Just as junk food fills a near-term hole but undermines health, so too are easy money policies.

Ruchir Sharma, chief global strategist at investment dealer Morgan Stanley (itself a huge beneficiary of regulatory largesse and financial bailouts over the past twenty years) penned a lucid op-ed in The Financial Times this week, “Dear Joe Biden: Deficits Still Matter.”

While some insist debt levels don’t matter so long as interest rates remain low, Sharma correctly points out that we are already paying a massive price for ‘easy money’ in the form of lost productivity, incessant bailouts, increased government involvement in the economy, massive wealth disparity and zombie companies:

Instead of a path to freedom, low rates are a trap. They encourage more borrowing and rising debt, which drags productivity lower and slows growth. That makes the economy financially fragile, forcing central banks to keep rates low. Given today’s very high levels of debt, only a small increase in interest rates would make the debt burden unsustainable.

…and much of it has stoked a different kind of inflation — asset price inflation. Since the 1970s, the size of financial markets has exploded from about the same size as the global economy to four times the size.

…recent studies show that easy government money has ended up supporting the least productive companies, including heavily indebted “zombies” that would otherwise fail. The support also favours monopolies that have expanded not because of their innovation but by lobbying governments for favours and sidelining smaller rivals. The OECD warned, in a 2017 study linking falling productivity to easy money, that these trends will make it harder for societies to deliver “on their promises to current and future generations.”

Sharma offered some highlights in a CNBC segment this week:

Ruchir Sharma, chief global strategist and head of emerging markets with Morgan Stanley Investment Management, joined “Squawk Box” on Thursday to discuss his latest piece for the Financial Times called “Dear Joe Biden: Deficits Still Matter.” Here is a direct video link.