Follow The Money

Now that there is a Democratic Washington, the Right Wingnuts are tres concerned about doling out moolah to the hoi polloi ('it will make them lazy and unwilling to work for our slave wages and may be die of Covid in the bargain. It's not fair to us, the creators!!!') and, of course, inflation. As these missives have been banging the drum about inflation: it has been around since Obama/Right Wingnut rescue began. The distinction is that the inflation is localized; to assets, stocks and bonds in particular. Mr. Market's bloating can only happen if there is excess moolah floating around with no useful purpose. If you have lots of cash you can't spend, then stash it away in hopes of capital gains, and gaining yet more cash you can't find a way to spend. If you are a scardy-cat, buy Treasuries. If you want more vig, Mr. Market has wares available. That is where we've been for at least a decade.

Of course, as with credit default swaps and securitized mortgages, Mr. Market's more devious denizens have created a new way to leverage their ever increasing slice of the income/wealth pie. Hoi polloi, meet SPAC. Today's NYT has a lengthy, well reported discussion. You should read it up.

The economics of running a SPAC are, well, SPAC-tacular. Typically, a SPAC's sponsor — the person putting up the initial capital — invests a nominal amount in return for a 20 percent stake, so long as the SPAC finds a target company and completes a merger. In other words, if a Wall Street executive or celebrity raises $400 million from public investors, that person also gets a stake worth $100 million, regardless of how well the company performs after the merger.

Will they crash either individuals (Robinhood) or the whole economy (CDS)? Only the Shadow knows.

Some have called the SPAC a new, public form of venture capital. That implies big rewards and real risks. Most venture capital deals fail.
The truth is that SPACs are rife with misaligned incentives between the sponsor and other investors, particularly those who come after a merger.

So, like Ponzi, first one in the pool gets the gold medal.

Where did all that money come from? The $2 trillion dollar tax give-away, directly, and the evisceration of the corporate tax rate, indirectly, helped a bit. The rich get richer and the poor have kids; My Pappy said so.