Livestream: Flip side of ‘cheap’ money flooding the markets

The Money Deluge: How the Rich get Richer is an eye-opening documentary that this journalist had the privilege to catch on DW-TV recently. Packed to the gills with incisive on the ground reportage and backed by numbers that would make one’s head spin, it lays bare the backbone of the modern-day financial system, as we have rarely seen it. It tracks the ascent of wealth as a determinant of socio-political and economic wellness, cutting across geographical boundaries and harkening back to history, and junctures that dipped the balance of prosperity in ways one had not anticipated. 

The film begins by chronicling how Europe, or in this case, how Germany reels from a condition of near-about zero interest rates on bank deposits made by the public. This leaves senior citizens like a certain bailiff based out of Bubendorf depend more on the safety of deposit vaults, not housed in banks, as opposed to actual financial institutions, where stashing one’s hard earned life savings seem pointless. The continuous fall in interest rates is predicted to stay in constant motion for the next two years. A top bank official pins the blame on the European Central Bank (ECB), which hinges on the concept of price stability. 

The ECB which has been lowering the base rate since the financial crisis of 2008, has catalysed a deluge of sorts of cheap money into the market, which needs to be pumped back into the tributaries of the economy – shares and real estate, whose prices continue to rise. This in turn leads to a concentration of wealth right at the top. It’s also why countries like Greece which are faced with high levels of debt can get their hands on cheap money. 

Using a simple but highly effective methodology of animated infographics, the documentary goes on to explain the correlation between the market value of the shares of Microsoft founder Bill Gates, which stands at 65 bn euros and draws parallels by stating that the total value of all the cash in the world is less than 100 times that amount – 5 trillion euros. To top it off. The value of all goods and services created all over the world in a year is 75 tn euros. That’s the real economy. But here comes the clincher, the total debt of the world is about 200 trillion euro. This is a world living on credit. And here’s one more – 705 tn euros, that’s the value of all derivatives – the speculative financial bets on the future which have nothing to do with real goods anymore. 

Economist Max Otto argues that this inflow of cheap money will split our society – moving money from the bottom up, as a gigantic redistribution machine. The middle class has savings and insurance policies, which are the losers in a low interest rate world. It also favours the rich which use this cheap money to buy companies, shares and real estate. This segment offers a throwback to India’s own impotence when it comes to dealing with financial fraudsters.

The feature even looks at London’s urban housing crisis where speculators have pushed up premium home prices skyward, in localities where billionaires are fighting to push out millionaires. Trillions of euros from Russians, Germans, Chinese and Indians have poured into London, where speculating with real estate is the big game. And the origin of the money is dubious as well. The real estate bubble is not endemic to London, it’s something that seen in every major city globally. 

This is just the tip of the iceberg. But for those looking for a smooth as silk primer into the world’s financial health, this documentary might be a good launchpad.