Always blowing bubbles

I was never very good at econometrics.  I found the study of economics to be an intensely interesting pursuit, but I could never quite grasp the mathematical side that seems to now be an all encompassing part of the profession.  From a basic level, I could understand all of the mathematical theories, but as it became increasingly complex, I found it to be increasingly convoluted and my interest levels waned.

Instead, I found the philosophical and historical side of economics to be a far more interesting and relevant pursuit.  I enjoyed what was an intensely social analysis of why things were and how things would develop.

I look at our current world of cheap money with confusion.

Welcome to the Everything Boom, or Maybe the Everything Bubble

The aim of restarting global economies through cheap money has driven up asset prices for certain, but has it actually achieved the desired result of restarting economies?  Are businesses booming?  Are people seizing their opportunites to start new ventures?

It doesn't really seem like that is happening.

Cheap money is meant to encourage people to invest and to create new businesses.  Instead, it seems that the gains that have been made have been largely through the increase in the prices of existing assets like property and shares.  That isn't real economic growth. That is merely the shifting of wealth from one group to another.

So why isn't this working?  I actually think that the reason is actually very simple.

People are lazy.

I should also add that they are relatively unimaginative as well.  When given cheap money, the natural instincts of people will be to seek out the easiest assets to invest into.  They will not be starting businesses or building labour intensive infrastructure.  Instead, they seek out the easiest ways to make a return and that's through assets like shares and property.  There is no work, there is no innovation, there is no development. 

Paper castles crumbling

Something isn't right in the global economy.

I have stood by and watched silently as share markets and property prices have continued to rocket skywards, even when I see problems everywhere in the "little things".  Globally, wages haven't improved significantly.  Unemployment continues to be a major problem that is now evolving into something more insidious as the unemployed get moved into increasingly low paying and menial jobs, the entry level jobs that once existed for graduates are disappearing and many of those jobs that do remain are being sent offshore to cheaper jurisdictions.  Cost of living continues to rise and people seem to be stuck treading water.

All of it seems to be driven by the same old story of cheap money.

However, it seems like I'm not the only one concerned about the direction we are all heading.

Sharemarkets set for biggest tumble since GFC, says veteran investor Han K. Lee

Is it possible for markets to continue to grow without the fundamental problems with our society being resolved?  Or will there be another innocuous event that will trigger another even more devastating meltdown? 

Worthless world

This is nothing particularly new, but the size of it is astounding.

Amazon, Twitter, JB Hifi and Groupon may be worth billions but their profit margins are tiny

How many people today live in paper castles?  How many people have their entire lives supported on the back of non-existent wealth?  How much of a shock would it really take for these companies to go from being enormous entities that are making little money to being enormous entities that are making enormous losses?

What happens to the world when all these emperors are found to be naked?

Do you hear the people sing?

How long will people be happy with growing global inequality?

United States Is Now the Most Unequal of All Advanced Economies

There have always been rich and poor, but the sheer size of the discrepancy is now truly breathtaking.  To add to this problem, the mass of the middle class who once made up the bulk of the Western democratic nations are now being hollowed up.  It is as if feudalism is slowly returning before our eyes and robbing us of the last two centuries of development.

When people are unhappy, they will accept it for a while.  But when they begin to lose hope with what is before them, will they continue to accept it?  Or will they take alternative actions that could be more devastating and terrifying for us all?