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How the rich get richer – money in the world economy | DW Documentary

Exploding real estate prices, zero interest rate and a rising stock market – the rich are getting richer. What danger lies in wait for average citizens? For years, the world’s central banks have been pursuing a policy of cheap money. The first and foremost is the ECB (European Central Bank), which buys bad stocks and bonds to save banks, tries to fuel economic growth and props up states that are in debt. But what relieves state budgets to the tune of hundreds of billions annoys savers: interest rates are close to zero. The fiscal policies of the central banks are causing an uncontrolled global deluge of money. Experts are warning of new bubbles. In real estate, for example: it’s not just in German cities that prices are shooting up. In London, a one-bed apartment can easily cost more than a million Euro. More and more money is moving away from the real economy and into the speculative field. Highly complex financial bets are taking place in the global casino - gambling without checks and balances. The winners are set from the start: in Germany and around the world, the rich just get richer. Professor Max Otte says: "This flood of money has caused a dangerous redistribution. Those who have, get more." But with low interest rates, any money in savings accounts just melts away. Those with debts can be happy. But big companies that want to swallow up others are also happy: they can borrow cheap money for their acquisitions. Coupled with the liberalization of the financial markets, money deals have become detached from the real economy. But it’s not just the banks that need a constant source of new, cheap money today. So do states. They need it to keep a grip on their mountains of debt. It’s a kind of snowball system. What happens to our money? Is a new crisis looming? The film 'The Money Deluge' casts a new and surprising light on our money in these times of zero interest rates.

review of: This Time Is Different: Eight Centuries of Financial Folly

"Building on a historical narrative that uses an extensive data set of their construction, Reinhart and Rogoff (hereafter R&R) show that periods of excessive public debt accumulation generally do not end well. Over time, many countries have defaulted on their debt (including restructuring) for a variety of reasons and by a variety of methods (inflating away the real value of the debt has been very popular). These defaults, they show, can produce detrimental spillover effects. Recent defaults by Russia (1998) and Argentina (2001) come to mind, and the possibility of a future restructuring by Greece looms large for its foreign creditors (for example, European banks)—and for European policymakers. One drawback of R&R’s analysis, which they readily admit, is that it focuses almost entirely on debt issued by governments, or sovereigns, rather than by the private sector. In the financial crisis of 2007-09, which they term the “Second Great Contraction,” the accumulation of private debt (chiefly mortgage debt of the dodgy variety) and the collapse in nominal house prices eventually helped trigger a banking and financial crisis of immense proportions and a collapse in economic activity. In response, federal government outlays in the United States and other advanced economies rose enormously, which resulted in huge budget deficits that have significantly boosted debt-to-GDP levels. Since emerging and developing countries tend to rely heavily on foreign creditors such as large multinational banks, sharply higher debt-to-GDP ratios in the context of weakening economic fundamentals can lead to “sudden stops”—that is, credit is withdrawn abruptly, leading to a cascade of defaults. In advanced economies, which have better credit and inflation histories, and thus sharply lower probabilities of default, rising debt-to-GDP ratios tend to weaken economic growth."

Poor Economics (book+web site)

"Part of why running a nonprofit is so hard is that pretty much all nonprofits are delegation. Donors aren’t buying a particular thing they know they want, they’re buying a chance to help others, without knowing exactly what it is they want. And that’s why randomized controlled trials have been transformational for the nonprofit sector — they’ve converted a delegation into a service. Great nonprofits don’t have to guess at what will help people the most; they just need to look up the most helpful service and then purchase more of it. Poor Economics is a remarkable book if only because it shows how crucial this is. It’s full of tales of small-scale experiments where well-intentioned do-gooders try hard to help some people and fail catastrophically. But they only notice because there are academics there collecting data; in the typical nonprofit, where the decisionmakers are far removed from the evidence on the ground, they’d probably never know that much was going wrong (assuming that they even cared)."