Excellent post. I agree with you about the the perils of growth in a limited environment. As in nature, diversity is a virtue by its imposition of homeostatic mechanisms.

There are some tools that governments can implement that would help ameliorate this. For example in real-estate, tax capital gains above a certain growth threshold. Allow for growth at a level (25%) above inflation, after that impose a capital gains taxes (even a progressive one).

Korea’s exports in Jan-Feb 2009 were down 25.7% from the same 2008 period, and seriously deteriorating as compared to the -9.1% recorded in Q-4 2008.

Imports didn’t fair so well: -31.1% in the first two months of the year, and down from -8.8% in the fourth quarter of last year.

“Record ugly” is the catch phrase of 2009.

Do you mean the annual US federal deficit at 100% of GDP? Why stop at 100% – isn’t the credit limit for any entity set by the gullibility of its creditors?

BTW, Michael Farrell, CEO of Annaly Capital Management (which is an auction agent for CDO liquidation) has informed its investors of its current operations:

“There are over $600 billion of CDOs outstanding, about half of them are already in EOD, or Event of Default, and only a third of that amount has been liquidated to date. We expect EODs and liquidation activity to continue to rise.”

This is just one of many CDO auction agents.

try this book ; “agricultural fluctuations in europe – from the thirteenth to twentieth centuries.” by wilhelm abel.

a picture of an unfamiliar mediaeval world, and yet one that reveals the recurring patterns. google for extracts.

Unless the local government defaults, which has happened with the United States municipalities. Credit ratings for US municipalities are altogether separate from the national government.

As far as pension liability. US Treasuries go out to 30 years, but SS liability projections go out to 75.

duke: What if both domestic savers and SWFs began to perceive their savings were financing the very tools of oppression? This is a volatile issue for both US conservatives and overseas nationalistic groups.

Chinese nationalists have enough sense to know that China is not going to be better off if the US collapses, and I think the same is true with Arab nationalists.

US conservatives are in the wilderness. They will come back eventually, but not in the next year.

duke: It is the demand side of consumption that is most vulnerable. What if “save more, consume less” were to become a rallying cry and focal point of a mass political movement?

Great!!!! More money to spend on capital investment. Demand is not the same thing as consumption. You can have high demand with high savings and high investment.

show me any hill and i will show you where to find the back of the hill. show me any upslope and i will show you where to find the downslope. show me any skyward spike and i will find its plunging mirror image very close by.

economic growth is exponential in nature. all of the problems and patterns of exponential growth in a limited environment can be found in ecological systems. economic systems are a subset of nature – natural systems.

and when you get exponentially growing systems interacting, you still have an overall exponential system, but more exaggerated than ever.

we need a word “floops” (?) for exponentially accelerating feedback loops. or decelerating floops. i know there is the phrase ‘positive feedback loop’ already – but we need a striking little word for tthe man in the street to take notice.

we also need a junior-school-friendly account of what capitalism is. too many journalists are using ‘capitalism’ to mean ‘speculation.’

capitalism only works without enormous crashes if you arrange for multiple minor crashes. just as death, or natural elimination, is required by the pattern of evolution – so some form of bankruptcy is required by the patterns of capitalism.

no one takes me up on this. there is a private sector and a state sector in modern economies. ‘small enough to fail’ is a requirement for functioning within the private capitalist sector. ‘too big to fail’ is the sphere of the state sector. monopolies can work in the state sector (two pentagons anyone ?) but make nonsense in the private sector. so do entities that are private sector when making profit – but state supported when making losses. that’s obscene.

if the overall global economy is too big to fail – then global communism (they will think of a different name for it) is it’s natural end state.

the global economy needs to be fragmented and diversified, under a multilateral ‘new world order.’

it is very likely to happen anyway. if the united states’ neo cons and others had their way with full spectrum dominance – they would create something mouthing equality while actually supporting a bastion of privelege – very like the soviet command economy elite. call it a green zone economy if you like.

the unrestrained global mobility of capital – needed for the new world order type agenda – links all assets and investments as borders and barriers are dismantled. this maximises and synchronises global growth. small irish country town credit unions, and enormous far eastern sovereign wealth funds, fish in the same pool of credit.

to fail to see the ecological pattern, and in a decade or two reinflate a global unified bubble of growth, is a potential disaster of lunatic proportions.

no one has yet fingered the villain of the piece. it is not the actual fractional reserve banking – it is changing the rules as to how much you are allowed to leverage. that accelerated the global economy. high speed is theoretically sustainable (?), but acceleration has to end. extreme acceleration has to end violently.

i apologise for my lack of economically literate language. i am trying to paint a picture, that it is the amount of liquidity which made the crunch inevitable.

to try another analogy. schumaker blasts off the starting grid at twice the speed of any previous driver. you do not need to be an automobile technician to guess that, at the first serious bend at the end of the straight (there always is one) he is going to brake harder than ever before . . . .

now the prudent producers (japan, germany,) are in the same trouble as the reckless consumers (united states, ireland,) and we are suprised. can you decouple consumers and producers ? we have the answer for china – stimulate domestic demand. why does it not apply to all of us ?

like communism, if they bring back protectionism, they will have to invent a new name for it.

no one is yet facing up to the massive change that is going to come upon the global economic system. most people have a deep intellectual commitment to the way things have been during the boom.

that cannot last.

I think many are ignoring the very real potential for transforming Treasuries into a political issue. What if both domestic savers and SWFs began to perceive their savings were financing the very tools of oppression? This is a volatile issue for both US conservatives and overseas nationalistic groups.

It is the demand side of consumption that is most vulnerable. What if “save more, consume less” were to become a rallying cry and focal point of a mass political movement?

After all, it would only take another 6% contraction (on top of the present 6%), to achieve an offset of 15% from the 3% forecast growth to put a significant dent in BHO’s fantasy budget.

It doesn’t matter if the USG had to make real cutbacks or if the Fed had to destroy the $USD by flooding the market with QE, the end effect of preventing further socialization would be achieved.

That’s enough for at least 100m Americans.