Is the world headed towards Monopoly money?

The abnormal is becoming the new normal for the global economy, writes a professor. Growth rate is falling because of high debt, which have to be paid, called deleveraging, before new investment can begin. Central banks are distributing money through unconventional means, such as negative deposit rates, quantitative easing, zero interest rate policy and unsterilized forex intervention. But none of that is working because banks are hoarding cash. All this loose money should result in the fall in the value of currencies and cause inflation. Instead, commodity prices have fallen and there is fear of deflation. Currencies are mere pieces of paper, since Richard Nixon abandoned the gold standard in 1971. The Rs 1000 note says that the Reserve Bank promises to pay Rs 1000, but does not say in what form. The value of currencies are their exchange rates against each other and thus prone to manipulation by central banks. It is possible therefore that this paper edifice may collapse in synchrony, resulting in hyperinflation across the world, leading to global famine. Because of high unemployment workers are unable to negotiate for higher wages. If wages are stagnant or falling how are people paying so much for watching Premier League football in England? Even the great 'vampire squid from hell' of financial companies, Goldman Sachs admits that it may have to take another look at how capitalism works. Profit margins of companies are high by historical standards. This is attributed to mergers and acquisitions, share buy backs and the use of new technology to cut costs by reducing the workforce. High margins should encourage new companies in the same market segment which would increase competition and reduce profits. So, if margins remain high something very abnormal is going on. So much loose money has created a boom in asset prices. The total value of developed real estate in the world has reached $217 trillion, which is 2.7 times the global GDP and is 60% of mainstream global assets, 21% being in North America. $162 trillion is in residential properties owned by 2.5 billion households. In comparison the total value of all the gold ever mined on earth is a mere $6 trillion. The other asset class that has benefited from free money are shares. Stock prices rose to dizzying heights even as central bank monetary policies indicated poor prospects for growth. Stock prices have taken a hammering since the beginning of the year, which is being blamed on a 25 basis points rise in interest rate in the US. So what are central banks going to do to stimulate growth? It seems that it is going to be more of the same. What is the RBI going to do? What can it do? Our retail inflation is already at 5.61% so a weak rupee will only increase it. Instead of reducing rates the RBI may have to increase it. Expect loud howls of anguish.