Financial Globalization

Brad Sester has an interesting post about how many of discussions of the benefits and perils of globalization miss one of the key factors that have driven its dynamic -- massive government intervention in the market. His point is simple but powerful. China, the Gulf, and a lot of other folks have built up huge dollar reserves by keeping their currencies undervalued to one degree or another. They then kept US interest rates low by reinvesting this money in US treasuries, and, increasingly now, US stocks. One market distortion -- China Inc. acting as one solid monolithic entity to hoard dollars -- induces another -- US financial firms benfit from the domestic business (subprime) created by this debt boom, and also make loads of money selling pieces of the US to the holders of all these dollars. The idea is that the big beneficiaries of globalization were banks -- the Chinese central bank, and the US banks and investment banks. This neatly ties together the huge increase in financial profits as percentage of US corporate profits, to the rise of these enormous SWFs, who are now, in a sense, the biggest hedge funds in the world. So the last decade of globalization was primarily a financial globalization, and the very real benefits of it were captured by financial firms.

Am I going to sound like a broken record if I point out that the non-zero sum game of free-trade-benefits-everyone (remember when people actually believed this) was, yet again, fucked up by state intervention in the exact place the state always intervenes to fuck things up -- namely the banking system? Will I sound like any more of a broken record than history itself?