It’s been a great twenty-eight year financial orgy. The bubbly flowed and the living was high. Virtual money created virtual bubble after virtual bubble. No sooner did one pop then a flood of funny money inflated another.
Alas, nothing is forever. It’s time for you and your cronies to start opening some Swiss bank accounts and scoring some one-way tickets to Brazil ‘cause the bullshit is about to hit the fan. Our twenty-eight year run of growth fueled by asset price inflation and rising indebtedness is over, and there ain’t no more bubbles to inflate.
This is what happens when finance is divorced from reality. It was great while it lasted. Your cronies managed to keep wages flat while increasing productivity. Look at what they accomplished. The minimum wage is currently $5.85. Had it kept pace with productivity increases, it would be $18 an hour. That’s $12.15 per hour, per worker you cronies have been able to pocket. This is just one way that capital is siphoned upwards.
Not only were our financial geniuses able to divorce wages from productivity, but they embraced large trade deficits, wallowed in rising debt-to-income rations, shipped manufacturing jobs overseas, and encouraged assorted bubbles.
All the while they concealed the effect of flat wages on the American worker by encouraging him to go deeper and deeper into debt. They inflated housing prices, thus enabling Mr. and Mrs. America to think they were doing well by tapping into their home equity.
Now, it is all coming apart. The country is broke, the average citizen is broke. Your cronies are over leveraged and are seeing their assets shrink. Ever since we went off the gold standard, we have managed to scam the world into believing the dollar was a viable reserve currency. The only thing backing it up was hot air and bullshit. The biggest favor ever done for your cronies was when the dollar was converted from a representative currency that could be redeemed for gold to a fiat currency based on the delusion that its value will remain stable. This enabled the United States to amass real debt using Monopoly™ money.
I assume your cronies are also busy converting their cash assets into gold or some other precious metal. This is why the price of gold has soared past the nine-hundred dollar mark. True, it’s a little hard to pay for a vacation villa in gold bars, but I’m sure the Swiss would be more than happy to convert their gold into Euros.
But, before they pack their suitcases and make one last call to their brokers, I hope your cronies will pause to utter a prayer of gratitude for the Fed. By keeping interest rates so low for so long the Fed encouraged a “chase for yield” that made the credit worthiness of borrowers an anachronism. The only requirement for a loan was the ability to fog a mirror.
Thank God capital is no respecter of national boundaries. Like a toxic cloud it floats over the face of the earth, creating deserts in its wake. It will never come to rest in its addiction to growth. Wherever there is a spirit to crush or a resource to exploit, there you will find capital.
I wish your cronies well in their next endeavor. I have faith that they will find another bubble to inflate as they continue their quixotic quest for the stainless-steel bubble that will never pop.