Little did you know that it’s no longer the supply and demand for companies, houses, office buildings, natural gas or wheat that sets prices. More likely it’s the supply and demand for the futures, swaps and other derivative instruments linked to those things.Now, as a result of financialization, prices are not so tied to real supply and demand for things, so we see new levels of inflation in food and real estate prices. This is particularly distressing for those living on low incomes in the US and in the developing world. The DC area is experiencing this too. This graph shows the increase in consumer prices in the Washington-Baltimore area since 2001 (Bureau of Labor Statistics data):
Financialization does not seem to be going away. How will those living in poverty deal with increasing prices? What will happen to those who have lost their jobs and their housing? Or could financialization go away? Would supply and demand for things themselves reappear? Would investment in the production of things expand? Since so many pension funds invest in finance, what would happen to pension funds? What might replace financialization?