Bernard Hickey writes compellingly on the coming fall of capitalism. Click through and read the whole thing, here are some highlights.
Capitalism – top heavy and toppling
The last fortnight’s dramas on financial markets is really just the sound of investors waking up to some fundamental problems in the global economy.
It is now dawning on the world’s biggest fund managers that there is too much debt weighing on households and governments in the developed world. More importantly, they realise there will not be enough economic growth and income to repay those debts over the next 10-20 years.
That means governments might default or print money to repay the debt. Bank shareholders and bondholders may have to realise enormous losses or face high inflation. Growth will be much slower and for longer than expected. Slower economic growth might mean lower corporate profits and lower share prices.
After nearly four years of urgent fixes, emergency measures, bank bail-outs, debt shuffles and government pump priming without any real improvement, there is a dawning realisation that something is broken at the heart of the global economy.
… Grantham has put his finger on the core problem with unfettered capitalism. It works to shift wealth to the richest but can eventually topple over under the weight of itself when that wealth is hoarded and not reinvested or spent.
… In New Zealand, the share of income going to the top 1 per cent also more than doubled after the mid-1980s to nearly 14 per cent of income by the early 2000s. Last year’s tax cuts will have worsened that.
The trickle-down theory will not be enough to save capitalism. Even the biggest capitalists are realising that now.