Kristalina Georgieva, the head of the International Monetary Fund has warned that the global economy risks a return of the Great Depression, driven by inequality and financial sector instability.
“In the UK, for example, the top 10% now control nearly as much wealth as the bottom 50%. This situation is mirrored across much of the OECD (Organisation for Economic Co-operation and Development), where income and wealth inequality have reached, or are near, record highs.”
Adding: “In some ways, this troubling trend is reminiscent of the early part of the 20th century – when the twin forces of technology and integration led to the first gilded age, the roaring 20s, and, ultimately, financial disaster.”
While I don’t completely agree with her stance, there are protections that have been added to prevent the reoccurrence of some of the fraud that was committed in the stock market in the 1920’s, such as the SEC and FINRA. Personal safety nets have been implemented such as welfare and unemployment benefits.
But the separations of the income and wealth gaps are returning to those historic levels. At one point J.P. Morgan was the personal bank of the United States. The government went to him for loans, not the Chinese government through bond sales as is done today.
We also seem to be inundated with more and higher taxes from all sources, Illinois has a referendum to increase income taxes scheduled, property taxes have risen 20% or higher with the last assessments and then the federal temporary tax reduction will be going away shortly and the loss of deductions are permanent. In the 1920’s the federal income tax was in its infancy and there were no state or property taxes to depress the economy as well.
The forecasting is mixed on the future of the economy. There are all sorts of experts expounding their opinion on the economy. Unfortunately, the only way to find out who is correct is to live through it.