Domestic and Global Inequality

Just read the paper Unequal = Indebted by Michael Kumof of the IMF.

It’s a short paper highlighting some of inequality’s effects. Take specific look at the commentary on China’s growing current account surplus. Contrary to popular belief, inequality has been rising just as quickly over there. The reason they aren’t in debt is because of their inefficient financial markets, in contrast to the US hyper efficient financial markets. They save more, despite making less and less, because there aren’t developed financial markets that provide banking services. This excess surplus travels to the US and fuels the debt investment driving our consumption and domestic demand. This type of behavior is driving global current account imbalances.