Monday, February 1, 2010

The Mindless Pursuit of Profit and Free Lunches Will Ultimately Be Our Nemesis

Author Andy Xie: Ex-Asia Pacific Chief Economist for Morgan Stanley
The first decade of the 21st century ended with a near-death experience. But financial markets that collapsed in 2008 have roared back in the decade's closing year, with Time magazine naming Ben Bernanke "Man of the Year" for "saving" the American and global economies. The mood symbolizes the ‘free lunch forever'ethos of the decade-long party that crashed and burned, only to be bailed out to party again. Bernanke is viewed as a savior because no one wants to take responsibility for what happened and wishes Bernanke could erase the past.
The magic ingredient for resuscitating the financial markets and the world economy has been trillions of dollars of bailouts. That money, not a better economic future, saved the financial markets. It has led to an emerging markets bubble that is supporting the global economy. It will take time for the money to become inflation, but when it does it will show the true cost of the crisis. With the world economy still not structured for another growth cycle, stagflation may stalk the world for a decade.
The two decades following the fall of the Berlin Wall will be remembered as a gilded age. After the ideological struggle of the Cold War, the world embraced globalization and making money in any way possible. The pursuit of profit became the most powerful force shaping the world. Factories were moved to wherever wages and environmental standards were lowest. Local neighborhood shops were put out of business by superstores on the outskirts of towns. Wherever regulation stood in the way, deregulation took its place in the name of efficiency.
Read more here

No comments: