If we take a random look at the economic stats of lately we can quite reasonably assume the global economy is on the rise again. Not only that, also the financial industry is hiring people and assets under management are growing, not only due to rising asset prices but also because money is coming back from deposits and other supposedly “safer” investments.
A month ago or so I read a long-term forecast that said the World GDP could rise to as much as 100 trillion in five to seven years time. I cannot disagree even because GDP is just a number and one to which governments around the world pledge significant resources. I sometimes find it hard to believe the amount of wealth that can be destroyed just to make that number rise by a couple of tenths. But then again, it is not their wealth to start with.
Well my question is not if we will reach that number but rather how much is deemed necessary, on average, in global growth of asset prices, for the combined GDP of world countries to reach 100 trillion y 5-7 years?
For the time being things look good, with QE’s excess liquidity being channeled to Paul Cézanne, Francis Bacon or Andy Warhol works of art. I must admit it is mighty clever of those art purchasers. They are acquiring unique pieces of human ingenuity by delivering a very large quantity of reproducible-at-will pieces of…well…digital bits and bytes. Those pieces, in turn, are backed by assets (namely debt) of dubious quality kept in central banks mainly to achieve the transfer of wealth from productive individuals to capital structures inadequately built to satisfy human needs (the worst of all, as we very well know, is called “the government”).
Not only those few fortunate investors can gaze at the excellence of those few works of magnificent art, but fine paintings come with the additional advantage of transportability. They can be carried around and put to rest faraway from the greed of bureaucrats and politicians. Something digitalized property claims, also known as financial assets, cannot. Could it be a coincidence that the first country to replace the use of a piece of paper to signify ownership of financial assets for a central clearing entity that just transfers registrations of ownership was Nazi Germany?
But the best thing is Francis Bacon’s paintings and Andy Warhol’s photos, like common shares, have a zero percent weight in the CPI so we can all pretend nothing is going on.