Financial stability in global markets is facing serious challenges amidst rising debts and financial repression. We analyze what consequences this may have for capitalism.
Financial Repression as an Invisible Tax on Savings
Financial repression is a mechanism where governments intentionally keep interest rates below inflation. As a result, savings gradually lose value without the need for new taxes. This approach allows authorities to reduce the real cost of government debt while shifting the burden onto the populace.
The Debt Trap of Capitalism
Consumer debt in the USA has exceeded 18 trillion dollars, including mortgages and student loans. Many Americans turn to credit cards with interest rates reaching 20%. This shift means that loans have become a means of survival rather than just comfort. Debts continue to accumulate, while real wages have remained stagnated since the 1970s.
Techno-Feudalism and Alternatives to Traditional Capitalism
Modern capitalism is undergoing changes, leading some experts to refer to this phenomenon as techno-feudalism. Large tech companies gain significant revenues through market control and lack of real competition. Potential solutions include universal basic income and cryptocurrencies, which could serve as alternatives to traditional financial systems.
According to forecasts, capitalism will not collapse anytime soon, but the upcoming changes are likely to make its structure more complex. Financial repression and debt issues present challenges to the economy that require new solutions and adaptation from investors.
