scrubbedexpat091

According to a Forbes economist anyhow.

Hong Kong ranked as most vulnerable.
Canada due for debt crisis and recession, economist argues - Business - CBC News

Shakyuk

I think his conclusion is sound. The global economic model of perpetual growth fuelled by perpetual borrowing is obviously fundamentally flawed. Eventually there's nowhere to grow and nothing left to borrow. I think we're close to that situation now but because money is still cheap and available we're slowing the onset of the inevitable collapse by borrowing. I'm sure one day there'll be another recession, but interest rates will already be low, money will already be devalued through money printing, debt levels will inevitably be higher but people will still expect jobs and socialist policies. With no money to fund either we'll be in a pretty catastrophic situation.

Shard

It's not flawed, it's the natural order. Corrections occur (eg. Japan) but this Forbes writer is simply doom-mongering for publicity.

Shakyuk

In my opinion it is flawed and I think logic and the current global economic stagnation supports my opinion.
Resources are finite. The ability to sustain population growth is limited by resources.
For perpetual growth you need perpetual increases in output, be they through labour force increases or efficiency savings. Global populations are expected to peak and then decline within the next century. With less people there will inevitably be less consumption, less production and therefore less growth.

Japan is actually a very good example of this. Years of stagnant population growth, reduced consumption and even with their huge exports they have suffered from years of economic stagnation and deflation. This population decease correlates with decreases in inflation and growth. Only when Shinzo Abe implemented his 'Abenomics' by massive money printing did the markets rise. Following months of market increases the markets had a sharp correction when institutional investors took their profits. The Japanese monetary policy continues and thus so does growth but at much subdued levels this policy cannot continue indefinitely.
Europe is the same, low population growth correlates with low economic growth and low inflation and sometimes even deflation.

Shard

Economic resources are not finite. We invent new 'resources' every day. Modern economies are more than wood, oil and fish. Science will bring us solutions to sustain whatever population growth that we require. Africa, rural India, and rural China remain a huge opportunity for economic growth as do modernising global energy and transport infrastructure. Japan is an anomaly. Their ageing workforce combined with cultural xenophobia has lead the country into deflation, but the rest of the world is not like that.

dave_j

I'm sorry but the man is correct. Easter Island was a classic example of what happens when humanity ignores the concept of a finite resource. Your argument ignores the selfishness and greed of those who always want more and are prepared to exploit all resources to acquire it, and we have only the one planet.
I'm afraid we don't invent resources. What we do is invent technology that exploits existing resources. I agree that we will continue to develop such technology and we may even develop technology that exploits resources that have as yet remained pristine, but I think that those resources that are considered useful; are already being exploited.
If only this were so, but unfortunately what we have in Africa, China and India are rural economies that will inevitably follow those of the first world, and why, because every individual is an aspirant and wants what other people have and existing resources will need to service this need. A little rose tinted I think.

MikeUK

Science has brought us the solution to population growth...

its called birth control

its also brought us solutions to finite resources

its called recycling and reuse

what it hasn't done (other than the first proposal) is a solution to naivety and ignorance

dave_j

I agree that science has developed a solution to poulation control that's birth control. Like you, I agree that it hasn't brought a solution to naivety and ignorance. One result of this is that its use is dependant on religious, tribal and individual tolerance. Even in China, where the one child per couple was implemented, the birth rate per woman remains stubbornly at 1.7. The result is an ever expanding population, so without the adoption of infanticide or forced sterilisation, it can only moderate, but not dictate, individual behaviour.
The adoption of recycling is adopted only where economics show that money can be made from it, otherwise valuable resources are simply buried or incinerated.
At an individual level, what do we do when the car breaks down. Do we repair it and drive an old banger? I suggest we do what rich nations, scientifically aware nations, do and that's scrap it an buy a new one. What we don't do, and one we should do, is adopt the cuban ethic where, because there has been no alternative, we should do as we used to do after the war, and that's make do and mend. I still practice what I learned from my father after the war and that's to collect old screws and reuse and straighten nails simply because they weren't available after the war. Until scarce resources dictate that such practices make sense then I'm afraid you won't get individual behaviour to trump scientific advances.

Alan2005

Easter island was a closed system.

The earth is a closed system too, but that's a very pessimistic way of thinking given there's a gigantic practically infinite energy supply out there. I'd like to think we aren't many decades away from solving that problem.

This isn't strictly true as it assumes that debt default isn't part of the economic model when it is. If there's a flaw in the model anywhere it's that it's too tempting for governments to take money earned from good investments and give to those who make bad ones via bailouts.

Shakyuk

I would argue Japan isn't an anomaly, right now Europe is facing the exact same struggle to prevent deflation that Japan did and the ECB are just printing money in an attempt to sustain long term growth. Bonds are so devalued due to this sustained economic policy that we're already near the end of its sustainability. Both Europe and the US have economies currently fuelled by massive public sector and consumer debt. Eventually that debt must be paid. When interest rates rise, bond yields fall, if bonds are already at low levels and interest rates are desired to rise then we're unarguably heading towards a time when credit availability will be dramatically reduced.
If you look at history, debt has been the destruction of almost every empire that didn't fall due to war or disease. The perpetual growth theory by its nature has no evidence of success but the evidence that perpetual growth based on debt has many examples of failure throughout human history.

Although fish reproduce and crops can be grown, they're still finite resources in the context of perpetual growth. We are already past the point of damaging fish stocks due to over fishing. Climate change due to pursuit of perpetual growth and destruction of rain forests is already happening. Land erosion and over farming of land are significant problems in developing countries. I would say the resources which you say are infinite and support this perpetual growth theory are actually already showing they're finite. Due to over exploitation they're are already causing climate change which will damage their existing yields never mind increase them to continue growth.

With respect to births, the human replacement is generally 2-3.5 births per female depending on the country due to infant deaths. If China is 1.7 then they're already experiencing population reduction.

Pizzawheel

Well at least houses might become affordable then.

Though no one will have a job to buy them with.

dave_j

Nicely put Shaky, a concise description of a process designed to fail.
Imagine a US unable to fund it's debt because, for whatever reason, it's creditors decided not to purchase US bonds. What would it do?
Well, war cancels a great many debts and stimulates economies.
Of course, world economies are interconnected and it's in nobody's interest that the US economy.. or any economy should fail, but s***t happens and some unforeseen event could trigger almost any scenario you could imagine and the causes of the 2008 debacle have still to be addressed.

paw339

The Japanese economy may have been stagnant but average real incomes were stable or rising due to deflation and a falling population, no real problem for the average person. Abenomics may have goosed the markets but real incomes have fallen recently due to higher inflation. Abenomics is another example of a policy that is good for the "elites" and bad for the average person. There is a lot to be said for a stable or slowly shrinking population provided growth isn't negative as it results in high living standards. Many parts of Africa have great growth rates but population growth prevents any real standard of living growth.

MarkG

That'll be why the British economy was so wonderful in the years after WWII.

Back in the real world, wars just take money from productive uses and funnel it to unproductive uses; even a socialist like Orwell understood that. It might look like a 'stimulus' in the short term, but typically just leaves you with more debt in the long term.

The benefit might be more than the cost if you can wipe out all your economic competition and become the world's most powerful economy, as America did in WWII. But that's not likely to happen again.

Alan2005

This 'the system relies on perpetual growth' is wrong; it doesn't at all. Debt default and deflation are part of the process. Nobody likes recessions, but they are inevitable and necessary.

These two things are contradictory. The dooms day scenarios of the US running out of money is not compatible with it going to war.

I'm actually very surprised at these pessimistic and cynical attitudes. The only alternatives that have been tried end up with totalitarian command economies; and who wants to live like that?