Gordon's Notes: Apocalypse now? Putnam investorsThis is what I think is going on.
... SEC bans short selling.... 300 trillion is kind of a lot of money ... US Treasury has guaranteed money market funds...
Yeah, sure, greed, self-deception, information technology enabling levels of complexity humans cannot fathom, Bush trashing US fiscal policy -- they all contribute. They're not new though -- well, maybe the complexity part is.
Here's what I think is new.
Sometime in the 90s we went through a set of major technological and social transformation. Information technology, especially the net, radically changed human productivity in ways we didn't fully measure. Secondly billions of people emerged from years of education in China and India to remake the world economy. Thirdly the end of cold war, and the lost days of Pax Clintonia, unleashed the full power of comparative advantage across the global economy.
Humanity generated vast amounts of wealth -- but it came too fast to be redistributed. It pooled in the hands of a very small number of people, in part because the increasing cognitive demands of workplace were effectively disabling 70% of the population. We began to enter the neo-feudal era.
Trillions of dollars are sloshing around now. Money that the bottom 70% of the population would spend on health care, on cars, on homes, on clothes and on education -- either directly or through taxes. The owners of the money can't possibly consume it, so they try to find ways to grow it. It must grow because that much money is about power, power is relative, and the competition never ends.
The money sloshes into stocks, then real estate, then financial instruments. It never really gets destroyed, just redistributed among the very powerful and very wealthy.
Until we find a way to recycle that money into the hands of people who will use it as a means to an end, rather than an end in itself, the cycle won't stop.
That's my why.