“Inflating phantom assets to collateralize expanding debt is failing due to diminishing returns on stimulus, zero-interest rates, money-printing and monetization of Federal debt.
That the policies of central states and banks have led to one disastrous asset bubble after another over the past 15 years is undeniable. This poses the question: is this serial bubble-blowing intentional, or are the bubbles merely unintended consequences of the neoliberal, neofeudal model of financialization that dominates global finance?
The answer boils down to this: inflate assets or die. The only way to support consumption in an era of declining wages is to enable more borrowing, and the only way to enable more borrowing is to:
1. Lower interest rates to near-zero so stagnant income can leverage higher debt
2. Inflate assets to create phantom collateral that can then support additional debt.
Central states live off taxes skimmed from wages and profits. If wages are stagnant, the state needs profits and capital gains to rise to support higher tax revenues.
In other words: inflate assets or die.
The entire scheme of generating GDP with more and more debt now yields diminishing returns.
Unfortunately for the central states and banks, though their unprecedented fiscal stimulus and money-printing has doubled the stock market off its 2009 lows, efforts to reflate housing have been tepid at best.
This matters because only the top 10% own enough stocks and bonds to make a difference in household net worth, while two-thirds of households own a home. Inflating another asset bubble in stocks was nice for the financial Aristocracy and their technocrat-class, but it didn’t do much to boost the net worth of the bottom 90% or enable more borrowing.
Let’s look at some charts that reflect the failure of massive money-printing and credit expansion to actually boost wages and household borrowing.
First up: real income (adjusted for inflation) has been flat to down since 2000:
Meanwhile, the ratio of household net worth to total credit market debt owed has plummeted, meaning that debt is rising much faster than net worth. This is called debt saturation: adding more debt generates less and less expansion of wealth…..”
Full article and many more charts
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