Wednesday, June 26, 2024

Off the rails - inequity and unfairness built into capitalism

I have largely withdrawn from posting items relevant to the details of our current political and social malaise, but I want to pass on a few clips from a piece by Brett Stevens, that passes on points made by Ruchir Sharma, the chairman of Rockefeller International and a Financial Times columnist, in his new book “What Went Wrong With Capitalism.” Sharma makes a convincing case that hits the nail on the head about what has gotten us where we are: easy money, or ultralow interest. When the price of borrowing money is zero, everything goes bonkers.
In 2010, as the era of ultralow and even negative interest rates was getting started, the median sale price for a house in the United States hovered around $220,000. By the start of this year, it was more than $420,000.
Inflation is seen in global financial markets:
..In 1980 they were worth a total of $12 trillion — equal to the size of the global economy at the time. After the pandemic...those markets were worth $390 trillion, or around four times the world’s total gross domestic product.
In theory, easy money should have broad benefits for regular people, from employees with 401(k)s to consumers taking out cheap mortgages. In practice, it has destroyed much of what used to make capitalism an engine of middle-class prosperity in favor of the old and very rich.
First, there was inflation in real and financial assets, followed by inflation in consumer prices, followed by higher financing costs as interest rates have risen to fight inflation...for Americans who rely heavily on credit, it’s been devastating...
...he system is broken and rigged, particularly against the poor and the young. “A generation ago, it took the typical young family three years to save up to the down payment on a home,” Sharma observes in the book. “By 2019, thanks to no return on savings, it was taking 19 years.”
The social consequence of this is rage; the political consequence is populism.
For all their policy differences, both leading U.S. candidates are committed and fearless statists, not friends of competitive capitalism.”
What happens when both major parties are wedded to two versions of the same failing ideas? And what happens when leading figures of both the progressive left and the populist right seek to compound the problem with even easier credit and more runaway spending?
The answer: We are wandering in fog. And the precipice is closer than we think.

1 comment:

  1. Charles B.10:02 AM

    In order to keep my anxiety level down, I've made the decision that when I arise each morning (so far), I will choose one thing only to fret about that day. Should it be AI, the Presidential election, abortion, wars abroad and at home (cultural), climate change, racism, inequality, the economy (according to the experts we've been teetering on the brink disaster now for about 15 years or so, so they are bound to eventually be right!)? On the Seventh Day I've scheduled a day of rest, when I only fret about what to cook for dinner and which music to enjoy.