Secular Stagnation is the New Norm

Greed, selfishness, megalomania and more power.

The elite is retro-feed with the invincible feeling, wealth concentration allows fewer people to influence trade rules, investment decisions, and political shifts through their rising economic supremacy. It nourishes their power addiction because it is doable.

Debt, debt and more debt.

The debt trap affect countries in different ways, for example individuals are mostly excluded of financial services due to high indebtedness in India, avoiding many from taking credit to consume. Also 40% of low-income countries wrestling with debt distress or high-risk debt levels. In this emerging countries public deficit and currency instability are major barriers so that public spending can’t provide structural needs for their fragile economies to develop.

The size of debt matters and when it is much big, it start to harm economies, this phenomenon called finacialization, an effect of a vicious monetary policy just putting a bandage on structural problems. For example, in the 70s the ratio between real assets and financial assets were 1:1, and it doubled at 90s, tripled the proportion in the 2000s. At late 2017 we have $350 T total wealth in a $80T GDP economy. That would approximate to a staggering 4.4 ratio.

The criminal operators from for example Lehman Brothers, Deutsche Bank and Monte Paschi had damaged the global economy relatively to mass destruction weapons but were merciful punished when it happened.

The expansionary monetary policy created the everything-bubble era, boosted equity valuations, and the the hazardous expansion of: junk bonds, high yield, distressed assets… Prudence on government budgeting and fiscal policy are indeed the harsh remedy that is neglected in our stagnated society. Instead, it is stealing the growth from the future generations that will inherit enormous debt.

Source: IMF Staff estimates

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Andre Castelo Branco

Andre Castelo Branco

Venture Capital @ TM3, building best practices of ESG & GRI. Engineer, entrepreneur & minimalist. Worked with SaaS Startups, Wealth Management and Agribusiness.