In popular lore, the theme parks that are the global financial districts from Manhattan to Shanghai, populated by the demigods a.k.a “Masters of the Universe (MOU)” are so because the denizens of these districts are infinitely more clever than those outside. The recent decades of rising hubris has led to the braggadocio of the financial mavens playing a game of chess with both their governments and peoples to demonstrate their supposed intellectual machismo. The result is that the savings of both the governments and their peoples have been rendered empty. Governments can print money and the people cannot. And the governments are doing so at the beck and call of the MOUs as if there is a memorandum of understanding.
It is perhaps acceptable if the bank balances of peoples and their governments are run down to zero, transferring that wealth from public and private savings, a.k.a when put together, the national savings of countries, to the private bank accounts of the new global supercapitalist class if doing so means equitably rising wages and job growth. However, this has not happened. Private savings are negative and so are public savings. Together, the national savings are below the seal level as the sea levels around the world are rising. Capitalism has turned into tyranny.
The hypothesis of the global savings glut which had gained much currency as currency was being funneled out of the Fed is true. There are parts of the world, such as China, Russia and the oil rich countries of the Near East, where the national savings rates are high. The trouble is that the financial markets, after running the printing presses in wealthy countries, have now turned their amorous eye to countries where the savings is waiting to be taken. And so, there was a bubble in the emirate of Dubai and there is another frothing up in China. The splatter from the Dubai bubble was cleaned up by its neighbor Abu Dhabi with its savings. Now, they want China to do the same in short order.
When asked why, they say “it is household and business fixed investment and that the national output will rise.” This is what they told us the last time we asked them about the American bubble or the British bubble. Perhaps the government must carefully look at its economic statistics to count household and business fixed investments properly before going ga ga over the rising gross domestic product (GDP) whose consumption component would eventually be predicated on the alms paid by their financial district (read as “Wall Street bonuses can raise consumption and hence GDP” ). Investing in second homes or commercial real estate for flipping like burgers before the property owners themselves end up flipping burgers to raise the nation’s GDP through the consumption habits of the very wealthy is incompetent economic management on the part of the government.
History shows that the middle and lower income classes have a higher marginal propensity to consume (MPC). This history is in the process of being revised the world over: the higher MPC is being shifted out to the very wealthy, and the bottom income rungs in proportion to their not level (human capital) but the social class of education (Harvard or Timbuktu) are being taught to live off of surgically adjusted income to debt ratios (detailed statistics of which are kept by the governments), which cycle only to the extent necessary to keep the riff raff where they belong in this new social order. The levels of inflation and unemployment are also being tailored to be commensurate with that objective. Both the governments and the markets are a party to it. It is a social phenomenon, not an economic or a political phenomenon. It is not chess, but corrupt, cabbalistic social engineering in the name of economic globalization.
It is time that the people of China and elsewhere let their governments know unequivocally not to bait their hard earned savings with promises of wealth. The wealth of nations resides in the capacity of their peoples to earn an honest living.