Forget About the Financial Markets

The sooner we forget about the financial markets, the better it is for the real economy - and everyone (well, almost)!

The financial markets are a distraction to the real economy. They generate inflationary pressures on the whole economy by distorting the relative prices of goods vs services; specifically, the price of real goods deteriorates with respect to the price of services. All the best resources and the best brains got into the financial markets, and hollowed out the foundations of the real economy.

The unwarranted attention given to the financial markets is the result of an excessive supply of money caused by (a) easy money policy, (b) government deficit spending and (c) capital inflows (short term).

With the current credit crunch worldwide, the financial markets should deflate. Politicians should not touch the stock market even with a six foot pole. Bank shares should deflate because of excessive lending to the real estate and stock market.

The government should increase deficit spending and spend it on building the human capital and technological infrastructure.

The government should support local investors and build a local industrial base with local talents.