“…we may be headed into a world where capital is abundant, deflationary pressures are substantial and demand could be in short supply for quite some time.”
—Lawrence Summers, former Secretary of the Treasury
Professor Summers must be reading Ben Bernanke’s new blog. Or maybe he’s writing it for walking-around money. At $250,000 a pop for making a speech, Mr. Bernanke can certainly afford to pay high-toned hacks to polish his spin-o-nomics. Raillery aside, Mr. Summers’ utterance provokes some pretty fundamental questions: what exactly is this world we’re heading into, and what exactly does that capital consist of?
It is, first, a world of unraveling globalism. So many people who should know better — members of the supposed thinking class who have suspended their thinking — swallowed Tom Friedman’s dictum that globalism was here to stay, a permanent new feature of the human condition. File that idea in the dead letter office, along with Francis Fukuyama’s The End of History. With the help of competitive central bank racketeering, desperate nations have propelled themselves from financial disorder to geopolitical turmoil and history marches on — lately to the ululations of gleeful beheaders. Friedman’s flat world was predicated on a dominant and sound American polity, and we’ll have neither in that world Mr. Summers says we’re moving into.
In fact the first condition was predicated on the second: that America would continue to dominate the global economy because its polity was sound. We have clearly blown that by rigging together a corrupt troika of banks, market swindlers, and captive eunuch officials who expanded the financial sector of the economy from 5 percent to more than 40 percent, largely by pillaging the middle class and destroying the basis of their income. The USA set the tone for 21st century magical finance, in which “wealth” was “created” by digital accounting fraud. The effects at home are visible on our landscape of suburban hyperwaste and decrepitating older towns and cities.
One might say the main effect of the 50-year-long Friedman globalism orgy was the schooling of other nations in American-style financial fraud. Surely China has now surpassed the USA, considering the structural perversities of their banking and government relations. They really don’t have to account to anybody, including themselves, and the numbers they publish must be even more fantastical than the junk statistics produced by the US BLS. Europe has been a star pupil and only a few months ago announced a Quantitative Easing (fake capital creation) program as ambitious as America’s have been. Japan, of course, is just marking time until it quietly slips away and goes medieval.
Global disintegration has advanced furthest, not surprisingly, in the fragile band of regions most strung out on the primary commodity: oil. The Middle East / North Africa / Central Asia war zone is steadily combusting, and there is no sign of resolution across the whole of it, only the promise that conflict will get worse. Saudi Arabia was the cornerstone of that district, and the senile Saudi leadership finds itself in peril as its military pretends to support splintering Yemen. The other Arabian princes of other non-Saud clans must be watching the spectacle with wonder and nausea. When Arabia blows up, that will truly be the beginning of the end.
The foregoing leads to that other original question: what is that “capital” we’re counting on? I’d propose that it doesn’t exist. It is a figment engraved on the hard drives of the world, a ghost that haunts the people still in charge of that disintegrating global economy. There is still wealth in the world, but a lot less than people such as Larry Summers say there is.