: they determine the tracks along which human action proceeds and society is consequently molded.

This insight is particularly apt when applied to economic [and monetary] thought: certain theories or worldviews—once entrenched—act as powerful memes that radically redirect the entire trajectory of economies and societies.

Memetic Monetary Theory follows and emphasizes the thread of human belief and action throughout history—how politicians, economists, and citizens imagined money could serve their ends, and how they acted upon these ideas.

Communication breakthroughs certainly laid some of the tracks of monetary history, but—from the gold standard, to Bretton Woods and Keynesianism, to the Nixon Shock—it was humans acting on ideology and incentives who manually pulled the switches that determined which lines society would ultimately follow.

Technology transmits and amplifies the signal, of course, but it is never the signal’s source. Whether hardware or software, tools are merely a conduit between belief and behavior. Indeed, every technology is itself first conceived in the mind of man as an idea before it can be wielded by him as a tool to implement his other ideas.

It’s also worth noting that—to Lyn’s point—technology may not only transmit memes but also shape the environment in which memes compete, potentially favoring certain types of ideas or enabling new forms of human organization and action that, in turn, generate new memes. We should therefore acknowledge this deeply reflexive interplay: while ideas may initiate and direct change, technology may also act as a powerful, transformative mediator that shapes the entire memetic environment—the very conditions under which monetary memes compete and evolve.

We don’t deny the role of technology or the state—rather, we explain how both act as vessels for monetary memes and human action in furtherance of those memes. It is the meme—not the machine or the monarch—that gives purpose to power.

Blame Gutenberg’s Printing Press Rather Than Telegraph?

If we must fault a communication technology for the ascent of broken money, the culprit is less the telegraph than Gutenberg’s printing press, invented four centuries earlier. By allowing ideas to be stamped onto limitless sheets of paper, the press inaugurated mass memetic warfare: governments and social theorists could now flood entire populations with ideological justifications—including those related to state control of money and markets—giving them the power to entrench these ideologies deeply into public consciousness.

Consider 1848, a year when telegraph networks were still sparse, slow, and largely disconnected from finance: revolutions ignited across Europe—the revolutionary spirit transmitted not by telegraph, but through pamphlets, newspapers, and books.

That same year, Marx called for radical monetary centralization: Plank 5 of the Communist Manifesto explicitly demanded the state monopolize credit via a national bank. This was pure ideology—memetically transmitted via Gutenberg’s press—rather than a response to settlement latency in banking, which would not become relevant for at least another two decades.

Long before Marx, print had been scaffolding the abstractions and centralizations on which our current fiat system would rest. Luca Pacioli’s Summa de Arithmetica (1494)—the “Bible of double-entry bookkeeping”—was one of print’s first financial ‘bestsellers’. It trained generations to conceptualize wealth not as what one held physically, but as a printed entry—an idea that seeped into merchants’ books, monarchs’ treasuries, economists’ theories, and even the minds of ordinary people who came to associate wealth with numbers on a page and confuse promises with wealth.

From these ledgers flowed a second revolution—standardized financial forms. Just as standardized language shaped national consciousness, standardized financial forms—enabled by print—shaped monetary consciousness. Laws and ledgers, once hyper-local and inconsistent, began to harmonize across regions through print. Legal tender statutes, financial instruments, and monetary norms could now travel in lockstep with ideology, embedding monetary abstraction into everyday economic life and normalizing the idea that money and wealth were what the printed page said they were.

The printing press scaled the mechanics of monetary control, as well. Abstractions like credit, IOUs, and paper claims had existed for centuries—but they were slow to produce, often handwritten, and limited in scale. With Gutenberg came printed templates for bills of exchange, promissory notes, and eventually state-sanctioned paper currencies. What once required trust in a local issuer could now be replicated with official seals and legal backing, vastly extending the reach of monetary authority.

For the first time, states could mass-produce uniform paper currencies—enshrining fiat in printed legal tender—and, in parallel, churn out standardized war bonds. Together, these twin feats constructed an architecture of abstraction and centralization that could be reproduced at industrial scale.

Paper replaced metal, promises supplanted substance, and law overrode gold. The printing press thus enabled the transformation of money from a bearer asset with value into an abstracted claim on that value, and later into a creature of state authority—backed not by gold, but by law and coercive power. As we showed in Money’s Metamorphosis, this shift set us on the path towards today’s monetary hyperreality:

This new metaphysics of abstraction helped pave the way for modern fiat and credit-based systems—where people trusted the symbol as much as the substance. Eventually, paper no longer represented a claim on underlying value—it began to replace the underlying value itself.

Money was broken long before the first telegraph wire was strung. France’s paper money failed twice—first with the collapse of John Law’s system and the Mississippi bubble, and again with the assignats of the French Revolution—without requiring a single electrical impulse.

Europe was already running on a system of monetary representation—abstract, centralized, and increasingly ideological—propelled by the printed page and printed currency. The telegraph may have quickened the tempo, but it was the printing press that composed the score.

Weimar: When Ideas Trumped Technology

Imagine an alternate Weimar history without the invention of the telegraph: the Treaty of Versailles still looms, politicians still seek to escape fiscal reality through monetary expansion, and the machinery to mass-produce marks still ignites a hyperinflation similar to those that afflicted countries like France long before the telegraph existed. The Weimar monetary breakdown stemmed not from a telegraph-induced lag in settlement mechanics, but from the collision of ideas, political will, and the relentless churn of the printing press.

Indeed, as Adam Ferguson noted in When Money Dies, the Weimar hyperinflation was both enabled and constrained by the printing presses, and the exhaustion of the humans who ran them:

The Reichsbank had proclaimed, and was now carrying out, a programme of unlimited printing of [money] notes. More and more printing presses were employed for the work, and by December the amount issued was limited only by the capacity of the presses and the physical fatigue of the printers… the unissued paper marks then in the hands of the Reichsbank and its branches would have filled 300 ten-ton railway wagons…The running of the..note-printing organisation…is making the most extreme demands on our personnel… The dispatching of cash sums must, for reasons of speed, be made by private transport. Numerous shipments leave Berlin every day for the provinces. The deliveries to several banks can be made...only by aeroplanes.

Telegraph: Wires As Meme Vector

Lyn’s own description of monetary debasement strategies—"spreading like a virus"—reads almost as if it were written through the lens of Memetic Monetary Theory: (Chapter 9, Broken Money)

The ability and willingness of governments to print money for war or other crises spread like a virus. Thanks to centralization and abstraction of money, governments were no longer constrained by the amount of gold in their vaults; they could tap into the savings of their entire citizenry. If one government could drain their citizens’ wealth quickly and non-transparently for war, then it increased their odds of winning — unless their opponent nations did the same.

Lyn’s viral analogy opens up an intriguing avenue—one that supports a memetic reading of monetary history. A virus, after all, is not passive—it is a replicating code. It spreads because the information it carries is compelling, contagious, and adaptive.

So, what was the viral code in this case?

Memetic Monetary Theory provides a clear answer: the ‘virus’ was memetic in nature—a powerful set of ideas about state monetary power, sovereignty, and the utility of inflation in times of crisis and war. These were the memes that infected policymaker after policymaker, nation after nation—spreading by telegraph and newspaper through communication, observation, persuasion, coercion, and perceived necessity due to competitive pressure. The 'technological mismatch' Alden identifies may have weakened the immune defenses of the gold standard, but it was the memetic pathogen—the idea and the will—that caused the infection.

And if it was memetic in nature, it would perhaps explain the speed of monetary failure “everywhere, all at once”:

This is why I argue that the global failure of the gold standard was inevitable due to a technological mismatch, and why it eventually failed practically everywhere all at once, rather than just in some places.

Alden continues, further underscoring the system’s vulnerability:

The easier it is to manipulate a ledger, the more likely it is that it will be manipulated. A centralized gold-backed paper currency and banking system is easy to manipulate, since currency can be printed first and the consequences such as the inevitable inflation and breaking of the gold peg can be dealt with later.

Here again, we find ourselves in agreement. But while Lyn emphasizes the telegraph's role in creating a physical settlement lag, Memetic Monetary Theory suggests an alternative reading: that its more profound monetary impact was the unprecedented acceleration of memetic velocity. Financial abstraction and centralization were already well advanced prior to the telegraph. What the telegraph did—profoundly and irrevocably—was compress the time it took for ideas to circulate globally.

Financial practices, theoretical frameworks, wartime policies, and justifications for currency manipulation could now spread globally in hours rather than days and weeks. The time lags that once constrained policy convergence dissolved. Ideas gained a velocity they had never possessed before—and with it, the memetic contagion of state monetary intervention became truly global.

The Strange Case Of Switzerland

Lyn references Switzerland, whose money did not entirely sever from gold until much later:

Switzerland was the longest remaining country on a gold standard, having dropped their gold standard in 1999.

This lends credence to the idea that communications technology alone didn’t kill gold: despite having the same telegraph wires and later the same electronic networks as everyone else, the Swiss legally maintained 40% gold backing for the franc from 1936 until Swiss voters voted to repeal it in a 1999 referendum.

For six decades the Swiss gold backing survived every external shock—World War II, Bretton Woods, the 1971 Nixon break, floating exchange rates—because the dominant domestic meme remained “sound money = gold.” Only when that belief lost its democratic majority did policy flip, and the Swiss National Bank swiftly start selling bullion. The hardware didn’t change; the idea did. Switzerland is therefore a natural experiment illustrating that monetary outcomes hinge more on memes than on wires.

In short: the virus was the meme. The wire just spread it faster. The telegraph’s most powerful monetary legacy was not a breakdown in gold settlement mechanics, but rather the real-time propagation of memes—especially those promoting centralized control.

Conclusion: Memes, Not Machines

The central argument of Memetic Monetary Theory is that ideas and action drive monetary systems. Money didn’t “break” due to technological obsolescence as much as it broke due the spread of memes—and people acting on those memes.

In Part 2B, we’ll examine the historical hinge points where ideas, rather than telecommunications and settlement lags, reshaped money’s meaning, purpose, and control.

Monetary history is not a smooth arc of technological succession. It is driven by ideological struggle. The next monetary battle won’t be won by metal or code alone. It will be won—or lost—through memes.

A single Tweet added $2.4 trillion to the U.S. stock market on Monday—only for that value to evaporate just as quickly when it was revealed to be “fake news”. The entire episode unfolded in just over a half-hour, triggered by a digitally amplified game of telephone claiming that President Trump was considering a 90-day tariff pause.

Global equity markets—and with them, millions of retirement accounts—proved as vulnerable to virtual whispers and “rug-pulls” as any fly-by-night memecoin. The S&P 500—purportedly a bedrock of institutional stability—momentarily revealed itself as little more than a Wall Street Bets meme stock dressed in a bespoke Kiton suit.

Monday’s volatility, however, merely foreshadowed the genuine upheaval that occurred two days later. Markets staged an intraday rally on Wednesday following a quintessential Trump Tweet, echoing the market-moving communications style that became a hallmark of his first term in office:

President Trump’s “buy” Tweet preceded by several hours an official announcement of a 90-day tariff pause. What had been dismissed as “fake news” on Monday became policy by Wednesday. The S&P 500 closed up nearly 10% and added $5 trillion in value, marking the third largest daily market move since 1990.

The whiplash proved so severe that Goldman's economists retracted their recession call within 73 minutes of issuing it:

The Financial Matrix: Welcome To The Machine

We chronicle the past week’s market events not because they were underreported or for their shock value, but rather because they have become routine features of our financial landscape.

It’s clear that we are witnessing a deep fracture in our financial reality. AI sentiment analysis now rivals financial analysis in importance, and a single ChatGPT-generated “fake news” headline can unleash algorithmic cascades that move global markets with unprecedented violence and velocity.

The fusion of social media, algorithmic trading—and more recently, AI chatbots like ChatGPT—now co-authors market reality, giving rise to the Financial Matrix: a hyperreactive, hyperreal simulation of markets in which vibes, memes, and machine logic displace cash flows and productive capital.

Note: The following was originally published privately on January 13, 2021. Updated, revised, and expanded for public release on April 13, 2025.

Hyperreality Unleashed: How Memes and Machines Hijacked the Market

Decades before iPhones, Twitter, and social media existed, French philosopher Jean Baudrillard—whose work inspired the movie The Matrix—provided a framework for understanding our current predicament. According to Baudrillard, even by the 1980s we humans had become so bombarded with information that we had lost our connection to reality itself.

Media and social media don’t merely reflect reality but actively construct it, creating what Baudrillard termed "hyperreality". As we wrote in Simulations & Simulacrum:

Baudrillard warned that society was becoming so reliant on models and maps to represent reality that it had lost all contact with the real world that preceded those maps. As we develop ever more sophisticated systems to codify and divorce ourselves from reality—“screen time”, social media, Virtual Reality, TV, algorithms, and artificial intelligence—we increasingly perceive the representations themselves as real, and in turn, the less the real world pertains to the reality that we perceive. This results in “the death of the real” or “hyperreality”: a self-referential simulation of reality…like the virtual world in The Matrix.

Markets crossed that line long ago. The Financial Matrix is Baudrillard's nightmare realized.

Digital Schizophrenia: Social Media’s Splintering Of Financial Reality

Baudrillard argues that constant exposure to information and imagery has transformed humans into “pure screen[s], a pure absorption and resorption surface of the influence networks”. Society indulges in an orgiastic “ecstasy of communications” yet the content of its communication is frequently devoid of meaning or reference to reality. Indeed, over the past decade in particular—as smart phones and social media have proliferated—society seems to have fully evolved into a Baudrillardian “postmodern carnival”.

Consider emblematic images of our hyperreal condition: the New Yorker’s 2020 pandemic cover depicting a woman carefully staging professional competence for her webcam while chaos lurks beyond the frame; or tourists risking their lives for the perfect wildlife selfie.

Google, Instagram, Twitter (X), Facebook, TikTok, and Netflix have come to not only define our lives, but have also spawned their own meta-realities: people now spend time watching other people play computer games on Twitch and watching other people trade stocks on Twitter, YouTube, and TikTok.

Baudrillard saw modern communication as schizophrenic—fragmented, discontinuous, and unmoored from shared reality both in structure and signal. Social media turns this fragmentation into feature, not bug: users juggle alternate accounts, curated avatars, and disjointed expressions of self across platforms. The result is digital dissociation of identity into a stream of disconnected signals, optimized for clicks but devoid of coherence.

But social media has been a pernicious enabler and amplifier of hyperreality in other less obvious ways, as well. It presents fundamentally distorted images of reality, triggering emotional responses and feeding our base instincts—such as envy when comparing one’s ordinary life to the curated perfection displayed on Instagram—that makes users more susceptible to manipulation by “influencers” and memetic contagion.

Moreover, these platforms enable us to inhabit isolated “reality” bubbles—some self-selected, others algorithmically imposed. This in turn amplifies our innate cognitive and emotional biases—including those that influence investing and financial decision-making—leading to increasingly distorted market perceptions and emotionally driven financial behaviors.

Financial markets now reflect this, as clearly evidenced by Mr. Market’s Schizophrenic Break in 2020 and the chaotic retail/algorithmic investor frenzy around meme stocks such as GameStop in early 2021 (and echoed again in 2024).

YOLO Economics: Dopamine, Meme Stocks, and Financial Anarchy

Social media also collapses our temporal perception into the perpetual now. Inflation has throughout history compressed societal time horizons and created a “YOLO” (“You Only Live Once”) mentality. This has been intensified, however, beyond any historic precedent as social media has single handedly turned much of society into ADHD-suffering dopamine addicts who constantly scroll through their timelines searching for instant gratification.

In a hyperreal meta-twist, social media turned the short time horizon mentality itself into a self-replicating meme (YOLO) replete with its own hashtag (#YOLO), brands, clothing lines, and “investing” strategies!

This shift toward short-termism hasn’t just warped individual behavior—it has rewired capital markets. Investors—both human and algorithmic—increasingly chase momentum and meme virality over value. Meme stocks, high frequency trading algorithms, and zero-day options (0DTE) now dictate the tempo of modern markets, compressing investment horizons from years to minutes and milliseconds. Founders and firms contort their business models around rapid monetization, meme fluency, and hype. We didn’t just meme YOLO: we institutionalized it and built our financial system around it.

The Influencer Industrial Complex Comes For Your Portfolio

The seismic shift from passive Web 1.0 to interactive social Web 2.0 over the past decade has dramatically accelerated the creation of virtual communities and viral meme propagation. Bloggers have evolved into social media “influencers” (think: the Kardashians) with the ability to reach millions around the world instantaneously—endorsers who create, shape, and spread audience attitudes memetically through social media.

Memetic influencers have become such a significant economic force in the Financial Matrix that we now witness surreal crossovers between influencers and the public markets. Having exhausted dodgy SPAC targets, we now IPO influencers in a trend disturbingly similar to one that occurred at the peak of the Dotcom mania:

Lest you think this a mere pipe dream, in 2020 we saw the IPOing of mansions filled with TikTok influencers through a Chinese reverse merger:

While most people think of “influencers” primarily in relation to consumer brands or products, influencers are highly active in the financial sphere as well, where they shape investment trends through memes.

Roaring Kitty and Dave Portney (Davey Day Trader)—known for picking stock tickers out of a scrabble bag—are perhaps the most high-profile examples, but there is a Twitter investment community known as “FinTwit”, Reddit’s WallStreetBets forum, as well as countless private chat rooms on Slack and Discord devoted to day-trading, ETFs, options, and various get-rich-quick investment schemes.

When President Trump Tweets, Algos Listen—And Trade

The explosion of social media has real-world consequences for professional investors: social media and “investing” have become increasingly closely interwoven in recent years, most notably when markets have risen or fallen in response to President Trump’s “Tweets” on Twitter.

Twitter Rewired Wall Street

Among its other achievements, Twitter revolutionized investing by democratizing and decentralizing access to financial news and analysis. Before Twitter, many market participants lacked any way to verify breaking news “reality” until mainstream media outlets such as Bloomberg or the Wall Street Journal published the story—usually behind pay walls and after delays. But in today’s environment, that model is increasingly unworkable: by the time an article is written, edited, and vetted, it’s already obsolete.

The past week’s Tariff Tweet incidents—which triggered multitrillion-dollar intraday market swings—demonstrates Twitter's role as an unprecedented real-time clearinghouse through which investors globally can directly create, disseminate, and engage with breaking news.

This democratization enabled global information sharing, crowdsourced research and due diligence, direct access to leading investors and CEOs, product feedback channels, and even whistleblower access—fundamentally leveling the playing field in financial markets.

Skynet’s Stock Picks: How Algos Amplify Social Media Madness

But Twitter was equally revolutionary because it presented all of this information in a text format that easily lent itself to algorithmic scraping and parsing. Now NLP (Natural Language Processing) algorithms parse the news, memes, and indicators of interactive “investor sentiment”—as well as additional types of social media data—in real time to apply in their trading strategies [Editor’s Note—this was originally written prior to the release of ChatGPT, when NLP-based sentiment scraping still seemed cutting-edge].

Twitter and social media have become powerful market-moving forces—not only because of the ways in which they connect people to one another and generate new modes of human interactivity, but also because they have opened a new communication portal between humans and algorithms. In other words, Twitter allows for the passage of memes and messages between humans-humans, humans-machines, machines-humans, and machines-machines in ways that are both exceedingly contagious and highly volatile.

When Trump Tweets, therefore, the market responses are driven not only by humans but also by algorithms which “read” the President’s tweets nearly instantaneously and then initiate a buy or sell position in response. Prior to the 2016 election this market behavior essentially didn’t exist; over the past several years Twitter and social media have become an integrally enmeshed part of the market itself—for humans and algos alike. The hyperreality and self-referentiality engendered by social media use among humans is amplified by algorithmic trading based on social media, and more recently the generation of social media by large language models (LLMs) such as ChatGPT.

Fake News, Real Crashes: The AP Hack That Erased $140 Billion

Disturbingly, as we saw this past week, the circulating messages and memes on social media–even those posted by “official” channels and that become “trending” topics—have no assurance of being grounded in any sort of reality let alone that they represent “truth”.

In light of the recently disclosed [Ed: 2020] SolarWinds hacking mega-scandal, it is worth underscoring that social media is also the perfect medium through which to engage in memetic warfare—including disinformation, “fake news”, and false flags—which propagate instantaneously through communications channels and algorithms.

Through social media, bad actors (or even algorithmic bots themselves) can spread false or misleading information about a stock or news event to large numbers of people with minimum effort and at a low cost. When necessary, they are able to conceal their true identities by using fake profiles or even impersonating credible sources of information.

The first ominous harbinger of these risks emerged 2013, when the AP inadvertently caused a stock market plunge—wiping out ~$140 billion of the S&P 500 index’s value in 6 minutes—when it tweeted a “fake news” story from a hacked account regarding an attack on President Obama.

The AP hack offered a blueprint for how fragile the membrane between media and markets had already become. The AP tweet spread memetically between humans and algos, and recursively moved and adapted back and forth between the two as both human and algorithmic traders responded to what appeared to be an authoritative news story.

The AP hack revealed the fragility of an emerging ecosystem. In 2025, that ecosystem has matured into a fully recursive infrastructure—where market narratives are no longer merely tracked by algorithms, they may even be authored by them. Large language models (LLMs) can fabricate plausible headlines with near-perfect linguistic fluency, injecting “fake news” directly into the bloodstream of platforms like Twitter—platforms that are already wired into the financial system via algorithmic trading systems and NLP pipelines.

When Memes, Man, And Machines Move Markets: The Viral Feedback Loops of the Financial Matrix

The AP hack crash is perhaps even more disturbing than the Amazon fly genetics book algo price war or the 2010 Flash Crash in that it reveals the triangular interconnection between the social media communication system, algorithms, and the financial system.

Humans and algorithms now intertwine not only within the markets and social media independently; these former information silos now automatically intermingle and transform each other through algorithmic amplification. News, ideas, emotions, and market signals flow seamlessly between social platforms and the financial system, generating feedback loops that cascade through markets at unprecedented speeds. This digital enmeshment produces emergent behaviors that ripple through our hyperconnected Financial Matrix, creating volatile outcomes and ultimately reshaping real world conditions as a result.

The combination of social media’s inherent hyperreality, its catering to the basest of human instincts and biases, the dopamine addiction to short term news and gambling that it fosters in its human users, its susceptibility to memetic warfare, its vulnerability to pump-and-dump schemes, and its intertwinement with instantaneous algorithmic trading and chatbots like ChatGPT can easily snowball; this cascade effect can continue until worthless one-employee companies such as CYNK spike 36000% to a $6 billion market value, or the entire financial system is threatened by market melts up or flash crashes.

Meme Magic Meets Robinhood’s Dark Patterns: Igniting A Retail Investor Frenzy

Algorithmic “meme magic” came into sharp focus during the retail trading frenzies of 2020-2021 as algos collided head on with humans and COVID “stimmies” (stimulus checks); social media platforms’ engagement-optimizing algorithms became market movers.

Reddit's social media algorithms, for example, likely enabled “meme magic” by amplifying GameStop-related content and catalyzed a cascade of attention and trading activity. GameStop’s algorithmically-fueled price surge reflexively enabled the firm to strengthen its real-world financial position by selling new shares to raise cash.

Robinhood, a key player in the 2020-2021 stock frenzies and meme manias, ran afoul of regulators for its algorithmic practices. The firm allegedly “gamified” its user interface—employing game-like elements in order to drive engagement in speculative activities—while simultaneously wielding “dark pattern” sorcery to manipulate users into addictively gambling on stocks with leverage.

But Robinhood’s true innovation wasn’t just user interface manipulation—it was the integration of behavioral nudging with real-time market participation, creating a feedback loop where engagement itself became a market input. Robinhood didn’t just reflect the Financial Matrix—it actively helped construct it, collapsing the distinction between entertainment, speculation, and price discovery.

Meme Stock Mania Fueled By Skynet

Algorithmic trading likely played a pivotal role during the 2021 meme stock frenzy that we discussed in Mr. Market’s Schizophrenic Break. As Sam Hendel explained:

The media is missing the quantitative trading component of this…computerized algorithms can pick up on the slowly increasing trading activity and then exploit it, leading to snowballing prices. The algorithmic trading is overwhelming the human trading.

Algos designed to react to market momentum and social media signals amplified the initial price movements triggered by retail investors on r/WallStreetBets. This created a self-reinforcing cycle: as stock prices rose, more algos and retail investors joined in, further driving up prices and attracting still more attention, leading to snowballing prices.

GameStop's trading volume hints at the scale of algorithmic activity. On January 26, about 179 million GameStop shares were traded, despite only 70 million shares existing. Each share changed hands more than twice on average that day; at times, GameStop's daily dollar volume rivaled giants like Tesla and Apple.

Institutional investors quickly adapted:

Managers in the US and UK have begun using algorithms to scour forums such as r/WallStreetBets or other data sources to try to spot co-ordinated buying...Tiger cub Lee Ainslie’s Maverick Capital wrote to investors in April that its quant team “now systematically monitors Wall Street Bets and other similar forums that cater to less experienced, retail investors”.

As CBS noted in a follow up article, the market “has changed:”

But while many of the meme stocks that flew high last year have fallen, their mere existence signifies an important shift in the market… Just as there are now specific indexes designed to follow stocks that make noise on social media, institutional investors are taking such buzz into account in making investment decisions for their clients running pension funds and 401(k) assets for millions of people.

"The market has changed," said Ihor Dusaniwsky, head of predictive analytics at S3 partners, a technology and data analytics firm. "We see hedge funds buying retail sentiment data — that's part of their algorithms now."

Investors a decade ago mostly zeroed in on a company's financial performance, such as past and projected profits, in assessing its stock. But recent years have underscored the importance of momentum in stock prices, Dusaniwsky said. In his definition, a stock has "momentum" when its price has changed significantly in the previous week at the same time it is attracting attention on social media and Wall Street…

Dusaniwsky concluded: "It doesn't have anything to do with technical aspects [of the company] or anything — it's really the market moving the stock.”

In other words, hyperreality and HyperPrices have long since outgrown the description offered in Jefferies’ primer "When the Market Moves The Market", which examined how computerized market structure self-referentially precipitated the hyperreal 2018 mini-crashes. The Financial Matrix has evolved into a multi-layered, recursive system where social media influences algorithms, which then influence markets, which then become social media topics—creating an unprecedented, self-referential feedback loop.

AI Hyperstitions: Reality Optional

The rise of AI and ChatGPT has taken this triangular interplay between humans, algorithms, and the financial system to dizzying new heights. In perhaps the most extreme example to date, an AI agent known as @truth_terminal began posting absurdist content centered on an obscure early-internet meme called "Goatseus Maximus".

What started as a surreal joke metastasized—through a recursive loop of ironic human engagement, algorithmic amplification, and the direct wiring of memes into financial infrastructure—into a very “real” $428 million cryptocurrency.

Goatseus Maximus wasn’t just satire. It was a test—a memetic summoning ritual—to see whether AI could conjure market value out of the digital ether via "hyperstitions": ideas that bootstrap themselves into reality through viral belief and propagation. In 2025, it turns out: it can. Beliefs can now be engineered by large language models trained on culture, tuned on virality, and rewarded by attention. It’s as if “pet rocks” got remixed by neural nets and sold back to us as a tradeable asset class; the meme is the market.

We’ve built a system where hallucinated assets can achieve significant market value, where a parody becomes a portfolio holding, and where satire is indistinguishable from signal.

Postmodern Portfolio Theory

The events and phenomena described in this piece—from the market-moving power of Trump's tweets, to the Robinhood retail trader frenzy, to the rise of AI-powered "hyperstitions" like Goatseus Maximus—all underscore the increasingly surreal and simulational nature of our financial markets. Meme virality replaces value; dopamine replaces discipline.

In the Financial Matrix, vibes override productivity and fundamentals. Social media, tradebots, and AI—operating within a medium shaped by central bank and Keynesian policies—no longer interpret the market: they script it. Together, they’ve fused into a self-referential, recursive feedback loop that erodes the essential mechanisms of capital formation and allocation—and thereby threaten the foundation of our economic system itself.

Our simulation has dissolved the difference between investing and postmodern performance art. We didn’t just build a system where markets react to fiction. We built a fiction that reacts to itself—and prices its own simulated reality in real time.

We didn’t just lose the signal—we monetized the noise.

Series Table Of Contents

Series Table Of Contents

We originally penned this in early January 2018—at the height of what was then considered a historic cryptocurrency mania—as part of a broader analysis that we later developed into the Sorcerer’s Apprentice in January 2021. We republish this excerpt today—almost exactly 7 years later—in honor of President-elect Trump's official $TRUMP "meme coin", which achieved a $32 billion market cap within hours of launch and generated $25 billion in paper wealth overnight for his organization.

The $TRUMP coin comes on the heels of HawkTuah coin and Truth Terminal—an AI bot turned meme coin creator with a net worth well on its way to $100 million. Together these memecoins represent the quintessence of modern markets: a recursive interplay between loose monetary policy, AI, social media, algorithms, memes, and human speculation that increasingly divorces markets from economic reality and synthesizes a Financial Matrix. The hyperreality we identified and analyzed in 2018 has not only persisted but intensified dramatically after Mr. Market’s Schizophrenic Break of 2020—reaching a scale we could scarcely have imagined.

The Markets Are One Giant Bet That Central Banks Control Rates & Volatility

As we showed in Volmageddon & The Ant Death Spiral, the global market boom post-2008 has been driven by two interrelated sources. First, trillions of QE dollars directly inflated global markets. Second, leveraged speculation—partly based on the (so-far) accurate perception that unlimited QE is available to backstop markets regardless of the amount of speculative mania it engenders—exacerbated QE’s liquidity excesses:

The entire investing world post-2008 has essentially become one gigantic, levered, self-reinforcing speculative bet that central banks control interest rate levels and volatility. The incoming Fed chair’s statements in the recently-released 2012 Fed minutes essentially admitted to this:

I think we are actually at a point of encouraging risk-taking…Investors really do understand now that we will be there to prevent serious losses…they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy… So I think it’s really a central bank stepping in and cutting off tail risk.

Last month, the St. Louis Fed echoed incoming Chairman Powell:

We are well and truly through the looking glass here. Central bankers are publicly boasting about purposefully creating the greatest monetary inflation and mispricing of financial assets in human history.

The closest historical precedent was John Law’s Mississippi Bubble in France. As and others showed, the Mississippi Bubble infected nearby Britain, creating an intertwined, parallel South Sea bubble. The twin bubbles—which pale in comparison to today’s global “everything bubble”—triggered a speculative frenzy whose collapse later plunged France and Europe into a severe economic depression and helped pave the way for the French Revolution and the French hyperinflation.

The Breakdown Of Bretton Woods II

We clearly have a front row seat for the greatest fiat and credit-driven bubble in world history; the past year, however, has made us seriously consider for the first time whether a far more insidious and dangerous factor is at work. Have we now reached the critical point where people are beginning to realize—albeit unconsciously—that the Bretton Woods II monetary system itself is terminal, and are therefore attempting to protect themselves from central bank-induced financial repression by hiding in any and every “asset”, unhampered by such pesky contrivances as “fundamentals” or “valuations”?

The lifecycle of major inflations typically follows three distinct stages: first, the initial "prosperity" phase as money flows freely and without negative apparent consequence; second, the growing instability as malinvestment accumulates; and finally, the terminal phase of collapse. As Henry Hazlitt noted, the initial stage of a monetary inflation generates an artificial boom and illusory prosperity:

The broad pattern of all [money and credit] inflations, historical and modern, is the same. The first result is commonly the ‘recovery’ that the inflationists…are seeking.

It is not until later that its disappointing and poisonous effects become apparent... This is because the kind of production stimulated by inflation even at the beginning is an unbalanced production (owing to the money illusions that inflation creates) and because inflation finally encourages merely malinvestment, thriftlessness, speculation, and gambling at the expense of production itself.

Ultimately, as Ludwig von Mises famously pointed out, central banks are caught between Scylla and Charybdis:

Either the banks continue the credit expansion [inflation] without restriction and thus cause constantly mounting price increases and an ever-growing orgy of speculation – which, as in all other cases of unlimited inflation, ends in a “crack-up boom” and in a collapse of the money and credit system. Or the banks stop before this point is reached, voluntarily renounce further credit expansion, and thus bring about the crisis. The depression follows in both instances.

Crack-Up Booms & CryptoKitties

Post-2008, the central banks have plainly chosen the path of unchecked credit expansion; observing the past year in the markets has made us wonder if we are nearing Mises’ Scylla and Charybdis moment. If the central banks choose to continue their current policy from this point, it seems that we are fated to enter the terminal stage of the inflationary process, when:

… finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them.

This phenomenon was, in the great European inflations of the [1920’s], called the crack-up boom (Katastrophenhausse)…

One of the actions people undertook to save their assets was the Flucht in die Sachwerte, the flight into “real values,” into tangible assets, everything from real estate to art collections. Nevertheless, the collapse of money’s asset function resulted in vast redistribution of wealth, especially among the middle class…[6]

The “crack-up boom” occurs when the public realizes that inflation is destroying their money and attempt to protect their wealth using any means at their disposal.

Venezuelan Stocks: Bubble? Currency Collapse? Both?

The “flight into real values” refers to the frantic rush to spend all monetary savings and other available cash (sometimes even borrowed cash), buying goods (whether needed or not) and speculating on “assets” to avoid holding—even for a short time—any amount of a rapidly depreciating currency.

We now bear witness to the modern spectacle of the flight into fake (and virtual) values such as cryptokitties and dogecoin, the cryptocurrency that was conceived as a joke and was briefly valued at $1.6bil (Ed: $59bil in Jan 2025).

Everyone Is Getting Hilariously Rich And You’re Not

Over the years, we have occasionally contemplated how a crack-up boom would unfold amid advanced digital technology and our modern monetary system. Events in 2017—and in particular the behavior described in the New York Times (NYT) article published this past week titled “Everyone Is Getting Hilariously Rich And You’re Not” about crypto-millionaires—make us concerned that we are witnessing an early glimpse of what such a phenomenon might look like in the future.

Hyperinflation & Hyperreality

The NYT piece eerily echoes Paul Cantor's “Hyperinflation and Hyperreality,” a work that's stayed with us ever since we first read it over a decade ago [Ed: and served as the inspiration for our Sorcerer’s Apprentice series]. Cantor examines a Thomas Mann short story about the Weimar period, showing how hyperinflation didn't just destroy Germany's currency—it unraveled the entire social fabric of society and destabilized fundamental notions of reality itself. The parallels to our own hyperreality make this analysis more urgent than ever. We strongly urge our readers to read Cantor’s piece in its entirety:

The story charts the dissolution of authority, as we watch a social order breaking down and see the confusions that result…The world...has become so confusing that it is difficult for the characters simply to tell what is real anymore. Mann creates a pervasive sense of inauthenticity in the story; the modern world is a counterfeit world…

The NYT article shows that society today suffers from a similar inability to distinguish real from counterfeit:

“Nothing feels real, it doesn’t feel real,” [Mr. Gardner] said.

“When I meet people in the normal world now, I get bored,” Mr. Hummer said. “It’s just a different level of consciousness.”

Nearby is a building residents call the Crypto Crackhouse. “My neurons are fried from all the volatility,” Mr. Hummer said. “I don’t even care at this point. I’m numb to it. I’ll lose a million dollars in a day and I’m like, O.K.”

Mann chose an actor to highlight the societal inauthenticity engendered by the Weimar inflation:

When an actor named Ivan Herzl shows up at the party in heavy makeup, he provokes Cornelius into thinking about how people no longer are what they seem: "You would think a man would be one thing or the other-not melancholic and use face paint at the same time"…In choosing an actor as his model, Bert ends up imitating an imitator, and thus threatens to become a mere simulacrum of a human being. What strikes Cornelius about Herzl is his total lack of authenticity; as an actor, he always seems to be putting on a show, and hence not to have any reality of his own: It all, no doubt, comes from his heart, but he is so addicted to theatrical methods of making an impression and getting an effect that both words and behavior ring frightfully false.

Today, instead of an actor we have CoinDaddy the cryptocurrency rapper:

He pointed to his outfit — a long white fake mink coat, gold-heeled shoes — and said, “It’s gold, right? It’s gold. It’s a niche, and I’m going to fill it.”

When Money Dies: The Dissolution of Reality During Inflation

Mann shows that “everything threatens to become unreal once money ceases to be real”:

Mann suggests that if we seek an explanation of the dissolution of authority in the world he is portraying, we should look to the monetary madness of the Weimar Republic. As he shows, inflation eats away at more than people's pocketbooks; it fundamentally changes the way they view the world, ultimately weakening even their sense of reality. In short Mann suggests a connection between hyperinflation and what is often called hyperreality...

A strong sense of counterfeit reality prevails in "Disorder and Early Sorrow." That fact is ultimately to be traced to the biggest counterfeiter of them all the government and its printing presses. Hyperinflation occurs when a government starts printing all the money it wants, that is to say, when the government becomes a counterfeiter. Inflation is that moment when as a result of government action the distinction between real money and fake money begins to dissolve.

That is why inflation has such a corrosive effect on society. Money is … the principal repository of value. As such, money is a central source of stability, continuity, and coherence in any community…To tamper with the basic money supply is to tamper with a community's sense of value. By making money worthless, inflation threatens to undermine and dissolve all sense of value in a society.

This perfectly describes the world today: the distinction between real money and fake money has begun to dissolve. Central banks have so corrupted money and the financial markets that the world was forced to create a parallel, virtual set of digital currencies such as those seen in video games.

Inflation Profiteers

One effect of the Weimar inflation was the creation of “inflation profiteers”, as described by Mises:

One of the reasons why public opinion [at the time] misconstrued the economic consequences of the German inflation was the emergence of a class of inflation profiteers. The profiteers were those speculators who were quicker to realize the true meaning of the inflationary boom than were the managers of the banks… No matter what stock he bought, the speculator netted a gross profit which exceeded by far the interest he had to pay to the lending bank. As long as the inflation went on there was no risk for him in embarking upon bull transactions with borrowed money… The inflation favored the debtors at the expense of the creditors. It made a very small group of smart speculators rich. It impoverished the immense majority of the nation.

The same phenomenon was described in “Hyperinflation and Hyperreality”:

Those who know how to exploit an inflationary situation can gain as much as others lose. As a result, inflation creates a topsy-turvy world. The fact that people are losing and making fortunes overnight is responsible for all the social confusions in "Disorder and Early Sorrow"…

Youth, Chaos, and Fortune: Inflation Rewrites Generational Rules

We would argue that the same is true today (in crypto and many other “assets”). In the Weimar—as in current events—it is the youth who are the most successful inflation profiteers:

This effect of inflation explains why youth has come to dominate the world of "Disorder and Early Sorrow"… The young are more adaptable to changing conditions, while the old are set in their ways. Hence the young cope better with inflation…[Inflation] alters the dynamic between the generations in society, giving the young a huge advantage over the old. Not having experienced economic stability, the youth of Germany are more able to go with the inflationary flow…It is not simply a matter of the old losing their economic advantage over the young. In an inflationary environment, all the normal virtues of the old suddenly start to work against them, while all the normal vices of the young suddenly seem to look like wisdom. Conservatism and a sense of tradition make it impossible to respond to rapidly changing economic conditions, while the profligacy of youth becomes paradoxically a kind of prudence in an inflationary environment.

The NYT highlights this “youth as inflation profiteer” phenomenon:

There’s an actual house called the Crypto Castle, and the king is Jeremy Gardner, 25, a rakish young investor with a hedge fund who has become the de facto tour guide for crypto newcomers… People had begun making pilgrimages to the Crypto Castle, knocking on the door, hoping Mr. Gardner could help them invest.

The NYT brings into stark relief the modern upheaval between the generations also witnessed in the Weimar:

Now, with a fortune he says is in the hundreds of millions, his parents have retired and sent his younger sister to live with him. “I’m taking over her education,” Mr. Fickel said, sitting on a white leather sofa, Mr. Bigglesworth asleep in his impossibly skinny arms.

We then are introduced to a middle-aged housekeeper who has turned to the younger generation for inflation profiteering advice:

Maria Lomeli, 56, came to the party to find the people she had put a lot of trust in. A housekeeper from Pacifica, Calif., she said she had invested $12,000 in cryptocurrencies over the last few weeks after reading about it in the news. “And maybe I’m going to lose it,” she said. “Maybe I’m going to keep cleaning houses. But something is telling me I can trust this generation. My instinct is telling me this is the future.”

YOLO

The Mann story illustrates something that Austrian economists have long known—that inflation distorts society’s “time preference”:

As he shows, inflation fundamentally changes the way people think, forcing them to live for the moment. There is no use planning for the future, since inflation, especially hyperinflation, makes future conditions uncertain and unpredictable…Thus inflation works to shorten everyone's time horizons, destroying precisely those attitudes and habits that normally make the middle class hard workers and prudent investors, those forces that lead them to restrict their present consumption for the sake of increasing future production…

We would be hard-pressed to invent a better word to describe this phenomenon than the millennial meme/catchphrase “YOLO” (“you only live once”):

James Fickel, 26, lives in a high-rise with a Russian blue cat called Mr. Bigglesworth. Mr. Fickel is known in the community for “going full YOLO” and investing $400,000 when Ethereum was at 80 cents.

Conclusion

The conditions that created Mann's "Witches' Sabbath" now combine with Money’s Metamorphosis and digital technology to accelerate the corruption of money, markets, and society. We will examine their interplay and consequences in the chapters ahead.