Sure. First, a bit of context. Back in the 1980s we had the era of the so-called "corporate raider". These people would buy up a failing or unprofitable company, break it up and sell it for parts. Basically, the book value of the company was more than the price to buy the company. Some viewed this as market efficiency. But the cost of job losses is never borne by the raiders. No, the government pays for that. So it's another form of wealth transfer from the government to the wealthy. This btw is the origin of the Rust Belt and how formerly Democratic strongholds ultimately turned red as the Democratic Party under Bill Clinton abandoned organized labor for corporate donations.

It's worth adding a little about the subprime debt crisis and the GFC. Mortgage debt is probably the most liberal in terms of collaterization rules. You can borrow so much more of the value because housing was considered "safe". So subprime loans started at a low rate but then that rate kept going up. There's more to it of course but the point I want to highlight how this was a case of complicated debt that exploded.

Private equity is really the next generation of corporate raiding. Here's how it works. You start a PE fund and raise capital for it. You then identify a target you can profit from and do what's called a leveraged buy out ("LBO"). You borrow more money against your capital and the business.

A lot of businesses have been poorly performing and they're sitting on a ton of real estate appreciation. Toys R Us was a big example of this. Toys R Us was an old company so owned a lot of its stores. But now that unrealized gain doomed them.

The PE firm will typically restructure a company into two companies: one holds the business operations. The other holds all the real estate. The first one will have binding contracts to rent from the real estate holding company.

Somewhere in all this the new owners will take a loan out against the company's assets to repay the LBO. So they've basically gotten a company for "free" and just loaded it up with debt. The financial arrangements will be complex and you may find that the rents will explode in future years, ultimately dooming the business operations. Now if you're a PE firm, you don't want to hold onto that. You want to sell it. That usually means relisting it on some exchange.

At some future point the business collapses, the PE firms often still owns the real estate and because that real estate has usually kept appreciating, it's even more profit.

So if the real estate hadn't appreciated so much, Toys R Us and many other companies simply wouldn't have been targeted this way. We killed a longstanding business that employed thousands of people so a handful of people could cash in on appreciating real estate. That's all that happened.

For this to work, somebody needs to buy the business operations half. And investors are increasingly cottoning on to this. If you can't sell it, it stays on the books and none of this works. This is where the principals in PE firms are being asked to contribute capital to keep this ball int he air until buyers can be found. Also, there are now trillions in private credit to keep this all afloat.

PE defenders will bring up Hilton and Kroger as two companies that were arguably improved by these LBOs but they are the exception.

As time has gone on, PE has gotten increasingly evil too. Now it looks for what they call "pricing power". They've invented a new term because the existing term would make what's going on obvious. It's inelastic demand. PE now loves private utilities. People need electricity. Profits are guaranteed. People also need healthcare so a PE firm will try and buy up every medical practice in an area or every vet or every trailer park.

Adam Smith:

> As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce

Karl Marx quoted Adam Smith in 1844 and also said separately many things about this including:

> The landlords,... operate a certain kind of monopoly against the tenants. The demand for their commodity, site and soil, can go on expanding indefinitely; but there is only a given, limited amount of their commodity.... The bargain struck between landlord and tenant is always advantageous to the former in the greatest possible degree.

PE is just one of many distortions that come from a system that allows people to hoard land.