The Reader may not believe my Take on this article, but here it is. Capital flows have become an extreme problem within the last 30 years; one element of the problem consisting of rapid reversals and removals which impact every economy. The genus of the Problem derives from excess Profits building in established Production, and the tendency of business leadership to closely watch financial markets, switching to those venues which show the greatest expectation of Returns. It is a Problem which has come to Us within a matter of decades, and one has to ask Why.
The extreme Profits deriving from established Production comes from technological improvement, static suppression of Wage rates, and avoidance of payment of Communication and Transport Costs through outsourcing those Costs to local and national communities. Corporations have utilized the economic blackmail of Production transference to get both lower Wages and lower Property taxation. The real construction behind the excess Returns from Production comes in the concerted effort by Business to limit or suppress the taxation on those Profits. There has been such a transfer of taxation that where Business taxation paid practically half of the tax revenues of the federal government in 1963, they now pay about 20%; down even from 2000. This means a huge cache of extra Cash swinging around in the financial world, more Cash than either established economies or emerging economies can absorb effectively.
Business leadership has sold the idea that lower Taxes promotes economic expansion. This is true in only limited context, and when there is too much Investment Cash, it holds the potential for disaster. Inflation not based upon resource shortages remains the Threat which is the real danger behind Inflation. Here is the Inflation that really bites. A Case in Point is the current Spot Price of Sweet Crude Oil, where Speculators are driving the price of the Oil upwards, even though there is a surplus of the Product. The natural correction for excess Investment Cash is higher taxation, a condition which is anathema to Business and Tea Party society. The ideation had better change in the near future, else We will attain a bankruptcy for governments of all types, alongside a degrading Production capacity due to excessive Resource Pricing. It is time for real Economists to step up to the Plate! lgl