U.S. commercial real-estate owners are raking in debt capital from South Korean investors hunting for higher returns and better asset diversification. In New York City, KTB Asset Management recently agreed to provide a five-year, fixed-rate loan to RFR Holdings for the refinancing of 285 Madison Ave., while IGIS Asset
Economic History: How would the dynamics of world economy change in the next 10 years? What will happen if the current system collapses?
The global financial system is apt to fail again within ten years. The economy is global, and no single nation has full control over their own domain unless it is North Korea, and from the view of a North Korean citizen, that is not a good example. Their system is controlled for the benefit of the rulers.
The United States stopped being a net creditor decades ago. Many factors are tangled up in that, including offshoring of production, but financially the US consumer pulled a number of economies out of trouble after WWII, beginning with Europe and Japan; then Taiwan, South Korea, Thailand, Malaysia; now Viet Nam and others.
But purchasing power in the United States can no longer pull every other country. The European economies have a lot of debt too.
The surplus in Japan went into US government bonds — and other financial institutions that financed private debt. In effect Japan recycled its earnings into the US to finance their own markets. In the 1990s, the lead role in buying US debt fell to China.
This party is about to break up for everybody. China is blowing bubbles in real estate. Exports to the US have ceased to grow. The European Union has an internal problem similar problem to China. Greece is an example.
Much of the injection into global money supplies has just bailed banks out of the bad loans that went sour in 2008 — and keep going sour. The central banks have interest rates near zero. They only thing they can do to keep the party going is print money — quantitative easing. Neo-conservative economists keep thinking that this will cause inflation, but that dog has not barked in a long time.
Instead we have deflation, much like Japan after 1990. And an interlocked global economy. Nobody wants to admit it.
Certainly nobody knows exactly what will happen or when. But the current pile ups of debt are like in Greece — impossible to pay by the current system. So something very different will emerge. Right now it looks like that transition will be chaotic because all players are focused on trying to maintain (or regain) some former position.
A possibility is a global currency regulated by the G20 central banks, but that’s theoretical. None of the players want to give up their sovereignty, and they won’t until it is obvious that their sovereignty is an illusion and reality is miserable. That is also giving up on the illusion of a global free market. Greece is not Germany and never will be, and Greeks and others are not going to be battered by debt they can never pay forever. (That’s slavery.)
I don’t know what will emerge, but the casualty will be the neoliberal view of the world, which is capitalism — but not state socialism, not a new communism — something different from all the above.
The last time I discussed this was in Germany, with non-economists. Everyone could sense change coming, and felt that if we were lucky, the world would be no bloodier than Moscow in 1917.