Private equity sounds like just another source of investment capital, like venture capital or hedge funds, but while these can be incredibly destructive and toxic, private equity has perfected destroying the real economy, ruining lives and making rich people richer.
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PE is fundamentally about destroying real value and converting it to wealth for already-rich people.
Here's the core play: buy a company, load it up with debt, fire employees, cut wages and squeeze suppliers.
Value is transferred from productive businesses and workers to partners, bankers and lawyers in coastal cities. New monies flow in through lobbying, litigation, price-hikes and pension fund looting, paid out as dividends and consulting fees.
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Companies acquired by PE funds see sharp debt hikes, slowed revenue growth, and plummeting capex.
PE is behind so much of what's wrong in the world today, from looting Canada's beloved Mountain Equipment Co-Op:
The US Government kicked off an incredible debt bonanza when it announced that it would buy corporate bonds, no matter how crappy the company's fundamentals were, leaving the largest firms awash in effectively free cash.
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Naturally, PE - which never met a debt it didn't like - hopped on board. The latest PE craze is dividend recapitalisations ("divi recaps"), AKA "borrowing crazy amounts of money on behalf of a company and then just sticking it in your pocket."
ONE QUARTER of all US debt raised in September went to divi recaps (it was 4% over the past two years). That's FOUR BILLION DOLLARS THIS MONTH.
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Oh, then there's this: "investors express concern over loose documentation underpinning the loans, offering little protection to investors should a company end up in trouble." -@JARennison, @FT
What could possibly go wrong?
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This is the true heart of the "zombie economy" - an economy that "improves" whenever sociopaths destroy its productive capacity:
The "Tragedy" hoax said that moving land from collective ownership "rescued" it from the inevitable tragedy by putting it in the hands of a private owner, who cared for it properly, thanks to "rational self-interest":
Amazon is very good at everything it does, including being very bad at the things it doesn't want to do. Take signing up for Prime: nothing could be simpler. The company has built a greased slide from Prime-curiosity to Prime-confirmed that is the envy of every UX designer.
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But *unsubscribing* from Prime? That's a fucking *nightmare*. Somehow the company that can easily figure out how to sign up for a service is totally baffled when it comes to making it just as easy to leave.
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Even Google admits - grudgingly - that it is losing the spam wars. The explosive proliferation of botshit has supercharged the sleazy "search engine optimization" business.
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Today, results to common queries are 50% Google ads to spam sites, and 50% links to spam sites that tricked Google into a high rank (without paying for an ad):
Boeing's 787 "Dreamliner" is manufactured far from the company's Seattle headquarters, in a non-union shop in Charleston, South Carolina. At that shop, there is a cage full of defective parts that have been pulled from production because they are not airworthy.
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Boeing's 787 "Dreamliner" is manufactured far from the company's Seattle headquarters, in a non-union shop in Charleston, South Carolina. At that shop, there is a cage full of defective parts that have been pulled from production because they are not airworthy.
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Anything that can't go on forever eventually stops. Monopolies are intrinsically destabilizing and inevitably implode...eventually. Guessing *which* of the loathesome monopolies that make us all miserable will be the first domino is a hard call, but Ticketmaster is definitely high on my list.
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It's not that event tickets are the most consequential aspect of our lives. The monopolies over pharma, fuel, finance, tech, and even beer are all more important to our day-to-day.
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