Andrew Sheng, Chief Adviser to the China Banking Regulatory Commission, is wonderfully straightforward and realistic for an economist. He is willing to say, as he does in this video, things that are obvious yet somehow unacceptable to ‘fess up to in policy circles, like the planet simply cannot support 3 billion people in Asia living European lifestyles. He warns of the danger of creating the mother of all crises if governments cannot stem the tide of leveraged capital flows, and also discusses the role of China on the global stage.
Enjoy!
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Well worth the listen.
This man demonstrates the vigor of a mind engaged in the world as it is and as it is becoming and not a world that is reflective of one’s economic modeling circa 1996 or 2002. I could not listen to the entire dialogue as it is disheartening to hear such clarity when DeLong and his east coast bretheren will not even broach the mere discussion of the analytical framework he puts forth so eloquently.. As an aside I hope you can link to the video clip I saw on Bloomberg where the Indian finance minister was openly chastising our beloved Treasury Secretary for the inflation ravaging his country. Monsieur Geithner had the look of the county’s biggest horse thief sitting next to the long-suffering sheriff.
@ 18:45 “’Creative destruction’ is always painful” *laughing*
“Creative Destruction”, that my friend says it all…
Well, then, let’s get on with it, eh. As in, let’s get on with the write-downs and restructuring. Hell, Main Street is already feeling the brunt of “creative destruction.”
How about some creative destruction up on capital hill and our 10 largest financial institutions, we would all be better off.
gs_
Mr.Sheng spoke of a “fiat crisis”. It is not fiat that is the problem except that fiat is legal tender for private debts when it should only be legal tender for government
debts, taxes and fees. Fiat is the ideal money form for government since government is force.
As for environmental destruction, it is usury that drives the need for exponential growth. And imagine the environmental destruction if gold or silver is remonetised as nations and individuals attempt to mine “money”.
Legal tender is meaningless. The euro is not legal tender. China has never had the concept. Legal tender has nothing to do with the value of fiat money – a pleonasm, btw.
Legal tender is meaningless. Calgacus
One way or another, (capital gains tax, etc.) we are forced to use a single, government enforced monopoly money supply so the effect is the same as legal tender laws for private debt.
Yes, as long as there is taxation, we will have government money, which will be at the top of the pyramid of money. We already have private money creation. It’s called banking and credit. Use of public money to settle private debts is an inevitable consequence of taxation. Next stop after getting rid of government monopolized money for private debts is the conquest of death.
We already have private money creation. It’s called banking and credit. Calgacus
No. The banking system is so backstopped by government (deposit insurance, lender of last resort, etc.) that the banking system is by no means private. It is instead, a government backed and enforced cartel.
Use of public money to settle private debts is an inevitable consequence of taxation. Calgacus
Not necessarily. It depends on how well managed the government’s money is and if private alternatives are permitted.
Next stop after getting rid of government monopolized money for private debts is the conquest of death. Calgacus
The government would be wise to allow genuine private money alternatives and to drop its support for the banking system. The banking system is killing US as a nation.
Yeah, smart guy — and honest too. But he’s way off on the whole debt thing. You can see from the way he touches on it that he’s confused.
“If I have 20 shillings and I spend 21 then someone somewhere has to loan me one shilling and… er… well… er… *trails off into another point*”
I just posted the following historical nugget in one of the other comments sections, but its worth repeating here:
“Chairman of the Federal Reserve Board, Marriner Eccles testified before the House Banking and Currency Committee September 30, 1941. He was asked by Congressman Patman, “Mr. Eccles, how did you get the money to buy those two billions of government securities?” Eccles replied, “We created it.”
Patman asked, “out of what?” Eccles answered, “out of the right to issue credit-money.” Patman then asked, “And there is nothing behind it, is there, except our government’s credit?” Eccles responded, “That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.””
That is one way it is looked at, but not the only way. Private entities can also have debts to each other which are marked off by something that looks an awful lot like money: cowry shells, wampum, barnes and noble gift cards, etc.
Thus one of the alternate definitions: money is a lien against future production, is (usually) valid as well.
Yes, the private sector can create IOUs — Minsky used to say “Anyone can create money — the problem is getting it accepted”.
But realistically we’re talking about $$$ here. IOUs play such a minor role in modern economies as to be inconsequential.
Really? Accounts payable and accounts receivable are not inconsequential to most small companies and NPO’s. Further, I doubt they are inconsequential to the economy as a whole.
Those accounts are paid in $$$ and always net to zero. If there is trouble with the payment the issue is taken up… you guessed it: with reference to $$$.
The IOUs we were referring to above would be IOUs for non-money. Promises of labour or a bartered item, for example.
How often do these occur? VERY rarely, I would think. Maybe in low-level drug deals. You sell me crack. I can’t pay the IOU I’ve lodged with you. You take my shoes and beat me up with a bat. No $$$ involved.
Come to think of it, even that’s a standard (or not-so standard) declaration of bankruptcy; liquidate assets etc. It’s still denominated in $$$.
Private money creation is even rarer. A few instances of local currency issuance maybe. But even there they can’t be used to pay taxes.
For those interested in private money creation — and learning something about money more generally — I’ve always thought the Buckaroo was a fascinating experiment by the MMT crowd:
http://cas.umkc.edu/econ/economics/faculty/wray/papers/ELR.IRRA.01.htm
http://neweconomicperspectives.blogspot.com/2009/07/berkshares-buckaroos-and-bear-dollars.html
“Those accounts are paid in $$$ and always net to zero. If there is trouble with the payment the issue is taken up… you guessed it: with reference to $$$.”
Please humor me. So unless I misunderstood, your saying that the dollar paid to a vendor for previously purchased goods or services, is nothing more than exchanging one form of debt for another, correct? I’m not an economist. Even so, I ‘m not convinced by the Eccles quote just because he said so.
I always considered money to be similar to engine oil. It’s not part of the engine, but merely a substance that allows the engine to function. The key for engine oil is in maintaining the appropriate level so that the engine runs efficiently and without damage. I thought that since money($) or currency was nothing more than an exchange mechanism or store of value, It’s nothing more than a tool that greases the wheels of the economy.
In the same way, AP allows a company to carry an amount owed to a vendor for purchased goods or services for a period of time, as an alternative to taking on bank debt or using cash. Hence, I continue to believe that the expansion or contraction of private party credit (such as AP & AR) can have an impact in a fashion similar to when there’s an expansion of bank loans and other forms of credit.
The key point is that new money cannot enter the economy without being taken on as a debt — an asset cannot be created without a corresponding liability. Either the private sector can take on the debt by taking out a loan at a private bank or the government can spend and issue bonds.
To use the oil metaphor: where does the new oil come from? Or even: where did the oil come from in the first place. It has to have entered the ‘engine’ at some point. How can it enter without somebody owing it (even if this ‘someone’ is the government)?
The money supply doesn’t stay static all the time — I could get some measures if you want. The new money has to enter somewhere. It doesn’t, as they say, grow on trees.
“In the same way, AP allows a company to carry an amount owed to a vendor for purchased goods or services for a period of time, as an alternative to taking on bank debt or using cash.”
I don’t think this is a good example because a new bank asset is not created. No ‘new money’ enters the economy. The loan has to be settled either with money already circulating (no new money created) or with debt taken out from a bank (new money circulates).
Eccles knew what he was talking about. Bernanke knew what he was talking about too when he said that the money from QE was just made by ‘crediting bank accounts’ — that is, creating money.
Here’s another similar source — an official video from the BoE website. Note that the robot lady says that the money was ‘created electronically’ — as if from thin air…
http://www.bankofengland.co.uk/education/inflation/qe/video.htm
Here’s a good explanation:
http://en.wikipedia.org/wiki/Circuitist
“In circuitism, as in other theories of credit money, credit money is created by a loan being extended….. When the loan is repaid, with interest, the credit money of the loan is destroyed, but reserves (equal to the interest) are created – the profit from the loan.”
Now, I think this is a fine description of how the private banking system works. It differs from the neoclassical theory in that there is not ‘reserve constraint’ — i.e. the bank need not hold a certain amount of cash to make loans from. Here is a critique of that view — with empirical backing:
http://bilbo.economicoutlook.net/blog/?p=10733
Note that the neoclassical theory essentially holds that money is created through debt — they just think this debt-money is more constrained than the circuitists (whoops! they missed the financial crisis!).
I agree with the circuitists when it comes to private money creation. But I think that the money that enters the economy through government spending is even more important again. That’s the chartalist view. It doesn’t contradict the circuitist approach, it just emphasises the amount of control the government have over money creation.
Ugh! Every time I start thinking about this I get totally roped in. Anon48, you have just ruined my day (kidding…).
Anyway, here’s a very suggestive graph I just came across:
http://www.bond-bubble.com/pics2/US-government-debt-gdp.png
So total government debt as measured in dollars largely TRACKS GDP growth as measured in dollars. Hmmmm… Pause for thought, no?
I appreciate your time, but please waste no more on my account.
I reviewed the Wiki explanation regarding circuitism and I’m still not convinced. I could infer a different conclusion s that would not eliminate private credit transactions from the equation. However, I don’t have interest as I’m sure neither do you, in devolving into a “yes it is/ no it isn’t” dialogue.
So let me just say that from my lay perspective, economics itself can be circuitous. When trying to contemplate “if/ then” arguments of logic, what I’ve experienced is that the underlying premises of economics have never been solid as stone, but rather they always tend to be squishy. There’s no underlying economic rule that works 100% of the time , unlike in other scientific arenas (e.g. energy equals mass times the speed of light squared, standard gravity constant, Ohm’s law, twelve inches equals a foot, etc.).
Is it possible to drill down into any of the significant economic theories from the ages, with the possibility of hitting solid rock? A foundational rule where the same answer can be replicated over and over again for an infinite number of times? Or rather, is it that in economics, the underlying premises always require that you accept general observations, tendencies, probabilities as the foundation upon which a case is built? Can it be shown that underlying proof of economic theories rise to a level anywhere near what it takes to establish scientific theory? I think you know the answer.
Again, from my lay perspective, economics is nothing more than an art that focuses upon relationships between variables. But unlike the ageless/ timeless nature and permanence associated with scientific theory, economics seems to have no more substance than a passing cloud in the sky. Common sense tells me that whenever new knowledge of meaningful relationships between variables is uncovered, the dispersion of that knowledge throughout a population, can have a direct impact by changing the nature of the relationship between the two variables. This, in the same fashion as people react to morning news broadcasts about traffic delays, by changing the route that they take. Accordingly, I find it hard to believe anything that economists predict with absolute certainty (which seems to be the way they generally project themselves) as something I’d want to stake my country’s future upon.
And dismissing the CBRC’s Mr. Sheng ,or the effects of private debt creation with such absolute certainty, seems to me to be something of an overreach.
I don’t want to be a pest, but I don’t think this is theoretical. Everyone — from central bankers to neoclassicals — sees money as being primarily a debt incurred by some sector in society.
Even people at high levels in banks should realise this. The money in the vaults — which, at that stage of the process are just tokens — cannot get into circulation unless someone has their bank balance credited (by the government, say) or takes out a debt. Then they can extract the paper from the ATM.
Here’s a film that was made in this. I have serious problems with the presentation, but the thesis is correct (even though its not really a thesis, its just a fact):
http://www.youtube.com/watch?v=vVkFb26u9g8
Just to be clear, that’s not what I’m dissing Sheng on. Earlier on today I wrote (see below):
“Next what is needed is for the government to take on the debt loads so that the private sector doesn’t have to.”
My problem with Sheng is that he cannot make this point — because he doesn’t understand Minsky or sectoral balances… indeed, he doesn’t even understand the credit system. And I guarantee that if people listen to the video with an open ear they’ll hear him on this quite clearly… he’s quite incoherent (something is ‘bad’ and it needs to be ‘fixed’, something to do with ‘creative destruction’ [see my criticism above] and that’s all the substance you get).
He doesn’t understand that if an economy is to grow and private debt is not to be incurred public debts have to be incurred (unless you have a MASSIVE trade surplus, which is unrealistic — and, anyway, cannot, by definition, occur in every country).
My criticism is not of Sheng’s ‘overarching’ theme — nor of INET’s generally — but of their lack of a real formulation of the workings of the credit system. They have the reference, well one of them (Minsky) and yet it is crystal clear that they haven’t understood what he was saying. It’s annoying.
If I’m not a trained economist and I can discuss Minsky with some of his students coherently, then surely a trained economist can do so too. But this is politics, unconscious or otherwise, methinks…
“In circuitism, as in other theories of credit money, … but reserves (equal to the interest) are created – the profit from the loan.” via Philip P
That’s BS. The interest is not created. It must come from someone else’s principal or from an external source such as government deficit spending
“The interest is not created. It must come from someone else’s principal or from an external source such as government deficit spending.”
You’re absolutely right. Interest comes from deficits — be they public, private or foreign.
But you’ve contradicted yourself. Interest IS usually ‘created’; at least from a macro point-of-view. The big question is: who creates it.
Is it by applying ‘the squid’ to domestic private assets? Or is it through deficit spending? Or is it through producing for and accumulating foreign assets?
I think we’re on the same page here. But we disagree over terminology. It’s important though. If you’re gonna push this stuff, you gotta get the facts/terminology right.
The big question is: who creates it. Philip Pilkington
Who else but the US Treasury and yes it must run a deficit to inject that interest into the economy. The issue is confused since new dollars are loaned into existence via the Fed but since the interest is rebated to the US Treasury the new dollars are essentially debt-free UNLESS the Fed resells the bonds.
The system is screwy. The US Treasury should just spend money into circulation and tax it out of circulation. Then there would be no national debt for the deficit hawks to rant about.
And why is the system screwy? Because we insist on a single monopoly money supply that is supposed to serve both government and the private sector. But why? Government has no need for banks or borrowing;the government need only spend and tax its own fiat. As for the private sector, let it work out its own money arrangements with the government completely aloof except for a safety net for the victims.
Philip, you are either confused or explaining badly. “IOUs play such a minor role in modern economies as to be inconsequential.” No, all money is debt, an IOU. Therefore IOUs play an enormous economic role. Circuitism, chartalism, MMT are just words for the same theory; many academics like to multiply inessential distinctions. In modern economies, for centuries, most money has been credit money, particularly bank credit money, bank IOUs, only indirectly backed by states. That’s pretty much the defining feature of modern capitalism.
All…me…can expect is abuse…advantage exorcised[?], say it ain’t so.
Skippy…BTW how does one avail of others advantage whence ye have none…over them as an individual. Vote?
“That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.”” Eccles
It doesn’t have to be that way. Government can create its tax money debt-free. As for the private sector, common stock is a private money form that requires no fractional reserves, no PMs and no usury.
Money is also made outside of the credit system, in the private sector. The power of merchants arises out of their competing creation of money, by the taking of profits. Profits do not exist until the transaction is complete. By selling commodities for more than they cost, the profit resides in the price until it is paid for. The merchant thereby creates money above what was previously in circulation, only the cost. This value added, represented by profit taking is the beginning of capital accumulation. Of course, the money sitting on the sidelines, extracted from the economy as a whole has to be replaced, and it is, by lending it back, creating a virtuous cycle of profit making enterprises. This is a perpetual motion machine which can never shut down. And we know, there is no perpetual motion. It has shut down now, worldwide, to our discontinuous misery. The modern nation state learned this from the merchants, it just skips the whole profit taking part, prints it up, lends it out and the circulating money makes the world go round. The lesson is simple, don’t mess with Mr In Between when you can buy wholesale direct from the Fed.
“Government can create money debt free.”
Yes, Lincoln did exactly that. Chances are if he had financed the Civil War through the bankers, we would still be paying for it. There is also a good chance he would have lived to enjoy a second term, and Garfield would have lived to enjoy a first term. About McKinley I am not sure. About the only thing Lincoln and Garfield had in common was opposition to the banking cartel. It makes a person wonder…
The link from the bankers to Lincoln were the Copperheads. Booth was a Copperhead or at least held all the beliefs. As the war was closing down the Copperheads were promoting the rumor that Lincoln was intending to become a dictator and a tyrant. Before Booth died, he was stunned to find everyone hated him, including those in the South. There are copies of the Copperhead magazine on the net at the MOM project at Cornell or in google books. Volume I of “The Old Guard” starts with the first essay savaging the greenback hated by bankers. If you like hate speech as surrogate history, these are great reading. It tells you just what was on their minds.
The more I watch this the more Sheng appears to be confused.
Okay, he cites Minsky (€20 says Sheng hasn’t read him in the original…). Then he goes on to say that the credit markets need to succumb to a ‘creative destruction’.
Okay, either he’s being remarkably vague or he doesn’t know what he’s talking about — I’m opting for the latter. If he’d read Minsky he’d know what would happen were a ‘creative destruction’ to occur in the credit markets without the government stepping in in any way at all: debt deflation — or, less euphemistically: Great Depression (“The sky would fall” to quote Minsky).
What is really required is a whole-scale RESTRUCTURING of the credit market. This isn’t a ‘creative destruction’, it’s a government led attempt to regulate.
Next what is needed is for the government to take on the debt loads so that the private sector doesn’t have to. Otherwise, as the Eccles quote above shows, new money could not enter the economy and growth would stagnate.
I don’t want to diss on Sheng too much. Yves is right, he’s honest and that’s a start. But I’m starting to see why people like Bill Mitchell hold the whole INET thing in contempt. It’s not really about looking at things differently at all. People still have blinkers on. You can see it in the digressive way they speak. If you listen closely they’re not actually making salient points about the problems in the credit system. They all cite Minsky but few have read him — and none have understood him. He’s just become a fetish.
Hey Philip,
Which Minsky book should I read first?
I’ve only got ‘Stabalizing an Unstable Economy’ and ‘John Maynard Keynes’ — I’ve read them both (at least, the parts I could understand — the mathematics are beyond me [for now…]).
A few things about Minksy. First of all, he’s a bad writer. He perfected the ‘thrown together’ blog style before the internet. However, he’s one of the sharpest thinkers I’ve ever read — and his empirical credentials are miles beyond any other economist I’ve encountered. This more than makes up for the writing style. But still.
Second, and tied to this is that Minsky is a real ‘academic’ economist. You’ll see this quickly. Both books are brilliant syntheses — but they’re VERY academic.
All that considered, definitely get ‘Stabilizing an Unstable Economy’. ‘John Maynard Keynes’ is a weird biography-cum-pure theory synthesis. ‘Stabilizing’ is much more accessible (apart from the ‘Economic Theory’ section that makes up about a third of the book. That’s the bit with all the maths that I can’t understand. But the rest is perfectly readable.
While you’re waiting for it in the post (American translation: ‘mail’) you should read his famous paper ‘The Financial Instability Hypothesis’:
http://www.levyinstitute.org/pubs/wp74.pdf
Have… er… fun…
Have… er… fun… Philip Pilkington
Thanks. Money is a mind boggling topic. It helps me to sample various viewpoints.
BTW, I am reading Money: Whence It Came, Where It Went by JK Galbraith. It’s pretty good though I do find him a bit glib at times.
I think it deals with the topic quite well. It’s not meant as a theoretical work and I think it gives a good feel for how varied can be the things used as money.
It also pays close attention to just how chaotic private banking actually is — which, considering what we’ve discussed in the past, I’d ask you to pay particular attention to.
The cheap trick, of course, is to highlight the point that Galbraith makes in that there were more banking crises after the Fed was established. Read in context what he means is that as the economy grows banking becomes ever more chaotic and that even with the establishment of a central bank its hard to stem the tide. But I’ve had that thrown at me once or twice. Easy rhetoric — really hard to ‘re-contextualise’.
By the way, have you read Randy Wray’s ‘Understanding Modern Money’ book? There’s a good introduction to a history of money as debt. That history has yet to be written in full but I think Wray makes a good go at it given the material he has.
I’ve read about 2/3 of Understanding Modern Money. It is very good. I disagree with his “employer of last resort” solution because if we had a bailout of the entire population followed by genuine liberty in private money creation then unemployment would be a very small problem.
But I’m starting to see why people like Bill Mitchell hold the whole INET thing in contempt. It’s not really about looking at things differently at all. People still have blinkers on.”
You and the MMT policy (neoliberal) entrepreneurs (in waiting) have a minimum wage “jobs” fetish and you’re accusing other people of wearing blinkers?
Sorry, you and the MMT neoliberal POLICY entrepreneurs in waiting have a minimum wage jobs fetish.
Someone hasn’t read the literature…
http://neweconomicperspectives.blogspot.com/2009/08/job-guarantee.html
“The package of benefits would be subject to congressional approval, but could include health care, childcare, payment of social security taxes, and usual vacations and sick leave.”
Also, there will ALWAYS be a minimum wage (eh… duh!). Now, we advocate that the government set it AND guarantee it. The only alternative is to let the market set it — which is scary.
Also, a lot of the MMTers want the JG in place. Then when it proves not to be inflationary start lobbying for higher JG wages — there’s been some talk about €13 an hour, but shhhh. The idea is to gradually raise the wage to ensure that inflation doesn’t take place.
Finally, MMT is not neoliberalism. That’s just crazy talk — you’re talking crazy talk!
Oh, and one more thing. Barring everything else, surely a job with a ‘minimum’ wage is better than unemployment. Or perhaps you’ve never experienced unemployment firsthand or otherwise and don’t know the effects it can have.
You are not being realistic about how this policy would be used. This policy would be used to under cut the public sector employees who are currently under attack and who currently make more than minimum wage, ie., the last bastion of the non-managerial middle class, in order to assist in the neoliberal project of global wage reduction.
Consequently, the MMT policy entrepreneurs are either ditzy neoliberal useful idiots or deliberately willing tools, working under the rubric of “the new new deal” in order to throw people like you off the scent.
The model of subterfuge is the “public option” from the recent health insurance financing bill, put forward by nominally “liberal” policy entrepreneur, Jacob Hacker. Go research it.
I predicted this “fate,” for Hacker’s plan whether he desired it or not, years before it went down, stating that anyone who thought his idea would be implemented as planned was too stupid for a tenure track policy job at Berkeley–of course, this is assuming that Hacker was well intentioned and that academics can be taken at face value, which is assuming a lot.
I am predicting the same fate here.
You also have no idea who I am. I will note however, that I am someone who finds you a tad obnoxious given your general intellectual and political confusion.
Also, one more thing about MMT since you have clearly swallowed the kool-aid and evidence all the drunken signs of the youthful new convert.
As I understand “MMT” it is a description of how neoliberals have use the financing capabilities of the US monetary system. Whether that makes “MMT” necessarily inherently neoliberal or if it can be put to better uses, is a matter of political debate.
Meanwhile, you might want to go make yourself throw up.
He seems like a decent guy but I found it tiredly familiar that he confessed to actually believing all the theory he was taught in school — then having an intellectual crisis when the theory failed.
How can one believe this stuff in the first place?
I don’t want to be snarky. I myself have fallen for bags of nonsense from time to time. And youth excuses a lot.
But there’s a point where one needs to put away childish things and look at reality face to face.
And if you ever reach a point where you have to work for a living — which excludes most academics — you start to smell the shit.
AND If you have a bit of a soul antenna, you should smell it even from a library. And form new theories around the reality of the smell.
Yeah, I don’t think the percentage of people smelling the feces from the library is very high.
And really, I don’t think the percentage of people around 40 who have sniffed out the merde based on real world work experience is much higher.
And frankly, based on experience, I don’t think the percentage of those wise souls in their 60s who have zeroed in on the stench from the latrine is much higher than that.
So I guess what I’m saying is, on a relative basis, Sheng is *way* ahead of the curve. Should we give him a cookie? A gold star? Or just mess his sh*t up by informing him that it’s insane to be sane in an insane world?
Thanks to all the comments; been thinking of better educating myself re ‘money’ and reading the exchange of comments has been fascinating. Just about to purchase Paul Gilding’s book The Great Disruption (anyone here read it?) and will add the Minsky book and possibly the JK Galbraith book that Philip P refers to.
Finally, Anonymous Jones made me laugh, “it’s insane to be sane in an insane world”. Wonderful!
I got the feeling Sheng was using catch phrases about money and economics too. But I thought he did it very gingerly. And his heartfelt message was something other: The forests of Borneo are dead. He could have added much more: The relentless drought in the Amazon rain forest is killing the old growth; the seaweed forests of the ocean are sick and dying. His point that our economics relies on ravenous consumption was on the money. That was the economic message I took away. I thought the most odd and understated part of the interview was when the interviewer asked him what he thought about the prospect of the US just imposing its will on the rest of the world militarily. His reply was stunningly subtle. He could have stirred up his leitmotif on the subject of war by cobbling together the anticipated answer: Asia has 3 bn people; the US only has 300m. But he graciously refrained.
Mz Susan;
While the Orient has ten times the human population as America, given a major disruption worldwide, this also works out to ten times ths chaos and confusion for the central government to try to manage. (Unless you buy into to the theory that social disruptions increase as the log of population growth.) Major wars for resources fill the bill nicely. (Such as the Chineese army and Japaneese navy moveing into the Persian Gulf. They wouldn’t even have to ‘invade.’ Just be asked in by one of the smaller less secure oil states.) Given the proliferation of ‘pocket nukes’ this scenario could easily go nuclear. A case can be made that America steered Japan into a war in the Pacific on just such terms. (Remember the strangling of Japaneese industry before the Pacific War through American manipulation of raw materials deliverys?)
I believe Sheng was being ‘diplomatic’ on the U.S. military question. He knows full well that an independant nations military usage is generally guided by domestic politics. Where he was candid, (refreshingly so,) was in his allusions to Americas Financial Sector as the locus of the worldwide malaise. This more than military adventureism guides our present course, which he quite clearly pointed out was unsustainable. His sly reference to Chinas’ long history of dealing with disasters of all sorts sent the message well: When things go really bad, who do you think has the experience and intellectual resources to come out ahead?
The evidence suggests that we as a species are at the beginning of a “Sixth Extinction Event.” Mankinds big advantage is its’ adaptability. If the financial and political classes today can’t so adapt, they’ll go extinct. The sooner the better, so the rest of us can get on with the task at hand, survival as a species.
Ambrit, I agree with you. I wasn’t going to put too fine a point on it. But Sheng’s plea for not doing anything (financially, etc) too abruptly, but to go slowly with our new world endeavors, was also very telling. Tinder boxes and unforeseen dangers are everywhere. I never get the feeling that the Asians are aggressive in a military sense. But they are dedicated and tenacious people. I’m glad they focus on the environment and global warming. And god only knows who will figure out our world finances. But I take no issue with Sheng when he says the Asians can not aspire to the livestyle of consumption enjoyed by the West. And I understand him to have also said that the West can also no longer do it. But he did not say it in words, just skillful implication.
The only amazing thing is that FINALLY economists like him “begin to realise” those otherwise obvious facts:
– Maintaining an indefinite growth in a finite world could only lead to major catastrophy
– Governments paying the debts of “free market” makes people angry
– This crisis is a serious one
– Free market economy is a chronicle of a death foretold
Saying this in 1850, that would have been impressive. Sayint it in 2011 is pathetic.
“the planet simply cannot support 3 billion people in Asia living European lifestyles”
I always find these statements disappointing. Not so much because they’re apparently false – they’re not if we look at the standard accounting and manufacturing procedures involved in European (or worse, U.S.) consumption. What bothers me is the framing of the question: what we should be saying is that a wasteful cycle of consumption is unsustainable anywhere. Consumer goods should be durable.
Indeed, Europeans can only sustain their lives by exploiting the weak political/economic positions of major manufacturing and resource-harvesting regions, like China and Africa. Why should their consumption be considered sustainable in the first place?
He seems to largely be a Minsky guy – central banks/ponzi/debt deflation. In other words one of the good guys.
His points on “european levels of consumption in Asia” gave the example of lumber – which is heavily used in the US and Europe, but much less around in tropical areas where concrete is mostly used (and as far as I can tell, still plentiful). I tried to guess what resource was next in line as overconstrained, and obviously the planet is getting squeezed on energy. Other natural resources (metals) do not seem under duress.
So I think it comes down to energy probably becoming more expensive for the world until we develop the next big breakthrough. I may not happen until 2100, which could mean that energy will take the place of food as the critical household expense in the world.
The problem is that energy is food, no energy, no food. The soil will not sustain life without the liberal application of chemicals and fuel to create and operate the labor scaling machines. George Washington spent a lot of time with his land, using the most innovative European methods, seeds and slaves, he could just barely break even. Southern Planters needed to move after several crop rotations because the land was exhausted. When we run out of oil, most of us will starve, or three quarters of the population will be toiling in the fields to feed the other 25%. The land requires husbandry which is more work than growing food.
“George Washington spent a lot of time with his land, using the most innovative European methods, seeds and slaves, he could just barely break even. ” Maybe, he was a really bad
farmer. Realistically, farming was a substience based
activity until modern times. No one farmed for profit unless if you mean by profit, land owners used poorly fed slaves to work the land and kept most of the food for themselves. That’s not really profit, that enslavement, in my opinion.
Between energy constraints , and the disappearence of fresh water as snow capped mountains disappear, I think humans are headed for extinction. Even the people attempting to live in primitive huts, off-grid will disappear. They will have a hard time growing anything in a continental sized desert. Most of the world’s continents will become large deserts
over the next 200-300 years, according to a least two climate models.
Whatever is not desert is likely to be submerged by rising sea levels. Land that is habitable will be much closer to where the ice caps are now. As the ice caps melt, there’ may be some land available for habitation.
As for those who suggest that humans can innovate, I would suggest that innovation cannot happen on a barren stretch of land. This is why space colonization never happened. The moon can’t support any kind of life without huge, amounts of energy and water input. There are no known substitutes for water and energy.
“George Washington spent a lot of time with his land, using the most innovative European methods, seeds and slaves, he could just barely break even. ” Maybe, he was a really bad
farmer. Realistically, farming was a substience based
activity until modern times. No one farmed for profit unless if you mean by profit, land owners used poorly fed slaves to work the land and kept most of the food for themselves. That’s not really profit, that’s enslavement, in my opinion.
Between energy constraints , and the disappearence of fresh water as snow capped mountains disappear, I think humans are headed for extinction. Even the people attempting to live in primitive huts, off-grid will disappear. They will have a hard time growing anything in a continental sized desert. Most of the world’s continents will become large deserts
over the next 200-300 years, according to a least two climate models.
Whatever is not desert is likely to be submerged by rising sea levels. Land that is habitable will be much closer to where the ice caps are now. As the ice caps melt, there’ may be some land available for habitation.
As for those who suggest that humans can innovate, I would suggest that innovation cannot happen on a barren stretch of land. This is why space colonization never happened. The moon can’t support any kind of life without huge, amounts of energy and water input. There’s no substitute for water, and energy
Is this not working for anyone else? Just an un-interactable white square for me (UK).