Capital Wars The Rise of Global Liquidity
Economic cycles are driven by financial flows, namely quantities of savings and credits, and not by high street inflation or interest rates. Their sweeping destructive powers are expressed through Global Liquidity, a $130 trillion pool of footloose cash.
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of global liquidit y
michael j. howell
Capital Wars
Michael J. Howell
Capital Wars The Rise of Global Liquidity
Michael J. Howell CrossBorder Capital Ltd. London, UK
ISBN 978-3-030-39287-1 ISBN 978-3-030-39288-8 (eBook) https://doi.org/10.1007/978-3-030-39288-8 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © vladimir3d, shutterstock.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
To the Salomon Brothers’ Diaspora
Preface
History, particularly financial history, is not random. The key idea in this book is that economic cycles are driven by financial flows, namely quantities of savings and credits, and not by high street inflation or the level of interest rates. Their sweeping destructive powers are expressed through Global Liquidity, a US$130 trillion pool of footloose cash. Our Central Bank policy-makers should, consequently, about-turn and focus more on financial stability than on hitting phantom consumer price inflation targets. The economist John Maynard Keynes distinguished the economy’s financial and industrial spheres in a similar way to how we might, today, separate the asset economy from the real economy. Trying to stimulate the real economy with liquidity always runs the risk of creating asset price bubbles instead. In the 1930s, facing a near-identical situation to the post-GFC years, policymakers then unleashed an analogous stimulus with the same outturn: nearflat high street prices, but soaring asset prices. A fractured, uncertain World encourages investors to hold excessive amounts of ‘safe’ assets, like cash and government bonds and, particu
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