Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

Imagine the whole economy has turned into a casino. Investors are betting on oil futures, subprime mortgages, and Internet stocks, hoping for a quick score. In this scenario the major brokerages and investment banks play the role of the house. Just like real casinos, they always win in the end—regardless of which investments succeed or fail, they always take their cut in the form of fees and interest. Also just like real casinos, they only make more money as the number of gamblers increases: the more you play, the more they make. And even if the speculative bubbles themselves have all the inherent value of a royal flush, the money the house takes out is real. Maybe those oil futures you bought were never close to being worth $149 a barrel in reality, but the fees you paid to Goldman Sachs or Morgan Stanley to buy those futures get turned into real beach houses, real Maseratis, real Park Avenue town houses. Bettors chase imaginary riches, while the house turns those dreams into real mansions. Now imagine that every time the bubble bursts and the gamblers all go belly-up, the house is allowed to borrow giant piles of money from the state for next to nothing. The casino then in turn lends out all that money at the door to its recently busted customers, who flock back to the tables to lose their shirts all over again. The cycle quickly repeats itself, only this time the gambler is in even worse shape than before; now he’s not only lost his own money, he’s lost his money and he...