Or, why Britain and Canada will probably join neighbouring Currency Areas and lose policy making indendence!
Right now the world's worst economic transformation is looming and the two countries at the source of it, the UK and the US are totally impotent to change their borrowing and consuming habits. Driving straight for the cliff, the lemings rush forward to their ultimate transformation into bony skeletons and they take the world with them.
Such a thesis starts from the premise that house and land prices in USA should be stagnant, level, low, whatever word that you understand to mean, there should be no inflation in land or houses. House orices have not been stable nor have not been for many years. What does that mean? It means that land and real estate is still being used by these major debtor countries to pay for their enormous overseas debts that have built up through the imbalance of their trade with Asia.
Much of the debt is in Asian hands and property in USA and the UK will ultimately be owned by Asians. This will occur after the largest deflation in history as the exchange rates of these two countries swing to bring about a balance. Never in history has the imbalance of trade been so great for so long for so much. Asia may see forces that bring about a balance, but it will be eventually through the ownership of land and real estate in the UK and the US. Paper assets will not be enough to satisfy Asian demands for payment. Issuing currency will not be sufficient to offset demands for real assets.
This is not a disaster if it were to stop at increasing Asian ownership, but it won't.
The UK and the US are increasingly beholden to Asian interests and will eventually surrender their independence of economic policy. Made in Asia will be US and UK interest rates. As Americans are removed from their houses through the inability to pay deposits they will become renters of land and real estate. Ownership and control will fall to Asian interests.
The form of ownership will be as multinational firms with Asian names. These companies will produce in America, but they will not necessarily export from America. Profits will go to shareholders and these will increasingly be pension funds of Asian based multinationals.
The degree of imbalance can be reduced, but as the process is like that of climate change, it will not be seen until it us irreversable. Why? Because America and Britain fail to take action to get their savings rates up.
The problem is one of attitude. The British and Americans presently have the attitude that there is no problem with going eternally into debt to Asian interests. However, we sense a different reality, don't we. We know what goes as present policy does not address the debt issues.