The Problem with TPP

June 14, 2015

On Friday, the House of Representatives dealt a major blow to what would have been a crown jewel in President Obama’s economic plan – the “Trans Pacific Partnership” (TPP) trade deal that he has worked for his entire presidency.  It’s a good thing.  Had he gotten the fast track trade authority he was seeking in order to steamroll this trade deal through Congress, it may well have sounded the death knell for the American auto industry, and perhaps even American manufacturing in general.

The problem with TPP can be summed up in two words – population density – and its failure to take this factor into account.  The TPP is a deal that has been negotiated between the U.S. and eleven other countries:  Australia, Brunei , Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.  Of these eleven nations, five are less densely populated than the U.S. – Australia, Canada, Chile, New Zealand and Peru.  The United States enjoys a surplus of trade in manufactured goods with every one of them – a surplus totaling almost $103 billion.

Of the remaining six nations, one – Brunei – is a net oil exporter.  The U.S. enjoys a surplus of trade in manufactured goods with all net oil exporters since oil is priced in dollars, and dollars can only be spent in the U.S.  Another – Singapore – is a tiny city-state and the U.S. enjoys a surplus of trade with nearly all such city-states.  Why?  Because manufacturing requires some serious real estate, something that city-states lack.  Their dense populations necessitate an economy built around services, like banking, for example.  That leaves four nations more densely populated than the U.S. – Japan, Malaysia, Mexico and Vietnam.  The U.S. suffers a trade deficit in manufactured goods with all four nations – a deficit totaling almost $155 billion.

A surplus with all five less densely populated nations of $103 billion vs. a deficit with all four more densely populated nations of $155 billion.  This is no coincidence.  It’s yet another demonstration of the power of population density in driving global trade imbalances.  It dwarfs all other factors in international trade.  Low wages, currency manipulation, lax labor and environmental standards – none of these things amount to a hill of beans in comparison to the effect of population density.  Compared to the citizens of less densely populated nations, those living in intensely crowded conditions such as you find in these four nations consume comparatively nothing, but are every bit as productive.  The result is that these nations come to the trade table with massive labor forces desperate for work, but offer nothing in return except puny markets emaciated by low per capita consumption.  Huge trade deficits with such nations are inescapable without the use of tariffs.

Many believe that globalization and free trade has already wiped out tariffs.  It has eliminated and reduced many, but consider this:  the American truck market, unlike the automobile market, is still protected by a 25% tariff.  Because of this, virtually every pickup truck and every larger truck, up to and including semis, are built in the U.S.  Take away that tariff, as TPP has vowed to do, and you can kiss the U.S. truck industry goodbye.  One might argue that that isn’t so – that the U.S. auto industry still thrives without the tariffs.  However, it thrives not because of tariffs but because of quotas, something else that will vanish under TPP.  If the American truck-building industry and what’s left of the auto industry vanishes, there’s a good possibility that a domino effect may very well lead to the collapse of virtually all of American manufacturing.

Trade policy that fails to account for the effect of population density has proven to be an unmitigated disaster for the U.S. economy for decades.  President Obama seems hell-bent to make matters worse, just as he did with the deal with South Korea that, in only a couple of years, has cost thousands of Americans their jobs.  Let’s pray that our congressmen will continue to stand fast against any further such hare-brained deals.

America’s Worst Trade Partners in 2013

May 26, 2015

Top 20 Deficits, 2013

In a recent previous post, I reported that the U.S. suffered a record trade deficit in manufactured goods with those half of nations above the median population density, and a healthy surplus with the other half of nations. The relationship between population density and trade imbalance is clear.

To make it even more clear, let’s take a look at the opposite ends of the spectrum of trade imbalances – those nations with whom we have the worst trade deficits in manufactured goods and those nations with whom we enjoy the biggest surpluses. This post will look at the top twenty deficits. In order to factor out the geographic size of nations as a factor, these trade imbalances are expressed in per capita terms – dollars per person.

Above is a link to a spreadsheet showing the top twenty per capita trade deficits in manufactured goods in 2013. The following are some observations about this list:

  • Of these top twenty nations, eighteen are more densely populated than the U.S. Most are much more densely populated. The average population density of the nations on this list is 504 people per square mile. This is almost six times the population density of the U.S.
  • The thing that may surprise people the most is that China, the nation everyone thinks of first when the subject of our trade deficit comes up, barely makes the list of the top 20 deficits, coming in at number 17. In per capita terms, our deficit with other nations including Israel, Taiwan, Japan, South Korea and a number of European nations, is much worse.
  • Low wages are often blamed for our trade deficit in manufactured goods. Manufacturing jobs, it is said, are shipped overseas to take advantage of cheap labor. So I’ve included the “purchasing power parity” (or “PPP”) – essentially the gross domestic product of each nation per person – to see whether this claim holds water. PPP is a measure of the purchasing power of the citizens of each nations, and is a good indication of the average wages paid. As you can see, our worst deficit are with rather wealthy nations. (By comparison, the PPP of the United States in 2013 was $49,000.) The average of PPP of these twenty nations is $35,330. Only two nations are below $10,000: China and Nicaragua. It should be noted that China’s PPP has more than doubled in the last eight years. If “low wages” were the cause of trade deficits, then we should begin to see our deficit with China decline as PPP rises. Instead, our trade deficit with China set a record in 2013. Our trade deficit with Switzerland, the wealthiest nation on this list, also worsened in 2013 to $1,859 per person from $1,680 in 2012, moving Switzerland from 3rd to 2nd place on this list.
  • South Korea moved from 12th place in 2012 to 11th place in 2013 as our trade deficit with them worsened from $426 to $496 per person. Our deficit with South Korea continues to worsen dramatically in the wake of the 2012 trade deal which the Obama administration hailed as a “big win for American workers.”
  • In the most dramatic move on the list, Malaysia went from 13th place in 2012 to 21st place – vanishing from the list – as our trade deficit with them was cut in half in 2013. This allowed Mexico to move up to 13th place in spite of a 20% decline in our deficit.

There are a couple of key take-aways from this list. First is that population density plays the major role in determining trade imbalances. If it did not, one would expect the ratio of more densely populated nations to less densely populated nations to be somewhere around 1:1. Instead, the ratio here is 9:1. Secondly, low wages clearly have absolutely nothing to do with these trade deficits. This list is heavily skewed toward wealthy, high-wage nations like Ireland, Switzerland, Germany, Japan, Israel, Taiwan, Denmark and others.

The problem with attempting to trade freely with these badly overpopulated nations is not that their wages are too low. The problem is that they buy too little from the U.S., thanks to a level of per capita consumption that has been decimated by their extreme population densities. People who live in such crowded conditions simply can’t consume products at the same level as people who live in more reasonably populated conditions like we enjoy in the U.S.

America’s Top 15 Trading Partners in 2013

February 20, 2015

Here’s a chart showing America’s top 15 trade partners (in terms of the percentage of total imports and exports) in 2013:  Top 15 Trading Partners in 2013.  First, some general observations are in order.

  • There are 229 nations on earth.  These fifteen nations alone account for nearly three quarters of all U.S. trade.
  • These fifteen nations represent approximately one half of the world’s population.
  • Those not well-versed in U.S. trade data are probably surprised to see Canada at the top of the list.  It’s not such a surprise when you learn that Canada is America’s largest supplier of oil and gas.  Canada’s share of U.S. trade rose in 2013 to 16.4% from 16.1% in 2012.
  • Second on the list is China – not such a surprise.  China’s share of U.S. trade also rose in 2013 to 14.6% from 14% in 2012.
  • Third is Mexico, with their share of U.S. trade rising to 13.2% from 12.9% a year earlier.
  • These three nations – Canada, China and Mexico – account for about 44.2% of all U.S. trade.
  • Japan, fourth on the list, saw its share of U.S. trade slip from 5.7% to 5.3% in 2013.
  • South Korea leapfrogged ahead of the United Kingdom on the list, rising to sixth place while the U.K. slipped to seventh.
  • France rose from 10th place in 2012 to eighth place in 2013, while Brazil and Saudi Arabia each slipped a notch.
  • Venezuela, 14th on the list in 2012, fell off the list in 2013 and was replaced by Switzerland.

The above list is based on total imports and exports of all goods and services.  But what really matters is manufactured products, since jobs are concentrated in that category.  Exports add jobs to an economy, and imports take them away.  A trade deficit in manufactured products represents a net loss of jobs.  So let’s turn our focus to that category of trade.  I should note here that, from this point on, trade imbalances will be expressed in per capita terms in order to factor out of the equation the sheer size of nations.  If the U.S. has a deficit of $1 billion with a nation of one million people and a deficit of $100 billion with a nation of 100 million people, it would be wrong to conclude that the people of the latter nation are a bigger drag on our balance of trade, since the people of both nations export $1,000 more to the U.S. than they import from us.

Of these fifteen nations, twelve are more densely populated than the U.S. and three are less densely populated.  With the three less densely populated nations, the U.S. enjoys a surplus of trade in manufactured products with all three – Canada ($1,988 per person), Brazil ($112 per person) and Saudi Arabia ($595 per person).

On the other hand, of the twelve nations more densely populated than the U.S., we suffer a trade deficit in manufactured goods with all but one of them – The Netherlands.  The Netherlands has an unusual economy.  As the only nation in Europe with a seaport on the Atlantic coast, it’s economy is heavily focused on trade, buying from the U.S. and then re-selling to other nations.  This is the reason that the U.S. enjoys a healthy surplus with The Netherlands.  Of the remaining eleven nations more densely populated than the U.S., our per capita trade deficits with them rank as follows:

  1. Switzerland:  -$1,859
  2. Germany:  -$822
  3. Taiwan:  -$706
  4. Japan:  -$696
  5. S. Korea:  -$496
  6. Mexico:  -$335
  7. Italy:  -$319
  8. China:  -$259
  9. France:  -$208
  10. U.K.:  -$30
  11. India:  -$11

Surprised?  If you’ve read Five Short Blasts, then you’re not surprised at all.  You understand how population density (and almost nothing else) drives trade imbalances.  When expressed in per capita terms, our enormous trade deficit with China (enormous because of its sheer size and population) seems rather mundane.  Others are much worse because they are much more densely populated than China.  In fact, if we plot our per capita trade deficit in manufactured goods versus population density, we find that the data follows a line that describes a logarithmic decay in our balance of trade as population density rises:  Per Capita Balance of Trade vs. Pop Density.

As you can see, trade with nations less densely populated than the U.S. (about 86 people per square mile) will almost surely be beneficial to the U.S. and produce a trade surplus.  Trade with more densely populated nations will result in a trade deficit and a drag on the U.S. economy.  The U.S. began trading freely with the other nations on this list long before we began trading freely with China in 2000.  For those who understand the role of population density in driving trade imbalances, it would have been easy to predict the results – a huge trade deficit.  In fact, the results of our trade policy with China fall very neatly along that line.

Some argue that trade deficits are caused by low wages in places like China.  Look again at the above list.  Low wages?  Not in Switzerland.  And not in most of the other nations on that list.  In fact, wages in China have risen dramatically and our deficit with them has only gotten worse.  To better understand the real relationship between wages and trade, take a look at this chart that plots PPP (purchasing power parity, analogous to average wages) vs. our balance of trade with our top fifteen trade partners:  Per Capita Balance of Trade vs. PPP.  The truth is that when trading with very poor nations (where wages are very low), we experience neither a large trade deficit or surplus.  As you can see, the relationship between trade imbalance and the wealth of nations forms an almost perfect “V”.  On the right side of the chart (which represents trade surpluses), the per capita surpluses grow larger as the wealth of our trading partner increases.  On the left side of the chart (representing trade deficits), the deficits with wealthy nations are larger than those with poor nations.

When you think about it, this makes sense.  Those nations on the right side (the surplus side) of the chart are less densely populated nations.  Their citizens are capable of consuming products and they are resource-rich, enabling them to produce products and have a self-sufficient economy.  Because they are wealthy, they are able to import products from America.  The right side of the chart, however, is populated with very densely populated nations where their citizens have insufficient space to consume at a high level, and they are resource-poor.  They are heavily dependent on manufacturing for export to sustain viable economies.  Poor people can’t buy and import products.  That’s why there are no big trade deficits (in per capita terms) with poor nations.  Once manufacturing is introduced into their economies, however, wages begin to rise and they are then able to begin importing some products.  That’s why the trade deficits are larger with wealthier nations – because our trade deficit has made them wealthier.  It should be noted, however, that the trade deficit we have with them is never reversed.  Regardless of how wealthy they become through manufacturing for export, it is still impossible for them to consume at a high level.

China is a good case in point.  Trade with China started at a low level.  Once it started, wages in China began to grow and they have the fastest-growing economy in the world.  But, as wages have risen in China, our trade deficit with them has actually accelerated instead of moderating, as the low-wage theory would predict.  It has accelerated because the Chinese are incapable of consuming at a high enough level to restore a balance of trade.  Contrast this with a poor, sparsely-populated country.  If manufacturing is introduced there, we will have a trade deficit with them for a brief period of time, but wages will quickly rise as their labor supply is quickly exhausted, and their wealth will quickly enable them to begin importing American goods.  A balance of trade is soon restored.

All of this illustrates just how foolish it is to apply free trade policy equally to both sparsely-populated and densely-populated countries and expect the same results.  Free trade with badly overpopulated nations is a sure-fire loser, guaranteed to produce large trade deficits and to devastate the manufacturing sector of the economy.  It has nothing to do with low wages; nor does it have anything to do with currency valuations, which I’ll cover in an upcoming post.  Our enormous trade deficit is driven almost entirely by attempting to apply free trade policy to nations that are severely overpopulated.


Exports Lag Obama’s Goal by Record Margin in November

January 8, 2015

As reported by the Bureau of Economic Analysis (see above link), the overall trade deficit contracted by $3.25 billion in November, due entirely to a drop in oil imports.

That was the good news.  The bad news is that the deficit in manufactured goods rose by $1.2 billion, thanks entirely to a $2.8 billion decline in exports.  After hitting a record in October, manufactured exports fell to their lowest level in five months.  In fact, since June of 2013, manufactured exports have risen by only $1.8 billion.

In January, 2010, President Obama set a goal of doubling exports within five years.  In November, exports lagged that goal by $54.7 billion per month – a record.  There are now only two months to go until the data for January, 2015 is released.  So far, instead of rising by 100%, exports have grown in five years by only 32%, all of which can be explained by inflation and by the rebound in the global economy – a rebound now faltering.  Absolutely none of the increase is due to any improvement in America’s trade position relative to other countries.  Here’s an update of the charts:

Manf’d exports vs. goal

Manf’d Goods Balance of Trade

Obama set this goal because he naively believed that there was no reason that the U.S. couldn’t become a net exporter like Germany.  There is, of course, one very big reason – the inverse relationship between population density and per capita consumption.   Germany is five times as densely populated as the U.S., making its per capita consumption a fraction of ours.  Like the citizens of so many other badly overpopulated nations (Japan, China, Korea and much of Europe, just to name a few) they can’t even absorb their own productive capacity, so why would they buy products from us?  (Well, they do, but not nearly as much as they export.)

Obama ran in 2008 on a platform that included tackling our trade deficit.  He took the coward’s way out, choosing to ignore the import problem, which everyone knows is where the real problem lies, focusing instead on exports in order to avoid unpleasant confrontations around the punch bowl at G8 meetings.  Aside from making the promise to double exports, he never lifted a finger to do anything to make it happen.  He’s done nothing to address the imbalances of globalization which nearly collapsed the global economy in 2008, and it’s going to come back to bite us.

Japan Plunges Back into Recession

November 20, 2014

It was reported on Monday (see above-linked article) that Japan officially slid back into recession in the 3rd quarter.  The economy contracted 1.6% (annual rate) in the 3rd quarter, following an even larger contraction of 6.7% in the 2nd quarter.  This came as a shock to the business community, which had expected a resumption of growth.

Japan is a poster-child for what happens to an economy that is badly overpopulated.  Japan is approximately ten times as densely populated as the U.S.  Because its people live in such dense, overcrowded conditions, per capita consumption there is a fraction of what it would be otherwise.  Low consumption would mean low employment, were it not for the fact that Japan runs a massive trade surplus in manufactured goods.  (It actually runs a deficit for overall trade because it’s also heavily dependent on imported raw materials in order to manufacture those goods.)  Without that surplus of trade in manufacturing, Japan’s economy would collapse into something resembling a third world country.

Once South Korea, followed by China, began muscling in on its export business, growth in Japan’s economy ground to a halt.  It’s been in a state of recession more often than not for the past two decades.  During that time, it has racked up an enormous national debt, the largest in the world, in order to prop up its economy.

In 2012, Shinzo Abe was elected prime minister of Japan, thanks to his promise to revitalize the economy through a combination of tax cuts, a huge boost in spending on infrastructure, and massive money-printing by Japan’s central bank – a program that came to be known as “Abenomics.”  Once the economy was kick-started, then the plan was to raise sales taxes in order to once again begin addressing the debt issue.

At least that was the plan.  It worked great at first.  The Japanese people were given lots of free money and they spent it.  The Japanese stock market soared.  But then came the tax hikes and the party was over.  The economy quickly collapsed back into a deep recession.

What economists don’t understand is that macroeconomic growth in a society plagued by severe over-crowding is impossible, and nowhere is this more evident than in Japan, one of the most densely populated nations on earth.  A point is reached where falling per capita consumption erases any gains that further population growth may provide.  This effect can be masked by deficit spending, but that tactic can only be sustained for so long.  Ultimately, the Japanese people are doomed to a failing economy and worsening poverty.

This opinion piece by James Saft does a good job of illustrating how boxed-in the Japanese economy has become, and how he and economists still don’t get it – that population growth is the root of the problem, not the cure – by implying that all would be well if Japan’s central bank could simply “print people.”

What Japan’s people need, more than anything else, is simply room to breathe.  Less densely populated, they could live in real homes instead of rabbit hutches.  They could drive real cars and park them in their own garages.  They could have lawns and gardens.  They could play golf on golf courses that currently don’t exist.  The quality of their lives would improve by leaps and bounds.  But, with fewer of them, the Japanese macroeconomy, as its traditionally measured, would be smaller and economists would be sounding the alarm.

It never ceases to amaze me how economists are incapable of recognizing or acknowledging how dumb their reliance on never-ending population growth in a finite world is.  Japan is a perfect example.

Trade Deficit in Manufactured Goods Soars to New Record in September

November 4, 2014

As announced by the Bureau of Economic Analysis this morning, the overall trade deficit rose by $3.0 billion to $43.0 billion in September, driven entirely by a steep rise in the deficit in manufactured goods – which rose by $3.9 billion to $52.1 billion – a new record.  (Check the chart:  Manf’d Goods Balance of Trade.)

The expansion of the deficit in manufactured goods was driven mostly by a sharp decline in exports.  September exports of manufactured goods fell to $111.9 billion.  That’s only $0.2 billion higher than in March, 2012.  Over that same time frame, manufactured exports needed to rise by $48 billion to keep pace with President Obama’s promise (made in January, 2010) to double exports within five years.  Here’s the chart:  Manf’d exports vs. goal.

In September our trade deficit with China soared to $35.6 billion, completely obliterating the previous record of $30.9 billion set only two months earlier.  Imports from China rose by $5.1 billion in September while exports to China fell by $0.3 billion.

The entire trade deficit in September is due to only four countries:  China ($35.6 billion), Germany ($6.1 billion), Japan ($5.3 billion) and Mexico ($4.8 billion).  All four nations are more densely populated than the U.S.  China’s population density is four times that of the U.S.  Germany’s is eight times.  Japan’s is ten times.  Mexico is only about twice that of the U.S.  Take away these four countries and the U.S. actually had a surplus of trade with the rest of the world.

Expressed in per capita terms (which factors out the sheer size of nations), the trade deficit with Germany was the worst of these four nations at approximately $100 per German citizen.  Mexico and Japan were nearly tied at about $43 and $41 respectively.  China was last at $29.   It’s important to note that Germany and Japan are both high wage nations, disproving the theory that trade deficits are caused by low wages.

Today, Americans went to the polls in a sour mood.  They’re unhappy with falling incomes and trumped-up employment reports.  They’re fed up with a president who’s more concerned with illegal aliens than he is with the plight of American workers.  And they’re sick of inaction on trade policy that’s has been a proven loser for decades, stripping them of their ability to make a decent living.  They’re right to be angry.  Since President Obama made his promise to double exports, our trade deficit in manfactured goods has nearly doubled while exports have barely budged.  There’s been no follow-through and there was never a plan.  Just a proclamation and crossed fingers.

Voters are in a “throw-the-bums-out” frame of mind.  If the president had been on the ballot, he’d surely have been the first “bum” to go.

The End of Growth

October 22, 2014

Last week, markets were in a steep sell-off, driven largely by increasing worries about global economic growth.  (See the above-linked Reuters article from last week.)  In the wake of the Great Recession, years of interest rates at zero and money printing by the central banks of the U.S., Europe and Japan have yielded pretty disappointing results.  Europe is once again on the brink of recession.  And Japan has either been in recession or been on the brink for decades.  And slowing economic data in the U.S. is making it look as though we won’t avoid backsliding into recession either.

We’ve all seen cartoons depicting pessimists standing on street corners wearing sandwich-board signs declaring that “the end is near.”  Well, folks, it’s time to face facts.  When it comes to economic growth, the end is, in fact, here.

Let’s begin with a step back – way back – to World War II.  The imperialist ambitions of both Germany and Japan had similar roots.  Both nations were badly overpopulated, short on resources and long on unemployment.  Both embarked on huge land grabs.  In the wake of the war, in 1947, the Global Agreement on Tariffs and Trade – the precursor of today’s World Trade Organization – was implemented, with the primary goal of preventing such wars by giving Germany and Japan easier access to resources and more access to U.S. markets, thus alleviating the high unemployment that fostered Hitler’s rise to power.

No problem, at first.  Americans had done without for years, with the nation’s manufacturing capacity devoted 100% to the war effort.  There was a lot of catching up to do and Americans’ appetite for goods seemed insatiable.  The economy boomed and the federal government was able to cut spending and whittle away the debt it had racked up during the war.

The infrastructure and economies of Germany and Japan were rebuilt.  Slowly, the new trade regime enabled imports from those nations to erode America’s trade surplus.  First came Volkswagens and a sprinkling of Mercedes and BMW’s from Germany.  Those were followed first by motorcycles from Japan, and then Hondas – pathetic little cars that were painted in paisley and sold as jokes, but they got their foot in the door.  By the early 70’s our trade surplus was gone.  We oscillated between surplus and deficit for a few years.  We ran our last trade surplus in 1975.  Since then, we’ve experienced 38 (soon to be 39) consecutive years of trade deficits.

At about the same time, America’s budget deficit began to grow again too.  It had to, to offset the trade deficit’s drain of money from the economy.  Soon, new terms began to creep into the American economic lexicon:  “redundancy,” “down-sizing,” “right-sizing” and “outsourcing.”  American manufacturers began closing their doors en masse, unable to sustain a profit margin in the face of the onslaught of foreign companies snatching up American market share.

Even with their new-found trade surpluses and manufacturing jobs cannibalized from American manufacturers, the Europeans and Japanese both found it necessary to lean heavily on deficit spending, just as America was doing, to keep a lid on unemployment.  Rising productivity enabled manufacturers to meet growing demand without growing employment at the same pace.

At the end of World War II, the world’s population stood at just under 2.5 billion.  Today it has nearly tripled.  All of this growth has been concentrated in urban areas.  Cities have expanded and grown vastly more crowded, and it’s a fact that people living in crowded conditions consume less out of necessity.  Growth in the global labor pool outpaced the rate at which workers were absorbed into the economy, putting downward pressure on wages.  And that situation grew exponentially worse when China was factored into the global trade equation, growing the global labor pool virtually overnight by 25%.

For a time, government deficit spending, used primarily to fund social safety net programs and other programs designed to supplement incomes and prop up a perception of wealth, sustained consumption and kept the economy growing.  But that tactic has run its course.  National debts have risen to worrisome levels.

Developed economies looked to China to pick up the slack by developing its economy, turning 1.3 billion people who had nothing into western-style consumers.  By that measure, China has been a huge disappointment.  Collectively, they consume a mountain of goods, but nowhere near enough to even consume their own productive capacity, much less to develop into a market for other nations.  Their growth is faltering and it looks like their domestic consumption will settle at the same diminished level as Europe and Japan.

Growth is now virtually dead and all the deficit spending in the world can’t prop it up.  Economists won’t admit that fact and adamantly refuse to give any consideration to the fact that population growth lies at the heart of the problem.  But markets don’t care, and what we’re witnessing is an adjustment to a no-growth world.  Interest rates have fallen to zero.  Bond yields, projected to rise as the economy “recovered” never did, and are now sliding backward to near-zero levels.  Central banks’ hands are tied, left only with thinly-disguised money printing programs to fall back on to provide stimulus to the economy, a tactic that’s already begun to make them nervous about unintended consequences.

The world’s economy is reaching a critical and dangerous point, where the inverse relationship between population density and per capita consumption begins to take hold in a big way that can trigger an irreversible downward spiral.  People consume less than they’d like for two reasons – because they lack space to make use of products, and because they are simply too poor to afford them.  When the proportion of people in the first condition reaches a critical level, the downward pressure on wages begins to make everyone poorer, accelerating the downward pressure on consumption.  Governments’ and central banks’ resources and abilities to hold this economic force at bay will soon be exhausted.

Economists had better extract their heads from that place where the sun doesn’t shine, and soon, if this economic fate that they don’t understand and are unable to see is to be avoided.  I fear that they won’t.  Growth isn’t always desirable.  Sometimes it’s cancerous.  Left unchecked, population growth will soon present the one challenge that none of them are clever enough to overcome – worsening poverty that gets so bad that it throws the world population into decline.  In essence, if economists and world leaders aren’t smart enough to manage our population to a level where all can enjoy a high quality of life, their stupidity will surely drive it to a level that no one wants.