Right now the United States and the world are facing four massive trends that, in combination, we haven't faced since the 1920s. We are seeing the rise of a new and brutal form of governance with extraordinary industrial capacity and power in China, much as Nazi Germany rose in Europe. We are seeing the exhaustion of monetary policies as interest rates hit zero and below, much as monetary policy was failing the world badly between 1929 and 1933. We are seeing levels of inequality and poverty in previously wealthy, industrialized countries that were only last seen in 1929. And we are seeing massive governmental and private sector debt that is being used to hold together, because of low interest rates, governments and large businesses, with the latter using that debt in many cases to simply buy back their own stock rather than investing in new products or services, much as margin debt fueled the stock market mania of 1929. As these variables rush together, we find the world on the brink of a second Great Depression and a Third World War. To navigate times like these, we need intelligent and committed leadership, but instead we have a thief and a con man in the White House. This is a prescription for worldwide disaster; hopefully
Artificially low interest rates are a atomic bomb embedded deep inside our economy. With interest rates in a normal range, around 5 or 6 or 7%, businesses only borrow money when they know that they can earn more money than the cost of interest with the equipment or expansion or new products they are rolling out as a result of the borrowed money. With interest rates around 1%, though, businesses don't need to make anything in order to make money; as long as the stock market is going up, all they need to do is buy their own stock, which raises stock prices and executive compensation, and then ride stock up with the market. Companies right now are buying back literally trillions of dollars worth of their own stock every year. The problem is that this adds nothing to the strength, wealth, or resilience of the companies, and when a downturn comes or interest rates start to rise these companies will be wiped out by their own debt. The CEOs who ran the share buyback Ponzi scheme will have already walked off with their hundreds of millions of dollars in profits, but the entire economy of the country will be left in shambles. We need sane monetary policy and laws to prevent this kind of extraordinarily risky behavior by corporations.