An historic moment in world finance came to pass this morning. Today, the European Central Bank (ECB) starts to buy Eurozone corporate bonds. French banks on behalf of the ECB kicked off  the debt purchasing programme by buying the bonds of a French utility company as the European markets opened.  The result is that in order to get any decent return on their investments, funds (such as the pension funds which invest the savings of tens of millions of people across the continent) are crowded out from securing these instruments at a reasonable return.  What’s more as can be seen in this screenshot the return on government debt is now at all-time lows, so again savers worldwide are set to suffer.

The knock on effects of this unprecedented action are hard to calculate – and surely this is the key point? Yet again we see the desperation and determination of the world’s central bankers and monetary policy elite to do ‘anything it takes’ to stop the necessary Great Correction from talking place after the 2008/9 financial crisis. What is clear is what they are doing is likely to have unintended consequences that make matters worse.  Will private funds have to trade down to the junk bond market to get returns? If so these rates are likely to fall and so may not reflect their true risk.

While saving us from pain now, the actions of the BOE, ECB and the FED are ensuring that correction in the markets of many asset classes will be bigger and more damaging for ordinary working people across the EU. It will be interesting to see just what the ECB thinks constitutes ‘quality paper’ under this scheme. For example, can we expect the ECB to buy bonds in Italian, Spanish and Greek companies?  Somehow I think not. So what signal does this send to investors about the future value of these businesses in periphery Eurozone countries? Yet another unintended consequence…

Understanding economics is easy. In the short run it's all about INCENTIVES, in the Long Run it's all about DEMOGRAPHICS. The more I travel the world the more I realise that the latter has a big impact on the short run too. Birth and death rates and MIGRATION are massive issues for global decision makers today. They impact public service resources, taxes and budgets.The chart below is one example of the statistics that bring understanding of these variables. For example, I am looking at smart investing in those countries with lots of young people who can strive to give me a long-term return.

Oh yes this is a good one! The effect of the financial crisis on the Richest and Poorest 10% in world’s major economies 2007-11. One definition of equality in any society is surely that when things go bad we all share the pain. Germany and the UK share this attribute where the line between the two is narrow. By definition the poorest will have suffered more as economies decline but in Britain we have ameliorated this and yet not skewered the wealth creators disproportionately. Is this why we are the fastest growing developed economy? All we have to do now is sort the national debt. Easy peesy!?

The spectre of DEFLATION hangs over the world's developed economies despite the massive Quantitative Expansion (QE) of the global money supply by Central Banks. Too Big Too Fail institutions have filled their boots and stuffed their balance sheets with cash to cover their bad and not-marked-to-market-yet assets and to meet increased regulatory capital reserve requirements. This morning’s survey by #Bloomberg tells us what ‘investors’ think. But these are same people who blindly invested in collatorised Debt Obligartions and hooky mortgage derivative instruments that brought the system to its knees in 2007/08. If Draghi listens and responds to them, he is likely to move to an even more aggressive QE as the news box above shows. Are we doomed once again to a financial crisis worse than the one we just had?

Is the solution to problems of global inequality more ‘world government’? This remedy lies at the heart of the policy prescriptions in the book by French Economist Thomas Piketty, "Capital in the Twenty-First Century", which is taking the world by storm according to The Economist (Read summary here). 

The international numbers for global inequality are shocking and Piketty puts them into useful historic context. But his prescriptions are, as a friend put it: “global government, global taxation and uber socialism or, in old terms, ‘communism’ in a nice suit”. After the European parliamentary elections this debate will really take off…