THE AGE OF OVERSUPPLY
Daniel Alpert, Portfolio/Penguin, 280 pages, $27.95
As financial markets from New York to Hanoi focus on the Federal Reserve’s next move, Daniel Alpert’s “The Age of Oversupply” explains that there are limits to how much monetary policy can help the global economy escape its five-year rut.
The book couldn’t be more timely, appearing so soon after the Fed’s surprise decision not to taper its bond buying buoyed stock and bond prices worldwide.
Alpert says our problems, including the 2008 meltdown, are due to a glut of labor and capital that has emerged in the past two decades since former socialist countries and other underdeveloped nations opened up to the rest of the world.
Billions of people have been added to the global labor force and trillions of dollars in savings to the capital chasing returns.
When there’s so much capital in the system already, how can the Fed pumping more cash into it help revive the economy?
It has only kept things from getting much worse, Alpert says. The real solution, he says, is to stoke global demand — through sizable government spending in the West and more consumption in emerging markets.
Alpert, a veteran investment banker who now runs his own boutique firm, Westwood Capital, isn’t the first to point out the dangers of global trade imbalances. Still, “The Age of Oversupply” does a great job of explaining the complicated connections between many contemporary economic issues.
Still, the diagnosis and the solutions presented in “The Age of Oversupply” raise some questions that are not answered.
One is how to convince the newly emerging middle class in China or India to save less and consume more before their governments start providing sufficient pensions or health care. Or why those governments should stop pursuing “mercantilism” when they’re just following in the footsteps of Western nations to catch up with them.