Andy Xie says the failure of central banks to focus on asset inflation has led to rising inequality on the back of mistaken stimuli. More than interest rates, it will be political tensions in the West that will burst the bubble
American household net worth is at an all-time high of five times GDP, significantly higher than the bubble peaks of 4.1 times in 2000 and 4.7 in 2007, and far higher than the historical norm of three times GDP.
The top 1 per cent in the US owns one-third of the wealth and the top 10 per cent owns three-quarters . Half of the people don’t even own stocks.
How is this all going to end? Rising interest rates are usually the trigger.
The most likely cause for the bubble to burst would be the rising political tension in the West. The bubble economy keeps squeezing the middle class, with more debt and less wages. The festering political tension could boil over.
Radical politicians aiming for class struggle may rise to the top. The US midterm elections in 2018 and presidential election in 2020 are the events that could upend the applecart.
Source: SCMP
http://www.scmp.com/comment/insight-opi ... ay-well-be