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In this fascinating and far-reaching book,
Roger Bootle shows how the perils of slump, deflation and
protectionism can be negotiated to enable us to transform
our lives in the economy of the future.
The world is now at a critical juncture,
poised between a surge in wealth and a descent into outright
recession. At the heart of this crisis is the gap between
real and illusory wealth.
Over the last decade, we have been caught
up in a gigantic illusion of wealth, generated by soaring
share and house prices as investors sought to condense the
productive potential of the infinite future into instant
capital value -- money for nothing.
As the bursting of the bubble leaves wreckage
strewn across the financial system, there is a real danger
of the housing market collapsing, pension schemes failing
-- and whole economies deflating, as Japan already demonstrates.
The central banks need to be prepared to cut interest rates
to zero. However, countries might instead resort to shutting
out foreign goods and services from their markets. Such
a lurch into protectionism would cause falling wealth and
unemployment, just as it did in the 1930s.
Yet we face the threat of a deflationary
slump at just the time that we stand on the brink of the
greatest increase in prosperity in our history. In the bubble
years the markets got ahead of the economics. Now the economics
are about to get ahead of the markets.
The new importance of the human factor in
the global economy will mean the acceleration of knowledge
-- and hence technological progress; the opening of the
road to good governance which underpins prosperity for all
countries, including those in the Middle East and Africa
currently written off by the world; and an enriching explosion
of trade with the developing countries, like China and India.
The interaction between these forces opens up a new era
of true globalization -- with developed countries enjoying
a rise in the rate of economic growth to historically unprecedented
levels as well as poorer countries coming within prosperity's
embrace.
This is "The Wealth Spiral." While
it may not be so quick or spectacular as stockmarket booms,
it is real wealth rather than financial fantasy.
In the economy of the future, things
will diminish in importance, and the products of the human
mind, ranging from scientific discoveries and new designs
to human relationships, will increase. This will be an age
of not just mass affluence, but also of human values and
choices, dominated by intangibles -- money for nothing.
One of the City of London's most respected
economics, Roger Bottle has a reputation for originality,
forthrightness and insight which few can match. In 1996
he rocked the economic establishment with his prophetic
book , The Death of Inflation, which forecast an
era of persistently low inflation and warned of the risk
of deflation. At the time he was roundly criticized -- especially
by central bankers -- but events have proved him right and
The Death of Inflation became a best-seller, subsequently
translated into nine languages.
Roger Bootle runs the influential London-based
consultancy, Capital Economics, which advises some of the
world's largest banks, fund managers and retailers, as well
as house-builders, lenders and assorted companies of all
shapes and sizes. He is also Economic Advisor to Deloitte,
a Specialist Advisor to the House of Commons Treasury Committee
and a Visiting Professor at Manchester Business School.
He is an Honorary Fellow of the Institute of Actuaries.
He was formerly Group Chief Economist of HSBC, and before
the change of government, he was a member of the former
Chancellor's panel of Independent Economic Advisers, the
so-called "Wise Men."
Roger Bootle studied at Oxford University
and then became a Lecturer in Economics at St. Anne's College,
Oxford. He has written many articles and books on monetary
economics. He writes a widely read weekly column in The
Sunday Telegraph, appears frequently
on television and radio, and is a much sought after speaker
at conferences and business gatherings around the world.
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