A system of supercomputers to rule the financial world!!!!
BlackRock is becoming better known throughout the world. But did you know that they use and sell a software platform that influences $21 trillion in assets?
We’re changing pace for this week’s newsletter to cover a corporate topic. While this isn’t a conspiracy, the massive implications of the topic make it a juicy thought-provoker.
If this isn’t your cup of tea, feel free to skip this one. We’ll be back to cold, hard conspiracies next week.
There’s a host of supercomputers and corresponding software that directly influence a freakish amount of our financial markets.
Official Name
BlackRock’s Aladdin investment platform (which stands for Asset, Liability, Debt and Derivative Investment Network) is a software platform that is a main algorithmic influencer of global financial markets.
It’s simple math people:
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Description
From BlackRock’s website:
From portfolio management and trading to compliance, operations, and risk oversight, Aladdin brings together people, processes, and systems to help support a seamless investment process. Aladdin allows teams across investments, trading, operations, administration, risk, compliance, and corporate oversight to use a consistent process and share the same data. Aladdin creates value by helping to enable informed decision-making, effective risk management, and efficient trading.
Financial institutions, insurers, and pensions all utilize the platform for guided portfolio management. All-in-all, the platform lets users get a consolidated view of many data points and take advantage of the highly leveraged markets in play today.
Digging into BlackRock’s website on Aladdin for institutions is a really good insight into the breadth of its capabilities.
The Details
Taking a step back, it’s important to understand the gravity of big asset managers in terms of their economic weight. AUM here stands for Assets Under Management:
The US GDP peaked at around $21.4 trillion in 2019 (and was around $20.8 trillion in 2020). So these 3 asset managers control $20.1 trillion which is 93.9% of the GDP. Meanwhile, BlackRock’s Aladdin influences $21 trillion in assets… which is pretty much 100% of the US GDP.
What does this mean? Well, basically that BlackRock walks around like this:
Anyways… GDP is the total monetary value of all finished goods and services within a time frame. AUM isn’t within a timeframe. So what do they have to do with each other? The main thing is that having such a large of control over assets gives these institutions A LOT of power in terms of the US economy and politics. With this amount of assets, these asset managers can create market conditions that fundamentally change the global economic landscape.
How this relates to our “corporate topic” is that markets are directly impacted and influenced by the supercomputer and its algorithms that run it. And the Aladdin tentacles are in every single global industry pie.
BlackRock sells Aladdin as a software platform that other companies can use. This means these algorithms are influencing nearly $21 trillion in assets spread across multiple institutions. It’s the ultimate situation that could inadvertently create financial groupthink.
Jeez just get to the point already…
Ok, ok, this is a problem because when everyone thinks and acts in the same way it can cause big ole’ problems. Since everyone has the same mental framework, they also have the same gaps in their mental frameworks. Which means a black swan event will have a HUGE impact on every single industry that is at the whim of the homogenous (same) mental framework. And that’s all industries when it comes to Aladdin.
Here’s some evidence of this in action. Over 200 investment firms are buying up all types of real estate, pricing out Americans from buying homes. What happens when Aladdin indicates that the lowest risk industries with substantial returns are agriculture, energy or medicine? Will we see the same “pricing out” in these industries as well?
What This Means
Aladdin is used by BlackRock, Japan’s government pension fund, the corporate treasury investment portfolios of Apple , Meta (Facebook), and Alphabet (Google), and the list goes on. Even the Federal Reserve has a tight relationship with BlackRock and therefore utilizes its tools in managing the US economy.
So compared to everyone else in the financial markets room, they look like this:
But BlackRock ain’t done yet folks. In fact, they’re more intertwined than ever before. The Biden administration has continued the Obama legacy of hiring BlackRock executives for various consultations, as well as filling official government positions. And BlackRock returns the favor by hiring powerful Federal Government employees as executives. Take a look at this Business Insider article highlighting this.
With a monolith like BlackRock’s Aladdin in the financial world, and BlackRock personnel with such a cozy relationship with the US Government, who really runs the world?
Other Crazy Stuff
Links below to some wild stuff we came across while writing this article.
US Officials heavily leaned on BlackRock during the coronavirus economic slide to bail everything out
Oh yeah, they did that in 2008 as well after contributing to what caused the crisis.
The Moon is a Harsh Mistress is a pretty cool science-fiction book with a plot based around a supercomputer
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