As global stock markets slump, interest rates dive and some of the world's biggest companies post losses, we must question our assumptions regarding the true nature of our economy.
For the past 10-years, after the Great Ression rocked the world, the economy has been in recovery mode. The recession should have been a wakeup call that economic manipulation is destructive. But we didn't.
In today's world, we assume that everything will be ok. When a stock dips, we buy the dip, because algorithmic traders will pick them up. It's part of their program. We programmed trading bots, and in essence they programmed us. The best days on Wallstreet are when no one is around, and robot traders rhythmically pass assets around.
Today we face a multitude of issues that have been put off for too long. Interest rates have been so low for so long that money has created asset bubbles everywhere. Real estate, stocks and most other assets are ballooned up to a level that's out of the middle class' reach. How do we fix this? More debt at higher rates. Is that safe?
We will see what happens. We have a first-class seat to the show. After a decade of cheap money and bubble economics, we are in a precarious position. Debt is at record levels. If we raise interest rates, the amount of money to be repaid balloons. Balloons pop. If we lower them, we take on more debt. The solution is unclear, and will require a deflation of our bubbles. We need them to deflate, because the popping of our world economic systems is a possibility that should frighten you. Strap in and hang on!
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Picture from Pixabay.
