SECTION THREE, PART ONE

SLIDING DOORS: Which Reality?. Globally, the current resuscitation event for domestic economic expansion has been left to monetary policy instruments by a very large number of countries, and by almost entirely the G20 countries. Theory tells us that monetary policy is, at best, a blunt tool by which to engineer tailored economic solutions, and the burden of bearing a disproportionate element of the adjustment is upon those with savings..low interest rates impose income burdens upon those who have already saved....surprisingly, those with the liquidity in the first place which saved the meltdown of 2007/2008 from being much worse. The main developed economies have argued that the low interest rate regime is in place to avert the possibility of deflation. Those with an (already) existing pool of savings would traditionally be the beneficiaries of deflation...their existing pool of assets would purchase more and more goods over time. But the central banks are trying to engineer an inflation, so that the debts of heavily indebted are erased more quickly. The difficulty with inflation is that it, by definition, is not fully controllable, and may break out in any range of avenues. The Fed seems to think ( in that very American way ) that wealth effects of higher asset prices, as reflected in share prices and real estate values, will be the feature which stabilises economic activity. A number of other countries are still too early in their adjustment cycle to be thinking about positive wealth effects....because they are still grappling with the issue of the extent of the economic adjustment. Apart from savers being disadvantaged, and by implication forced to take financial risks to achieve even adequate investment returns, the other disadvantaged componentry is the worker, who is still not dealing with normalised economic conditions in any event. Given that the inflation is, at the very least, Government sanctioned ( in some stunning belief or hubris that they will be able to both spot and control any outbreaks of unsatisfactory inflation ) , I am reminded to look to some past periods of inflation, and how it was able to be both spotted, and correctly dealt with. The next series will be quotes from prior periods..." It should be clear by now that one of the most fateful legacies...was a feeling throughout ..society that various groups and individuals were unfairly advantaged or disadvantaged by the ..economy, and that many of the social and economic consequences ...were unjust and illegitimate." Anyone following social media comments about any of the lawsuits/actions against financial market organisations or individuals cannot help but notice how vituperative some of those comments are. One simple recurring feature at present is that a broadening mix of people are feeling disenfranchised by the pay-out system which is flowing from the current policy responses of the authorities...and as I have commented before, the statute of limitations period is fast closing on a number of scoundrels. I am guessing the there will be an audible hiss when the first action is defeated by the passage of the actionable time. Lets hope the advantage/disadvantage argument doesn't rend the social fabric like the quoted country/ period did during last century.