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There is one other factor: the exponential growth of financial obligations. Creditors, bond holders are above democracy, governments, presidents. I just read in Lithuanian media that the president Grybauskaite profited handsomely from the "crisis" 6.625% bonds of the former (conservative) government. Is this a common practice for the modern presidents, royals?

We have thus at least four interacting factors:
(1) Economy - which should follow Keynes and prosper;
(2) Democracy - which should guard affluence prospects for all;
(3) Compound interest - obscure while the economy is growing in a good tempo;
(4) Resource limitations - threaten to halt the requisite growth.

When the GDP growth (be it nominal) is anemic, the economy is in trouble if only because the financial interest becomes highly parasitic.

How different is the factor (3) now from the 1930s? Creditors for the public were not that strong, organized?

The elites today have a definite interest in materialization of their ridiculous financial positions. Not letting others to have or enjoy anything is possibly becoming the most realistic way to maintain their relative "worth". And if they have silent Malthusian scare that there won't be enough to share, they are surely not interested in a new Keynesian expansion. Keynesian aspirations are pretty revolutionary then.

by das monde on Tue Nov 4th, 2014 at 07:32:49 AM EST
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