The End of Neoliberalism and the Coming Storm | Viktor Shvets
What this covers
In Episode 443 of Hidden Forces, Demetri Kofinas speaks with a former investment banker turned global strategist whose books The Great Rupture and The Twilight Before the Storm provide an audaciously comprehensive and compelling framework for understanding the forces shaping our world. These include technology and finance, amplified by climate change, demographics, and a series of socioeconomic and geopolitical shocks that have created the once-in-a-century superstorm now enveloping Western democracies.
Viktor and Demetri spend the first hour of this episode exploring Shvets’ central critique of neoliberalism and why he believes that much of the current crisis stems from this failed ideology. They compare today’s sociopolitical and economic dynamics to those that overtook the world in the 1930s, focusing on technology-driven social disruption, a decline in the marginal utility of labor, runaway asset prices, repeated financial shocks, pandemics, climate stress, migration, and a deep loss of faith in institutions, in our collective identity, and in our shared capacity to solve problems.
The second hour turns to questions of policy design, institutional reform, and portfolio strategy. Viktor and Demetri debate the pros and cons of redistributive solutions such as universal basic income and more heavy-handed fixes to America’s broken healthcare system and antiquated educational model. They also stress-test alternative modes of sociopolitical organization such as despotic feudalism, techno-communism, or models that attempt to better balance the more extreme outcomes that a highly technologized society like ours would produce.
The two end the episode with a conversation about digital currencies and the disruptive potential that decentralized finance will have on money and banking. Kofinas also asks Shvets what assets he believes will outperform if governments are able to institute the types of reforms that he believes are necessary, and similarly, what assets investors will want to own if we trend toward some of the darker scenarios that he envisions.
You can subscribe to our premium content and access our premium feed, episode transcripts, and Intelligence Reports at https://hiddenforces.io/subscribe.
If you want to join in on the conversation and become a member of the Hidden Forces Genius community, which includes Q&A calls with guests, access to special research and analysis, in-person events, and dinners, you can also do that on our subscriber page at HiddenForces.io/subscribe. 00:00 Introduction 05:51 The Inspiration Behind 'The Great Rupture' 07:13 The Cyclical Nature of History 09:47 Freedom and Neoliberalism's Consequences 30:22 Technological Evolution in the 1920s and 30s 30:51 Climate Change and Pandemics: Then and Now 31:13 Loss of Confidence in the System 32:12 Comparing Crises: 1930s vs. Today 33:45 Government Interventions and Economic Policies 34:24 The Role of the Federal Reserve 37:47 Baby Boomers and Economic Freedom 39:34 The Greenspan Put and Market Volatility 42:49 The Fuji Effect: Societal Superstorms 44:11 Financialization and Its Impact 49:04 Proliferation of Alternative Systems 51:38 The Network State vs. Nation State 50:43 Topics for the Second Hour
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Editor & Engineer: Stylianos Nicolaou Follow Demetri on Twitter at @Kofinas Episode Recorded on 09/29/2025
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Victor Jvetsik argues that neoliberalism—the 40-year ideological framework prioritizing unfettered markets and individual freedom—has created a structural crisis analogous to the 1930s, driven by converging shocks (technological disruption, financialization, climate change, pandemics) that demand a fundamental rethinking of the relationship between state, market, and society.
- Neoliberalism's theoretical elegance fails in practice because real economies and societies cannot absorb the disruption of unconstrained markets without political backlash and social collapse
- The Fujiwara Effect—multiple crises reinforcing each other (information age + financialization + climate + pandemics)—is creating cascading instability faster than societies can adapt, unlike the 1930s which had single major crisis
- Suppression of economic cycles since 2008 via central bank intervention has avoided depression but produced secular stagnation, accumulation of inefficiencies, and loss of legitimacy in institutions, forcing a search for alternative political-economic systems
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In 1937, a book titled 'Planned Societies and Economies Yesterday, Today, and Tomorrow' brought together economists and sociologists from Nazi Germany, fascist Italy, the Soviet Union, and New Deal America to debate not whether societies should plan their economies, but how much planning and how much freedom should be left to markets—a consensus that has now fractured.
“In 1937, I keep referring to that book. There was a book written, planned, societies, and economies yesterday, Today, and Tomorrow. It's never been republished since 1937. But it's interesting that that book actually featured economists, sociologists, anthropologists from both West and East, from Nazi Germany, from fascist Italy, from the Soviet Union to New Deal economists in the United States. And what they were asking in 1937... what they were saying is that clearly free market philosophy and freedom philosophy had catastrophic consequences... So the question is not whether we should be planning our societies and economies but how should we do it?”
Politics and national security were treated as externalities by neoliberal theory, which either did not believe society existed at all or treated it as merely a construct of politics that impeded market functioning, when in fact economics is always embedded in politics and when they are separated, people revolt and mobilize against the system.
“Societies and economists were supposed to be separate. In fact, a lot of neoliberals do not even believe society exists... economics is embedded in politics. It's embedded in societies. They're not separate. And if you keep them separate then the chances of extreme social outcomes are increasing because people will revolt against it, people will apprise, people will mobilize against it and that's exactly what we started to see over the last 15 to 20 years.”
In 1970s, the pendulum of government regulation swung too far toward overbearing control, creating stagflation, demonstrating that excessive government intervention is also destructive—but this does not prove the neoliberal extreme of minimal intervention is correct either.
“Now you have to be careful however because what we saw are certainly starting from late 1960s but certainly through 1970s that the government can become overbearing. That's one of the reasons we've experiencing a stackflationary period through the 1970s. So you can always swing the pendulum can always swing too far”
The original liberalism of the late 19th and early 20th centuries dictated that the economic system must rebalance itself and that government interference would be counterproductive; this ideology prevented aggressive intervention even during the Great Depression, with only Hoover's tentative reforms preceding Franklin Delano Roosevelt's comprehensive government intervention approach.
“In 1930s the original liberalism in other liberalism of the earlier part of the 20th century late 19th century the original liberalism basically dictated that the system has to rebalance itself that interfering with the system it will be counterproductive. Now it is true that prior to Franklin Delana Roosevelt certain policies were already put put in place in order to amilarate some of the negatives but they were very tentative because as I said the system didn't believe in government interference.”
Demetri's observation that younger people tend to believe the world is black-and-white and blame predecessors for failures, but older experience shows the world involves muddling through with incomplete information and that current critics of past policy decisions lack the contextual knowledge of those eras—a meta-observation about how societies approach historical judgment.
“When you're younger, you have this belief somehow that the world is black and white and that there's an ideal system and the people in the past who messed it up are so stupid for having messed it up. But the older you get, the more you realize that you kind of just muddle your way through.”
In the 1937 book 'Planned Societies and Economies: Yesterday, Today, and Tomorrow,' economists, sociologists, and anthropologists from Nazi Germany, fascist Italy, the Soviet Union, and the New Deal United States reached broad consensus that free market philosophy had created catastrophic consequences and the key question was not whether to plan economies but rather how much planning and how much freedom to preserve.
“In 1937, I keep referring to that book. There was a book written, planned, societies, and economies yesterday, Today, and Tomorrow. It's never been republished since 1937. But it's interesting that that book actually featured economists, sociologists, anthropologists from both West and East, from Nazi Germany, from fascist Italy, from the Soviet Union to New Deal economists in the United States. And what they were asking in 1937 or saying in 1937 and remember this was a very bad time. So what they were saying is that clearly free market philosophy and freedom philosophy had catastrophic consequences.”
The intellectual misconception that 'freedom has no price' and that unrestricted markets automatically reconcile conflicting consumer, societal, and firm interests has caused societies to conflate market deregulation with human freedom, when in fact they are separable concerns.
“It's basically that freedom does not have a price. That freedom gives you the best possible outcomes and reconciles irreconcilables. Whether it's desire and interest of consumers which have different interest and different taste, whether it is society, whether it's economic participants, firms, whatever they are, that essentially freedom has no price and a freedom gives you the best possible outcome.”
Politics and society were treated as externalities to be separated from economics in neoliberal theory, but this separation is impossible because economics is fundamentally embedded in politics and social structures; keeping them artificially separate increases the likelihood of extreme social outcomes and revolutionary rejection.
“Societies and economists were supposed to be separate. In fact, a lot of neoliberals do not even believe society exists... that was regarded as a construct of uh politics that is really impeding the well functioning neoliberal theory. So to answer yes politics and societies were supposed to be separate from economy but as a lot of sociologists or political scientists keep highlighting economics is embedded in politics. It's embedded in societies. They're not separate. And if you keep them separate then the chances of extreme social outcomes are increasing because people will revolt against it, people will apprise, people will mobilize against it”
Neoliberalism as an ideology sounds good on paper and can be modeled well mathematically, but does not reflect how real societies and real economies actually function because it assumes perfect information, competitive markets, complete free trade, and public acceptance of unemployment and job degradation—conditions that never hold in practice.
“If you think of neoliberalism as a concept, it sounds very good on paper, it can be modeled incredibly well, but it does not reflect the way real societies and real economies work. If if our markets were perfect, if we had a perfect information, if the markets were competitive, if economies were open, if we had complete free trade and if people more importantly accepted the consequences of that either in terms of unemployment or in terms of degradation of jobs or in terms of prices or whatever that is, then theoretically neoliberal framework is as good as it comes. The problem is that is not the way societies work.”
Political constituency in recent decades has been more concerned with protecting accumulated wealth (asset values) than with rebalancing and restructuring the American economy, leading to central bank asset price support that prevents healing and creates stagnation rather than enabling recovery.
“Is that because the political constituency today was more concerned with protecting what it had than it was writing the ship and rebalancing the American economy?...Exactly. Exactly. That's exactly right.”
The freedom ideology underlying neoliberalism (free markets, deregulation, minimal government) had ironic consequences: baby boomers who sought to shrink government in fact became increasingly reliant on government intervention via central banks and fiscal policy to maintain the asset values they had accumulated, the opposite of their stated intent.
“I mean one of the classic contradiction is that baby boomers who wanted to degrade the government who wanted the government to get smaller never really achieved this outcome. In fact, not only they haven't achieved, but in order to maintain the wealth that they've accumulated, they increasingly become reliant on the government to maintain asset values through central banks, fiscal policy, suppression of economic cycle, suppression of capital market cycle.”
CEO compensation rose from 40-50 times average earnings in the 1970s to 300 times average earnings by the 2000s, reflecting neoliberal belief in executive freedom to set their own pay rather than government oversight of corporate compensation structures.
“What you saw is a co compensations which used to be 40 50 times average earnings grew to 300 times average earnings.”
The objective of corporations in the 1950s-70s (producing quality products, satisfying customers, supporting national economic development) was replaced by Milton Friedman's profit maximization doctrine in the 1980s, which became the only criterion for corporate behavior, enabling massive compensation and buyback expansion.
“Whenever we have a severe disruption, certain elements are present. First of all, you can always see significant rise of some form of technological disintermediation... If you think of the US round table which is the largest lobbing group of corporates what they were saying is that the objective of the companies to produce good quality products satisfy the customers and sort of enable the economy and society of our countries to develop. If you think of it by late 80s, early 80s, profit maximization, which is Milton Friedman idea that the whole purpose of a corporation is to generate returns to shareholders, that profit maximization become the only criteria that corporates have.”
Neoliberalism's dominance across political parties (Democrat/Republican, Labor/Liberal, Conservative/Labor) starting in the late 1970s through mid-1980s meant that regardless of electoral outcomes, policy priorities favored private sector autonomy and minimal public sector constraint.
“it didn't matter whether you're democrats or republican or in Australia whether you're labor and liberal whether in Britain you were conservative or labor party didn't matter everybody saying from the same hbook private sector knows the best public sector is inefficient incompetent unjust and therefore we should allow as much freedom as possible”
Different regimes chose different paths to manage markets: communists abolished property rights and democratic governance, putting technocratic elites in control; fascists maintained private property but eliminated democratic politics and subordinated business to state objectives; New Dealers kept both property and democracy but added regulation and social welfare.
“So for example communists took it the extreme way and that is to say we're going to abolish all the property rights... fascists... we will eliminate into you know the democratic politics we will put experienced people and good people to run the economy but you as a proprietor of business only function on behalf of the government you only steward of national assets and then of course if you think of new deal economists they were saying Well, maybe we just need some social welfare. Maybe we need security and exchange commission that actually will manage the market rather than eliminating such a considerable degree of rights.”
Alan Greenspan's response to Black Monday 1987 (the 'Greenspan put') established that central banks would not tolerate asset price volatility, creating a series of puts (Bernanke put, Yellen put) that socialized losses while privatizing gains, accelerating inequality.
“Let's go to Black Monday 1987 when Greenspan just became the head of the Federal Reserve. What did he do? He didn't allow adjustments to occur in 1987. Instead, he created something that become known as a green spin put. That is you can't tolerate volatility of asset prices because otherwise economic impact will be devastating. the green spin put become Bernaki put and then it become yellow and put”
The 1970s represented the most egalitarian period in human history for income and wealth distribution, making it a unique reference point; by contrast, the 1920s-30s (and today) represent periods of extreme inequality comparable only to early 1900s gilded age.
“Remember 1970s was a period of the most egalitarian income and wealth distribution almost in human history. So it was the opposite of that. Secondly what we had we had increasing technological evolution...Today we have extremely high levels of inequalities in equities.”
Freedom has never been absolute in America; by the measure of absence of government constraint, America has become progressively less free over 30 years, with rising bureaucratization reducing freedoms in many areas even while other aspects of freedom (personal expression, identity, movement) have expanded.
“freedom has never been absolute and America as a society if we define freedom as the absence of government constraint in those terms has become progressively less free. By other measures the society in certain instances has been more free. So my question is how do we think about freedom? And also like you know in many ways America's become an overly bureaucratized society. So in certain areas we have much less freedom today than we had let's say 30 years ago.”
The government's role in economic regulation of monopolies, trusts, and anti-competitive behavior substantially atrophied from the 1950s-70s through the 2000s, such that antitrust law was not adapted to new technological contexts where harm comes not from price gouging but from usage of consumer data and behavioral manipulation.
“Prior to new technologies arriving, for example, most of the anti-competitive behavior was judged against prices... We never adapted to the new environment whereby it's not necessarily price gouging. In fact, prices fall. It's not even about quality of products. Quality actually increases about the usage of consumers as a data source as a user... Through the subsequent three years, three decades, all of that atrophied.”
Government regulation of corporations atrophied significantly between the 1980s and 2010s as antitrust enforcement weakened, and the criteria for monopoly—which had been price to consumers—were never updated for technology platforms that charge zero price but extract value through data and behavioral extraction.
“Prior to new technologies arriving, for example, most of the anti-competitive behavior was judged against prices. In other words, is there a price gouging? Are consumers better or worse sold? We never adapted to the new environment whereby it's not necessarily price gouging. In fact, prices fall. It's not even about quality of products. Quality actually increases about the usage of consumers as a data source as a user.”
The Federal Reserve's intervention since 2008 prevented a 1930s-level depression (avoiding 30% unemployment and pension fund collapses) but created secular stagnation instead, requiring perpetual fiscal and monetary support because underlying productive potential has not recovered.
“Federal Reserve prevented us from having the same or plunging to the same depths of despair what actually people saw in 1930s. But because we've avoided it, we also avoided recoveries. So in other words, we've settled for a circular stagnation. Something that Larry Larry Sus have been discussing since 2012. Something that Paul Krugman as well been discussing. Why we can't recover? Why we can't grow the same way? Why do we need to have constant support through the fiscal and monetary policies? Why neutral rates are star? Why neutral rates are are lower than what they were 20 years ago.”
Financialization creates disinflationary rather than inflationary pressures when capital stays in financial markets (distant from real economy), because the money velocity is low and it inflates asset prices rather than consumer prices—a key difference from mainstream monetary economics.
“The other thing it does, it start generating disinflationary pressures, not inflationary. People tend to think the more money you generate, the more inflation you get. That is only true if this money gets to the ground where real people are. If it stays in a cloud of finance, it's actually disinflationary rather than inflationary.”
Abundant cheap capital from financialization dramatically reduces the cost and increases the speed of technological innovation, allowing almost any idea to get funded and iterate rapidly—turbocharging the pace of information age disruption relative to what capital constraints would normally permit.
“But how quickly technology progresses depends on availability and the cost of capital. So one of the things financialization has done is massively increase availability and depress the cost of capital. So what you find by late 1990s you can try almost any idea very very quickly and you get funded and then as a progressive 2000 that's got even worse.”
Declining marginal utility of labor creates psychological and mental health impacts on workers who become aware their labor is becoming obsolete—the emotional impact compounds economic displacement to create behavioral crisis.
“And as I said earlier on, I think McKenzie was absolutely correct to argue that... marginal utility of labor declines. And the more marginal utility of labor declines, the more when you sit in the chair, the more you feel less useful. If other people know that you're not as good, that depresses you. That actually have mental impact and psychological impact on you.”
Suppression of economic and capital market cycles over time produces shallower growth rates, accumulation of inefficiencies, lack of market clearances, rising inequalities, rising inequities, fewer jobs, and accelerated technological disintermediation—the hidden costs of preventing natural market adjustment.
“As you continue to suppress economic and capital market cycles, you ended up with shallower growth rates. You ended up with accumulation of inefficiencies, lack of clearances. That's the other side of it. You end up with inequalities. You ended up with inequities. You ended up with less jobs. You accelerated technological disintermediation.”
Critics like John Maynard Keynes, Karl Polanyi, and others stretching back to the 1940s have highlighted that neoliberal theory (freedom, free markets, unconstrained economies) does not reflect how real human societies work, and this critique is not new but rather represents established economic thought.
“if you look at John May and Kanes, if you look at Carl Palani, if you look at many critics of neoliberal approach stretching back into 1940s all the way back then, all of them were highlighting that theoretically neoliberalism in other words freedom, free markets, unconstrained markets, unconstrained views, that all of that ultimately will generate better economic and social outcomes do not reflect how real human societies work.”
Demetri argues that empirical observation of policy dysfunction suggests politicians and policymakers are working with incomplete projections of the future and doing their best with available information, which reframes blame-seeking media narratives as unproductive.
“I think it's important to recognize that nuance that everyone is kind of working with an incomplete projection of the future and doing their best and somehow we always find ourselves in these cycles and so there's got to be a reason for it.”
Neoliberalism as an ideology is theoretically sound when modeled but does not reflect how real societies and real economies actually function, because it assumes perfect markets, perfect information, complete free trade, and populations willing to accept unemployment and wage degradation—conditions that do not exist in practice.
“If you think of neoliberalism as a concept, it sounds very good on paper, it can be modeled incredibly well, but it does not reflect the way real societies and real economies work... if our markets were perfect, if our if we had a perfect information, if the markets were competitive, if economies were open, if we had complete free trade and if people more importantly accepted the consequences of that either in terms of unemployment or in terms of degradation of jobs or in terms of prices or whatever that is, then theoretically neoliberal framework is as good as it comes. The problem is that is not the way societies work.”
Marginal utility of labor declines as information-age automation progresses, and this psychological impact (feeling less useful, knowing you're not as good as machines) generates mental and psychological distress that reinforces itself through depressive feedback.
“As we progress towards it, marginal utility of labor declines. And the more marginal utility of labor declines, the more when you sit in the chair, the more you feel less useful. If other people know that you're not as good, that depresses you. That actually have mental impact and psychological impact on you.”
The world as known in the 1980s, 1990s, and early 2000s ended around the 2008 global financial crisis and will never return to that configuration.
“I've come to a conclusion that our world as we knew it in 1980s and 1990s and early 2000s have ended and it's never going to come back.”
When growth and wealth accumulation become the preoccupation of society at the expense of everything else (health, environment, social cohesion, meaning), this creates cascading negative consequences across all other domains and becomes ultimately unsustainable.
“preoccupation of growth and wealth at the expense of everything else”
The millennial and Gen Z generations, having grown up in crisis/low-growth environments without asset ownership participation, are now demanding systemic change—mirroring 1960s baby boomers' rebellion against the constrained post-war order, creating a generational symmetry.
“And this time we also have a younger generation millennium and Z generation that really have a very different experience to baby boomers who were growing up in 1960s and 1970s and they are demanding change... The newer generation that didn't participate in any of that basically saying this system does not work. This system is corrupt. This system does not reflect our objectives. Not dissimilar what baby boomers were saying in late 1960s. Very very similar.”
Proximity to the fountain of money (financial assets, credit access) creates an accelerating wealth-generation mechanism, while conventional individuals relying on wages have become progressively poorer, driving massive inequality acceleration independent of real productivity differences.
“The closer you to the fountain of money, the closer you are to the fountain of assets, the vast and richer you become. your ability to generate wealths accelerates. The more you're conventional individual relying on wages and household channels, the poorer you have become. And so one of the things it does, it massively accelerates inequalities and inequities.”
Demetri mentions awareness of Balaji Srinivasan's 'network state' concept, which proposes that the world will increasingly organize around internet networks (nodes) rather than nation states, and that techno-elites are pushing this alternative organizational model as a replacement for the nation-state system established after the Treaty of Westphalia.
“I was thinking about this in the breakup of because this is kind of again it's like a cyclical it's a way of thinking about things cyclally after the treaty of Westfalia and especially with the break up of the Ottoman Empire and then the AustroHungarian Empire you saw that the nation state model became increasingly the organizational mode through which nations would organize all these different ethnicities within the empires and it seems now that folks like ology who's kind of the the figurehead for this movement...It's essentially saying that the world now is a network, the internet network that is grafted on top of the physical world. And that the nodes within this network are becoming more powerful than the nation states themselves. And that the future organizational model of the world is going to be this quoteworked state as opposed to the nation state.”
The annual volume of share buybacks in the United States reached approximately $1 trillion per year, representing roughly half of what capital expenditures are, meaning corporations are increasingly engaging in self-liquidation to inflate stock prices rather than investing in productive capacity.
“Today we're doing $1 trillion of share buybacks every year. It's almost well not not quite but it's about half of what you know capital expenditures are being done on a US-wide basis.”
Share buybacks now constitute approximately $1 trillion annually in the United States, representing roughly 50% of capital expenditures, and function as corporate self-liquidation to boost stock prices rather than investment in productive capacity.
“For example, today we're doing $1 trillion of share buybacks every year. It's almost well not not quite but it's about half of what you know capital expenditures are being done on a US-wide basis.”
The individual elements of crisis today are not as extreme as in the 1930s Great Depression, but the frequency of dislocating crises has changed from roughly one major event every 5-7 years to roughly one annually, and this cumulative frequency is producing the same social impact as a single greater crisis would.
“A lot of people say that you know the global financial crisis is nothing like what happened with the depression of 1930s and I agree but what's happening to us we have a sequence of crisises one after another after another usually we will have maybe one dislocating event every five six seven years today we're getting them almost on an annual basis so to speak and so the sequence yes individual elements are not as extreme what they were back in 1930s, but cumulatively they're actually having exactly the same effect.”
The information age began in the early 1970s but did not become significantly disruptive until the late 1990s, and disruption has increased through subsequent stages of the information revolution, fundamentally altering the role of capital and labor.
“The way basically describe it information age we can date it pretty precisely. It started in early 1970s but it really didn't become disruptive until late 1990s and the disruption increased as we progress through the first second third stage of information revolution.”
Financialization creates a sugar effect early on (bringing forward consumption and growth through borrowing) but becomes toxic over time, because those closest to the fountain of capital become richer while ordinary wage-earners become poorer, massively accelerating inequality.
“Initially what we had is the sugar effect. So if you think of late 80s through 90s bringing forward consumption to the presence through borrowing relying on asset classes to charge your growth rates... But then over time it becomes negative. It becomes toxic as you go forward. Why is that? Well, it does couple of things. Number one, the closer you to the fountain of money, the closer you are to the fountain of assets, the vast and richer you become. your ability to generate wealths accelerates. The more you're conventional individual relying on wages and household channels, the poorer you have become.”
The Federal Reserve prevented a full depression equivalent to the 1930s by intervening in 2008-2010 and during COVID, but by avoiding the pain of deep recession, governments also avoided the recovery and deleveraging that would normally follow, settling instead for 'circular stagnation' with chronic dependence on monetary and fiscal support.
“Federal Reserve prevented us from having the same or plunging to the same depths of despair what actually people saw in 1930s. But because we've avoided it, we also avoided recoveries. So in other words, we've settled for a circular stagnation. Something that Larry Sus have been discussing since 2012. Something that Paul Krugman as well been discussing. Why we can't recover? Why we can't grow the same way? Why do we need to have constant support through the fiscal and monetary policies?”
FDR's New Deal policies (1933-37) were correct for their time and likely would have succeeded in producing stable recovery even without WWII, demonstrating that government intervention in severe crises can work.
“I personally think that those policies were correct for the time. They pursued the right objectives. Even if there was no World War II, I think those policies would have succeeded.”
Suppression of economic and capital market cycles led to shallower growth rates, accumulation of inefficiencies, lack of clearances, accelerated technological disintermediation, increasing dependence on asset appreciation rather than earnings, and ultimately systemic inefficiency that younger generations reject.
“You end up with shallower growth rates. You ended up with accumulation of inefficiencies, lack of clearances. That's the other side of it. You end up with inequalities. You ended up with inequities. You ended up with less jobs. You accelerated technological disintermediation. You started to rely more on assets rather than earnings.”
By late 1970s-early 1980s, the idea that freedom (political, personal, economic) has no price and automatically produces better outcomes became the dominant consensus across all political parties and countries, regardless of political ideology.
“by late 70s to mid 1980s. That baby boomer culture become completely dominant. So it didn't matter whether you're democrats or republican or in Australia whether you're labor and liberal whether in Britain you were conservative or labor party didn't matter everybody saying from the same hbook private sector knows the best public sector is inefficient incompetent unjust and therefore we should allow as much freedom as possible”
No major economist in the 1960s believed the private sector was better at capital allocation than the public sector, because they had empirical evidence from 1920s-30s of private sector failures in capital allocation, reversing the burden of proof that neoliberals later assumed.
“Go back to 1960s nobody at the time thought that private sector is actually better at allocation capital than public. Why didn't they sing that? because I remember what public sector actually did in 1920s and 1930s that you have plenty of evidence to suggest there were periods when private sector was not best at allocating capital.”
Chief executive compensation grew from 40-50 times average worker earnings in the 1970s to 300 times by the 1980s, reflecting the shift from stakeholder capitalism (where executives were stewards of broad prosperity) to shareholder capitalism (where their sole obligation is to maximize stock price).
“So what you saw is a co compensations which used to be 40 50 times average earnings grew to 300 times average earnings.”
The 1930s and today share fundamental structural similarities: technology-driven labor disruption, severe financial crises and high financialization, climate disruption, pandemics, inequality comparable to the Gilded Age, and loss of confidence in the system leading to proliferation of alternative political ideologies.
“Whenever we have a severe disruption, certain elements are present. First of all, you can always see significant rise of some form of technological disintermediation... Secondly, what you see is severe financial crisises of some form and a high degree of financialization. The third thing you frequently see is impact of climate or some form of climate change... You frequently see pandemics or certain healthc are risks. And so if you think of all of those elements, all of them come together in 1930s as well as today.”
Financialization generates disinflationary pressures, not inflationary, because abundant capital flowing into financial markets rather than the real economy does not reach consumers and workers where real inflation occurs, a reversal of conventional monetary theory.
“The other thing it does, it start generating disinflationary pressures, not inflationary. People tend to think the more money you generate, the more inflation you get. That is only true if this money gets to the ground where real people are. If it stays in a cloud of finance, it's actually disinflationary rather than inflationary.”
The 1930s and today share seven fundamental structural similarities: technological disruption of labor markets, severe financial crises and high financialization, climate disruption, pandemics, extremely high inequality, loss of confidence in institutions, and proliferation of alternative political-economic systems as ideological consensus breaks.
“Whenever we have a severe disruption, certain elements are present. First of all, you can always see significant rise of some form of technological disintermediation... Secondly, what you see is severe financial crisises of some form and a high degree of financialization. The third thing you frequently see is impact of climate or some form of climate change... You frequently see pandemics or certain health care risks... if you think of all of those elements, all of them come together in 1930s as well as today.”
Information age started in early 1970s but did not become significantly disruptive until late 1990s, and has progressively increased disruption through three successive waves, with the waterfront of assets and activities impacted being approximately 3,000 times greater than the industrial revolution and progressing at 10 times the speed.
“The way basically describe it information age we can date it pretty precisely. It started in early 1970s but it really didn't become disruptive until late 1990s and the disruption increased as we progress through the first second third stage of information revolution... I think McKenzie was absolutely correct to argue that the waterfront of assets and activities that information h impacts is at least 300 times what industrial revolutions were doing and it's progressing at 10 times the speed. That means it's 3,000 times the impact.”
The 1970s stagflation resulted from government becoming too overbearing in its intervention in the economy, providing a cautionary example of excessive control; therefore, the pendulum should not swing all the way back to pre-1970s statism, but rather find a middle ground.
“You can always swing the pendulum can always swing too far and the government could become incredibly overbearing in determining the objectives... what we saw are certainly starting from late 1960s but certainly through 1970s that the government can become overbearing. That's one of the reasons we've experiencing a stackflationary period through the 1970s.”
Paul Volcker's deregulation of capital markets in 1979-1982 initiated financialization as a distinct force, with financial paper increasing from 1:1 ratio to underlying assets in the 1950s-80s to 6-10:1 today, meaning the financial sector is 5-10 times larger than the underlying economy.
“It started with Paul Walker in 1979 80 8182 and that is what Paul Walker decided... his much greater legacy in my view longer term relates to him deregulating the capital markets and as you deregulated the capital market you started something new financialization. If you go back to 50s, 60s, 70s, even 80s, there used to be one piece of financial paper for every underlying asset. By the time we get to Greenspan, it was 2:1. By the time we went to Bernaki, it was 3:1. By the time we get to Yelen, it was four or 5:1. Today, it's anywhere from six to 10:1.”
Financialization began in 1979-1982 with Paul Volcker's deregulation of capital markets, and the ratio of financial paper to underlying assets has grown from 1:1 in the 1950s-80s to 6:1 or 10:1 today, representing a 5-10x expansion of the financial cloud relative to the real economy.
“At the same time financialization started. It started with Paul Walker in 1979 80 8182 and that is what Paul Walker decided. I mean he's best known for crushing inflation of course but his much greater legacy in my view longer term relates to him deregulating the capital markets and as you deregulated the capital market you started something new financialization. If you go back to 50s, 60s, 70s, even 80s, there used to be one piece of financial paper for every underlying asset. By the time we get to Greenspan, it was 2:1. By the time we went to Bernaki, it was 3:1. By the time we get to Yelen, it was four or 5:1. Today, it's anywhere from six to 10:1.”
The information age changes the role and marginal utility of labor more deeply than the industrial revolution, which only displaced human muscle; the information age displaces human cognition and judgment, potentially approaching singularity (indistinguishability between human and machine contribution) within 15-20 years.
“This goes beyond human muscles. This is goes into cognitive actions singularity where we really won't be able to tell the difference between human and nonhuman contribution is probably within the next 15 to 20 years.”
Instead of a unified consensus on proper political-economic organization (as in post-1945 or post-1980 periods), the world is now fragmenting into multiple competing systems without agreement on what is right or wrong—China, Russia, United States, and Europe each pursuing distinct models.
“Instead of subscribing to some common acceptance, what is the right thing to do? What is the wrong thing to do? What are the right political social economic system? We now have proliferation of them. The same as in 1930s.”
Demetri references Jeffrey West's book Scale, which uses frameworks from natural systems to explain how socioeconomic systems with embedded growth obligations (created by debt-based monetary systems and unfunded liabilities) create finite-time singularities and runaway financialization that require political solutions, not just economic ones.
“It was written by the founder of the high energy physics group at Los Alamos National Laboratory, Jeffrey West. The book is called scale and Jeffrey essentially uses this framework to draw a comparison between natural system the way natural systems or physical systems scale versus socioeconomic systems which have these embedded growth obligations that debt and unfunded liabilities create along with the debt based monetary system and they create these finite time singularities where essentially you get this kind of runaway financialization which you were talking to and that isn't an economic problem. it is truly a financial problem. It's a problem of claims on on the assets and that requires some kind of political solution.”
The Fujiwara effect describes a meteorological phenomenon where multiple hurricanes converge and either merge or strengthen, used metaphorically to explain how multiple historical crises (technology, finance, climate, pandemics) converge simultaneously to create supertorms that are far more disruptive than any single crisis.
“Fuchar effect effectively it's a materological concept and that is when one or two or three sometimes hurricanes come too close to each other and as they come to close to each other sometimes they merge and when they merge they either change direction or they significantly strengthen they're going to have a much larger impact than individual hurricanes could have had”
The question determining outcomes from current crises is which decisions policymakers make now—analogous to the 1930s when policy choices (FDR's interventionism versus other approaches) determined whether the world descended into WWII or stabilized.
“And so the question is what wrong decisions people made in 1930s that led you to the world on fire of 1940s and what decisions are we making today? Are they right decisions? What policies will be right? What policies will be wrong? To me that's the key because that will determine how we progress uh beyond this period.”
Demetri notes that the cyclical pattern might reflect how human beings develop frameworks and schemas that work well initially but degrade over time, and as they continue to be applied beyond their point of utility, they eventually fail and are rejected—citing Ian McGilchrist's Master and Emissary framework as relevant to understanding this pattern.
“There may also be a kind of cyclicality to how human beings attempt to operate in the world, which is to say, we develop frameworks and schemas and maps that work really well, but then they degrade over time. Their usefulness degrades over time. And as we continue to apply them, we increasingly apply them with futility leading to revolutions and other sort of rejections.”
The rise of neoliberalism from the late 1970s through 2000s had five major consequences: massive acceleration of technological disintermediation, rise of deep financialization, increasing dependence on assets rather than income, massive increase in inequalities and inequities, climate degradation, and a preoccupation with growth and wealth at the expense of everything else.
“And I said, the idea was freedom... Now that had consequences and that's what the book discusses that has a consequences of massive acceleration of technological disintermediation the rise of deep financialization increasing dependence on assets and wealth rather than income driving individual well-being. that also had the impact of massive increase in inequalities, inequities, climate degradation, preoccupation of growth and wealth at the expense of everything else.”
Technology is fundamentally a manifestation of human curiosity (present since human origins) but the speed of technological progress depends on capital availability; abundant cheap capital in post-1980s financialization accelerated information-age disruption like 'pouring kerosene on a bonfire.'
“So technology by itself is really a human spirit. Humans have always been technologically curious going back to you know days when we were in Africa. So it's not anything new. But how quickly technology progresses depends on availability and the cost of capital... Now the result is a tuba charged information age. The way I look at it is like bonfire of the vanities. It's like pouring kerosene on a bonfire.”
The global financial crisis of 2008 represented the 'check arriving'—the moment when the costs and contradictions of three decades of neoliberal policy became undeniable, and younger generations (Millennials and Gen Z) began demanding systemic change, similar to how baby boomers demanded change in the late 1960s.
“the price or the cost of that or the the check arrived around the global financial crisis. We can debate whether it predates a little bit the GFC or immediately afterwards, but around 2010 the check has arrived. And this time we also have a younger generation millennium and Z generation that really have a very different experience to baby boomers who were growing up in 1960s and 1970s and they are demanding change.”
Neoliberalism applied to personal life and social welfare suggests reducing social safety net payments and mandating healthcare choices as expressions of personal responsibility, which has social, managerial, market, and economic implications that collectively destabilize societies.
“So it has social and welfare system. If you believe that personal responsibility, free markets is the essence of neoliberalism, then that personal responsibility implies that we should reduce social and welfare payments. We should give individuals as much freedom as they want to have in health care rather than mandating certain health care schemes for example. So it has social, it has managerial, it has market, it has economic implications.”
The Fujiwara effect—when multiple hurricane systems merge and strengthen each other—is a useful meteorological metaphor for describing how multiple independent crises (technological disruption, financialization, climate change, demographics, pandemics) reinforce and amplify each other, creating societal superstorms far more disruptive than the sum of individual shocks.
“Fuchar effect effectively it's a materological concept and that is when one or two or three sometimes hurricanes come too close to each other and as they come to close to each other sometimes they merge and when they merge they either change direction or they significantly strengthen they're going to have a much larger impact than individual hurricanes could have had.”
Private sector capital allocation was not always superior to public sector allocation—the 1920s-30s provide examples of periods when private sector misallocated capital catastrophically, justifying some degree of public sector role in allocation.
“But to argue the other way that private sector is always right and public sector is always wrong and inefficient to my view is incorrect. And in fact if you go back through economics books let's say go back to 1960s nobody at the time thought that private sector is actually better at allocation capital than public. Why didn't they sing that? because I remember what public sector actually did in 1920s and 1930s that you have plenty of evidence to suggest there were periods when private sector was not best at allocating capital.”
Demetri references Jeffrey West's book 'Scale,' which argues that socioeconomic systems have embedded growth obligations (debt and unfunded liabilities in a debt-based monetary system) that create finite-time singularities and runaway financialization, requiring political solutions rather than market solutions.
“Jeffrey West... uses this framework to draw a comparison between natural system the way natural systems or physical systems scale versus socioeconomic systems which have these embedded growth obligations that debt and unfunded liabilities create along with the debt based monetary system and they create these finite time singularities where essentially you get this kind of runaway financialization which you were talking to and that isn't an economic problem. it is truly a financial problem. It's a problem of claims on on the assets and that requires some kind of political solution.”
The Greenspin Put, Bernanke Put, and Yellen Put represent a continuous policy of asset price protection originating in 1987 and persisting through multiple Fed regimes, indicating that societies demanded this policy rather than it being a Fed innovation.
“you would say oh my goodness that's deviation from central bank policies no it is not it's societies that demanded irrespective of my productivity my wealth my earnings must continue to increase and politics delivered exactly what people wanted”
Neoliberal frameworks once worked well (1980s-1990s) but have degraded in usefulness over time as they continued to be applied, reflecting a broader pattern where human frameworks and schemas work initially but degrade over time and eventually produce revolutions as people reject them—this reflects Ian McGilchrist's framework about hemispheric degradation in applied paradigms.
“I was thinking about how there may also be a kind of cyclicality to how human beings attempt to operate in the world, which is to say, we develop frameworks and schemas and maps that work really well, but then they degrade over time. Their usefulness degrades over time. And as we continue to apply them, we increasingly apply them with futility leading to revolutions and other sort of rejections. Again, I I highlight Ian McIllchrist's work here with Master and his emissary and the left and right brain because I I feel like a lot of that is what we're seeing here. The neoliberal framework worked much better in the 1980s and '90s than it does today.”
Since late 1970s for the first time in history, people no longer agree on what the right social, political, and economic models are. Without consensus, politics cannot be consensual, requiring societies to find new equilibrium through sometimes 10-20 year periods of turbulence.
“for the first time since late 1970s people no longer agree what is the right social model what is the right political model what is the right economic and business model and if people don't agree politics by definition cannot agree it cannot be consensual and so we need to find this new equilibrium it takes sometimes 10 to 20 years to actually get to that point”
Baby boomers who originally wanted to shrink government and deregulate markets in the 1980s-90s ended up increasingly dependent on government intervention (central banks, fiscal stimulus, cycle suppression) to maintain the asset values they had accumulated—the opposite of their stated goal.
“I mean one of the classic contradiction is that baby boomers who wanted to degrade the government who wanted the government to get smaller never really achieved this outcome. In fact, not only they haven't achieved, but in order to maintain the wealth that they've accumulated, they increasingly become reliant on the government to maintain asset values through central banks, fiscal policy, suppression of economic cycle, suppression of capital market cycle.”
Neoliberalism failed not because it was consciously chosen by one group, but because democratic populations voting through their preferences demanded the government protect asset values and suppress volatility—the Federal Reserve responded to popular demand, not ideological conviction.
“that became the dominant culture depending on the country by late 70s to mid 1980s. That baby boomer culture become completely dominant. So it didn't matter whether you're democrats or republican... everybody saying from the same hbook private sector knows the best public sector is inefficient incompetent unjust and therefore we should allow as much freedom as possible... when we saw the problems... politics by definition cannot agree it cannot be consensual”
In the context of choosing between despair and stagnation, Demetri reframes the question: the Fed picked up the baton of policy intervention only because the federal government became dysfunctional, suggesting that institutional dysfunction rather than ideology drove central bank activism.
“What the Federal Reserve did was it picked up the baton that the government left on the floor. The federal government did much more in the 1930s than the Federal Reserve did. And in turn, central banks picked up that baton in the post 2008 period because governments were so dysfunctional.”
Demetri notes that in the 19th and 20th centuries, the primary ideological battles were between western democratic capitalism and two alternative systems (fascism and communism), and asks whether equivalent alternative systems exist today or whether the Chinese state-capitalist model represents such an alternative.
“In the 19th century and the 20th century it really became about two alternative models of organization competitors to western democratic capitalism which were fascism and communism. Is there something equivalent today? Is a Chinese state capitalist model an example of that?”
The critical question about post-crisis policy is not whether central banks deviated from mandate, but rather: would critics have preferred 30% unemployment, real estate prices returning to 1990s levels, and pension funds becoming insolvent, thereby making central bank intervention politically inevitable regardless of stated ideology.
“What did you want Federal Reserve to do whether it was 2008 2009 whether it was during the covid would you have preferred a 30% unemployment would you have preferred that the real estate prices will return back to the level of 1990s would you have preferred if 401ks and pension plans suddenly had no money to pay the pensioners.”
The information age is changing not just the importance of human muscle (as industrial revolution did) but human cognitive capacity itself, approaching technological singularity where humans and machines become indistinguishable within 15-20 years, creating an existential challenge to human purpose and value.
“This goes beyond human muscles. This is goes into cognitive actions singularity where we really won't be able to tell the difference between human and nonhuman contribution is probably within the next 15 to 20 years.”
Even if Franklin Delano Roosevelt's New Deal policies had not been followed by World War II, they would have succeeded in stabilizing the economy and society—suggesting that the causes of 1930s instability were social-structural, not exogenous shocks.
“Now we don't know the answer. I personally think that those policies were correct for the time. They pursued the right objectives. Even if there was no World War II, I think those policies would have succeeded.”
Victor has a Bachelor of Economics from University of Sydney and a Master's degree from University of New South Wales, both Australian institutions, and is trained as both an economist and accountant.
“In terms of education and training I have completed University of Sydney with Bachelor of Economics and I did masters at the University of New South Wales. both of them are Australian institution. So I'm an economist, accountant by training”
Demetri Grafinas, host of Hidden Forces podcast, has met Victor Jvetsz in person at a recent NYC dinner and read his books; they spent time discussing Victor's views before recording the episode.
“You and I actually got to meet in person recently because you were at our recent New York City dinner. So, not only have I read your books, but I also had a chance to speak with you at length and hear your views.”
Victor was a Lehman Brothers employee during 2008 financial crisis, which personally impacted him and prompted reassessment of investment strategies and broader understanding of societal success/failure, economic/political/social/market disruption, and historical periods of dramatic change that alter every element.
“I at the time I happened to be an employee of Leman Brothers. So it actually impacted me probably a little bit more than other investment bankers. I've come to a conclusion that our world as we knew it in 1980s and 1990s and early 2000s have ended and it's never going to come back.”
Victor was born in Ukraine (then Soviet Union), immigrated to Australia in late 1970s, and has lived and worked in Australia, Hong Kong, China, London, and the United States; he worked in investment banking for almost four decades with major institutions and is currently a global strategist with a major financial institution.
“I was born in uh what at the time was known as the Soviet Union or Ukraine which is was part of the Soviet Union and I've immigrated to Australia back in late 1970s and I basically lived s and worked between Australia, Hong Kong, China, London, UK as well as the United States. I've been in uh investment banking business for almost four decades working for variety of major shops and I'm still a global strategist with a major financial institution.”
Interest in cyclical historical explanations has increased dramatically in the past 15 years compared to 2009-2010 when few resources were available making similar arguments, driven by increasing pressure on people to find logical explanations for what is happening and what it means for them, their families, economies, and the future.
“When when I start discussing some of those issues around 2009, 2010, there was actually very little available... Now the reason people in the last sort of 15 years started to explore it more is that people are trying to find a reason some form of logical reason what is happening why it is happening and what does it mean?”
Victor is publishing 'The Great Rupture' and 'The Twilight Before the Storm' and is working on a third book focused on the Fujiwara Effect—exploring what is disrupting society, what is driving change, and how disruptive and positive that change will be going forward; the third book builds on themes from the first two.
“In terms of education and training I have completed University of Sydney with Bachelor of Economics and I did masters at the University of New South Wales. both of them are Australian institution. So I'm an economist, accountant by training but most of my time I've spent either in investment banking or or in research including the last uh 15 years or so predominantly on the global strategy.”
Victor is a global strategist still working at a major financial institution, with an economic and accounting background (University of Sydney and UNSW), and has worked in investment banking across Australia, Hong Kong, China, London, and the United States for nearly four decades.
“I was born in uh what at the time was known as the Soviet Union or Ukraine which is was part of the Soviet Union and I've immigrated to Australia back in late 1970s... I've been in uh investment banking business for almost four decades working for variety of major shops and I'm still a global strategist with a major financial institution.”
Demetri compares Victor's work to that of Neil Howe, Peter Turchin, George Friedman, and Paul Kings North in applying cyclical frameworks to historical change and noting increased contemporary interest in these explanations.
“I would actually characterize you or put you in the same bucket as people like Neil How, Peter Turchin, even George Freriedman who wrote a book similarly titled The Storm Before the Calm. All three of those have been on the podcast.”
Victor disagrees with the network state concept, though he doesn't elaborate on his disagreement in the transcript and this discussion is deferred to the second hour.
“No no I don't...I would disagree. I would disagree with the”
Victor's upcoming third book will build on the Fujiwara effect, exploring what disrupts society, what drives change, and how disruptive the changes will be as they progress forward.
“It's going to be building on a key theme and that is the Fujiwaro effect. In other words, what is disrupting our society? What is driving change and how disruptive and positive it's going to be as we go forward.”
The host and Victor are scheduling a second hour of conversation to discuss policy solutions (UBI, healthcare reform, educational reform, alternative governance models, digital currencies, decentralized finance) and portfolio strategy for different geopolitical scenarios.
“The second hour turns to questions of policy design, institutional reform, and portfolio strategy. Victor and I debate the pros and cons of redistributive solutions such as universal basic income and more heavy-handed fixes to America's broken health care system and antiquated educational model. We also stress test alternative modes of socopolitical organization such as despotic feudalism, technocommunism, or something that attempts to balance the more extreme outcomes that a highly technologized society like ours would produce. We end the episode with a conversation about digital currencies and the disruptive potential that decentralized finance will have on money and banking.”