Excerpted from Publisher Rich Karlgaard’s “Digital Rules”
column in the July 2 issue of Forbes
he bottomless pool of liquidity around the world is the business story of 2007. It drives everything: low borrowing rates, high stock prices, buybacks, hedge fund growth, the private equity boom. So here’s the trillion-dollar question: On balance, is the global cash glut mainly the result of the U.S. Federal Reserve’s loose monetary policy (think of all the world’s currencies that are pegged to the U.S. dollar), or can it be explained by a new force,rapidly rising prosperity around the world? I debated this recently with Forbes.com editor Paul Maidment. We agreed that the answer is “both.” Monetary policy is too loose, yes. But rising prosperity is real, too. The global economy has grown by a quarter since 2002. The world has up to a billion more people in the ranks of the middle class than it did a mere 20 years ago.
