Tuesday, November 3, 2009

Asset-price inflation is the goal of economic policy

Why the crisis isn't going away

Capital flows into paper assets trigger debt-based speculative booms and bubbles. When the debts cannot be paid or rolled over the bubbles crumple, leading to a credit crunch, asset-prices plunges, market crashes and unemployment. But wait, governments have found ways to fix all that - except the unemployment bit. US Fed support has enabled the financial sector to maintain its debt level at $16.5 trillion while giving the appearance of deleveraging (by enabling the sector to expand its equity base). This debt level keeps asset prices artificially high so that 1) finance can maximise its profits via risky investments (normally a correction would dampen such investments) and 2) consumers' 'wealth effect' remains largely intact. Oh, and the real economy goes down the toilet.

Posted by icarus @ 06:08 PM (910 views)
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2 thoughts on “Asset-price inflation is the goal of economic policy

  • There seem to be a few people now concluding the same thing on this.

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  • What determines economic policy? Some say the political world is as it seems. Some say it’s completely different from that The latter sometimesare called ‘conspiraloons’.

    Let’s look at what Blair’s doing. This gives at least a hint that the political world is in fact different from what it seems.

    He’s the ‘Middle East Envoy’ for the EU, the US, the UN and Russia (shome overlap there, shurely) and he heads Tony Blair Associates (oh no, shades of Henry Kissinger Associates – “of all the fingers in all the pies in all the world why does HKA have to walk into mine”) that was set up to make money from foreign governments, includiing sovereign wealth funds, and major companies. Why the Middle East? Because Blair wants to save the Palestinians? No, because that’s where the money is.

    Blair also represents JP Morgan (the ones with £29 billion of US taxpayers’ money) in the region. One day 6 months ago TB, as ‘peace envoy’ met the UAE education minister to have a chat about Gaza and later the same day he met the UAE finance minister to discuss ‘investment opportunities’. Similar meeting have been held with the ruling families of Saudi Arabia and Kuwait (and what’s he doing in Libya?). Commissions from deals resulting from such ‘consultancy’, plus fees for his talks on ‘leadership’, book deals and his JP Morgan salary + commission probably net him an annual sum not unadjacent to £10 million.

    Who can tell me that political leaders are not looking toward a future such as this while they are in office?

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