30 December 2019 — theplanningmotivedotcom
A BUBBLE TOO BIG TO FAIL
‘The global economy was an economy of two halves, the halve-nots and the halves- everything. I have pointed out a number of times, that in many major economies, especially the biggest of them all, the USA, the top 10% spend as much as the bottom 80% on personal consumption. The top 10% rely heavily on capital gains, and their spending habits are shaped by the status of the share and bond markets.
Remove these capital gains enjoyed by a tiny minority in each country and the global economy implodes. The world economy is now addicted to these bubbles, though the fix needed keeps growing. Nothing could be unhealthier. A capitalist economy driven by low interest rates feeding speculation rather than a high rate of profit feeding investment has scrambled the DNA of capitalism.[my emph. WB]
In the film the “Big Short” a distraught investor asks how the banksters could act with such reckless (and profitable) indifference in the face of surging mortgage defaults. His answer was that they knew they would be bailed out when it all collapsed. The difference today is scale. In 2008 it was the New York Investment Banks scamming the markets prior to the Crash. Now it is the central banks themselves. They have created a financial monster that needs to be fed, for if it collapses, the fall out will be beyond imagination. We are no longer talking about banks too big to fail, but a global bubble too big to fail.