Hughesair (Inflection Point)

Retired physician and air taxi operator, science writer and part time assistant professor, these editorials cover a wide range of topics. Mostly non political, mostly true, I write more from a lifetime of experience and from research, more science than convention. Subjects cover medicine, Alaska aviation, economics, technology and an occasional book review. Globalization or Democracy documents the historical roots of Oligarchy, the road to colonialism and tyranny

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Sunday, February 12, 2023

Capital Divergence

 Economists call the extreme liquidity flow and concentration of wealth in the hands of a relative small elitists group, Capital Divergence. The elite may be fascist, socialist, multinational, technocrat, banker or oligarch. Their sequestered capital, whether earned or ill-gotten, no longer changes hands within thé resulting stagnated economy.

A Sectoral Balances equation by Godley and Cripps, a formula taught in probability second-year economics where: S = domestic savings; m = imports; x = exports; I = investments; g = government spending and t = treasury revenue.

           S + (m-x) = I + (g-t)   

Middle class Savings + trade deficits = foreign Investment + government spending, a stagnant economy and inflation. Ross Perot called it a giant sucking sound.

The formula shows a balanced accounting, but when you look close, shows the massive liquidity flows resulting from foreign trade imbalances.

Liquidity flow from trade deficits come from consumer-savings and, the money no longer exchanging hands within the consumer market. Wealth from the middle class migrates to investment banking, multinationals and foreign enterprise as Investments in the equation. With reduced economic velocity, stagnation, and fear within the the consumer and small business economy, less revenue goes to the Treasury, t in the equation. Thus, the government prints more money, g within the equation, resulting in Inflation.

All the while, a small internationalist plutocracy and foreign interests grow rich off the back of the waning American economy.

We can make the argument that Capital Divergence lead to the slow cycle of depression, wars, revolution, poverty, pestilence, mass migrations and the fall of civilizations. The historian might see such a scenario in the end of the bronze age, 1177 BC, and others, once you look.


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