Recent reports out of London and New York, the world's principal financial capitals, suggest that happy times are here again. The same banks which nearly destroyed the world economy a year ago are once again swimming in a sea of money and big profits. In consequence, they are paying their employees fat bonuses.

Sports car dealers are doing a brisk business. Luxury retailers are on the roll again: Unity Marketing reported this week that luxury spending in the US rose 29 per cent in the last quarter. And the prices on high-end properties in London are once again rising. The crisis is well and truly past.

However, in the world's provincial capitals - in the states and villages and on so-called Main Streets - something got lost in transition. In the US, Britain and other major economies, growth is anaemic at best. Housing foreclosures are on the rise. Life savings have yet to recover last year's brutal losses. And in the US, wages are down to levels last seen a generation ago. The good news has yet to arrive. With unemployment expected to keep rising, it may be a good while before it does.

Two worlds are emerging within one. A five-year-old Citibank research note recently resurfaced in, of all places, Michael Moore's recent capitalism-bashing film. Now updated, its authors discuss the emergence of a 'plutonomy,' an economy in which a small, hyper-rich class do most of the consuming. If the thesis is correct, it means that investors need not fear persistent unemployment or worsening poverty; they need merely tailor their investing to the companies that target the lucky few.

Yet as we know, the plutonomy doesn't exist on its own. The banks are swimming in money again because central banks have thrown all-but-free cash at them with their liquidity injections. When the central bank lends to you for next to zero, and you can then invest in asset markets - with an implicit guarantee that if your investing backfires, the government will bail you out since you are 'too big to fail' - how can you not make money?

inflation

But the money is not actually free. Unchecked lending will eventually cause inflation. Who will then pay the price? Not business owners who will ratchet up prices to cover losses, but rather those with the least bargaining power. If there's one thing we know about the burden of inflation, it is that the poorer you are, the worse it will be.

In effect, governments are shifting the burden of pain into the future. When the tab comes due, it will be passed to poorer citizens. Fat bonuses will, no doubt, continue to roll in for the bankers. So it may turn out that the poor have been taxed to feed the rich.

Conspiracy-minded types will say that this should hardly surprise us. Recent reports showed that many of the advisers around US Treasury Secretary Tim Geithner were showered with bonuses by these same banks before taking a break to do a bit of hobby work for the government. Chief White House economic adviser Larry Summers too. And as for Secretary Geithner himself, the record of his phone calls in the midst of the financial crisis revealed that he spent much of his time talking to a handful of the same bankers who, now, are raking in the cash.

No doubt, Michael Moore would say the Wall Street plutocracy have bought the White House. This isn't too dissimilar from what former International Monetary Fund (IMF) chief economist Simon Johnson has been saying: crony capitalism and Russian-style oligarchy have crossed the Atlantic.

If that's so, will any populist ride to the rescue of democracy?

John Rapley is president of the Caribbean Policy Research Institute (CaPRI), an independent research think tank affiliated with the University of the West Indies, Mona. Feedback may be sent to columns@gleanerjm.com.