In this interesting post ‘How Monopolies Broke the Federal Reserve‘ the author expresses the opinion that the current world of low interest rates is a direct consequence of the emergence of large monopolies in the current global economy (after having however qualified this view by the fact that economists are good to explain the past and terrible to explain the present!).
The point that is made is that interest rates are low because people don’t know what to do with all their liquidity: “Thanks to ever-increasing wealth concentration and meager growth across the developed world, you have some people sitting on incredible piles of cash and a shortage of people with robust opportunities to borrow and use that cash.” It’s a savings glut!
However beyond this explanation what is offered in the post is that it is not that there is nothing worth inventing anymore, but that any worthwhile innovation is captured – and the value is kept – by a few giant concerns. “The economy has become a giant kill zone. In venture capital circles, the term “kill zone” has become quite popular to describe the phenomenon of having no places to profitably invest“.
There are signs that the GAFA of this world are eating, devouring the value of startup companies and not really allow them to grow and prosper. Could the increasing power of monopolies be limiting innovation and creating a situation where new upstarts can develop? And is the consequence low interest rates?
While I am not entirely convinced, it is still a view useful to ponder!
