Our recent video interview with John Fullerton, the founder and President of the Capital Institute, touched on some very profound ideas about how the economy interacts with the biosphere. As with other interviews we've done, we engaged the INET community with an appropriately stimulating question in our Q&A Forum:
"Can capitalism work without a perpetually growing economy?"
We were very impressed with the responses we received, as was the subject of the interview, John Fullerton. He read through the replies and responded himself, answering questions and clearing up some points. Here are some of the highlights:
Russell R NYC pointed out that:
“...So Fullerton is really describing the pernicious effects of free riding with inflationary dollars when he talks about the growth of money driving investments that deplete natural resources. Without inflation, the market would regulate and reduce such investments where the price became too high because of scarcity.”
Fullerton’s reply:
“I have to disagree that I'm really just talking about inflation. I would suggest that markets are very good tools at solving efficiency problems as you have said, this is the beauty of capitalism that we must celebrate and retain. But, markets do not address scale problems. You can have 2 mice in a small room with a block of cheese, or 2000 mice in the same room with the same block of cheese. In both cases there is an efficient allocation of the scarce cheese, but you don't want to be one of the 2000 mice. I hope this helps.”
INET community member wrees laid out some compelling points which show that the growth mentality is genetically hard-wired into humans and that psychology will play a big role in the transition to a steady-state economy.
Fullerton’s response:
“As always, you get right to the crux of the issue. In the maturing economies of the west, we need to shift toward quality, and away from ever more quantity. Just like a human being's growth and development over their lifetime, or any living being for that matter. We need a financial system that fuels this transition, inclusive of the critical feedback mechanisms you call for. While I agree with the decision to not let the financial system simply collapse, we have in the process negated the natural feedback loop that would have perhaps transformed the system to one that is more sustainable (although at unacceptable short term pain). So we have a systems architecture challenge that demands the application of our knowledge of natural systems as Andy Haldane and others understand. But I believe there is also a prerequisite shift in consciousness necessary to drive the transition. Of course the imperative of a shift to qualitative growth is not necessarily the case in many emerging economies, so the challenge is complex.”
There’s still a good conversation happening on the Q&A topic now – be sure to read all the responses, vote on them, and respond yourself if you have an opinion. We are looking to you, the INET community, to help expand our thinking, drawing from your diverse backgrounds and interests.
You can also watch our full interview with John Fullerton here.
Comments
The world are talking about a recent major financial scandals, unfortunately, it's protagonist is China. In addition China has Of both and more than 900 billion U.S. dollars. 30 years of reform and opening up foreign exchange for most family property set in it. Already sent a warning, why not take evacuation measures? Private officials to take kickbacks very simple result.
Hong Kong CPPCC member Liu Meng Xiong financial experts to write Liu Meng Xiong sternly asked about China's fiscal and financial regulatory authorities closed one: bankrupt, how will you explain to the nation? so outrageous decisions have shady, Congress should immediately organize a thorough investigation of the Special Investigation Unit, accountability!. The comment set off a bomb as the busy city, causing the community, especially the strong response of financial as well as the economic sector, but are in the upper high-level economic circle.
subprime mortgage crisis, the United States, the two mortgage mortgage institutions, China, involving the two held a total of up to $ 376,300,000,000 company bonds, accounting for 21% of the total foreign exchange reserves. International economic community as an incredible big scandal.
national data show that since 2004, China held U.S. debt has been growing rapidly, from 2004 to the phenomenal growth of 2007, three times, reaching a high of 922 billion U.S. dollars. Last year, only 2006 to 2007, China's holdings of U.S. bonds increased 66%. In the U.S. subprime mortgage crisis is about to reveal ugly face on the eve of China still had a crush holdings of U.S. bonds to keep generous. Who has such crazy huge foreign exchange reserves of China the right to dispose of, such as dementia, like crazy to buy U.S. bonds?
same Asian countries of India, foreign exchange reserves is very objective, but in India the U.S. sixteen thousand thousand times, almost three trillion Hong Kong dollars. This money into the U.S.
internationally accepted principle that foreign exchange reserves investment principles generally accepted safety first, dispersion is appropriate, but the Chinese monetary authorities to shift more than twenty percent of foreign reserve investment in the U.S. , which is equivalent to most of the eggs in one basket. Current Asian financial crisis, Hong Kong and Southeast Asia property market collapse, but also sudden,
not just in one basket, this is the golden rule of financial investment common sense. Foreign reserve investment principle is safety first, sound comes first, the proportion of fragmented structure of yuan. But we are pretty heavy right by holding the State Administration of Foreign Exchange, Ministry of Finance, the People's Bank of China officials of the black sheep in general, all of these are master's and doctor!
on the red this point, what the Chinese people in India face to laugh! Ask someone to Asan, its almost as big Ah. In the end the scourge of the Chinese who suffer so, no, hit, and become the laughing stock!
joy of spring to what I am always on the grand party, the opening ceremony did not agree what to spend money on posters, it is as good as face into an unprecedented overstating? See their own weaknesses, and worry that he might be rivals early repair and fatal Achilles heel caught more than anything else!
I think: this exposure to financial scandals, in essence, hit the Chinese economy is huge, and the spirit of national confidence against the big, simply to offset a large number of other achievements of our own propaganda aura. This is not a general problem, not even any major mistakes! Can not use the concept of failure, but directly called in the Behind it is a serious dereliction of duty should be the nature of the strategic spy!
Chinese economists are doing, put forward by the so-called mainstream economists on the impact of the implementation of high policy, and finally to who the ultimate beneficiaries, who plunged into a deep embarrassment to it? Those Experts in the end are doing, their bottom line and the true identity of who is in the end?
recent years, offshore activities of interest groups are active in China, activities of foreign interests in China, means many-fold: some familiar with China's national conditions, clever use of all connections, trying to close to the leaders at all levels, commercial lobbying of the relevant decision-making, paving the way for commercial activities; some outside interest groups on the relevant ministries, institutions and scholars to give generous research funds and other means to enable them to use their research results and impact of the so-called foreign multinational group profit, paving the way , the relevant departments of China to influence decision-making and legislation. So China's economic experts and economic officials, many of them rely on group profits, bribery, relying on outside groups to do research funded by domestic and foreign media, carefully wrapped, deliberately to create and provide the stage various activities to improve the visibility, reputation to become industry leaders in China, has a strong voice, paving the way for domestic and foreign interest groups call sign, brokers act as a comprador, over the years have really affected the real sector as well as national economic decision-making.
I always think that the national economy in recent years, such a strange phenomenon and secretive behavior, love of money is much more than the surface of experts, officials of dereliction of duty so simple, it should be opponents and hostile forces abroad carefully planned and tireless efforts, their strategies for financial success spy. This shaking of the U.S. bond scandal, but also strengthened my judge China's national conditions, therefore, continue to wait for all-round short time limit down.
Attached: the United States to die accompanied with the United States, the world's only death, now, decided the outcome can only be God.
words say it?
any over-development of financial derivatives, leverage in-depth understanding of the people, will be issued so pessimistic expectations.
CASS Institute of Finance provides the data show that secondary bond market derivative contracts to be enlarged to nearly 400 trillion, equivalent to 7 times the global GDP, high.
March of this year, I gave head, called the pinnacle of financial derivatives, as it would not be an exaggeration. Subprime derivatives like an inverted pyramid, once the subprime mortgage default rates rise, the risk is multiplied, and with disastrous consequences. However, in practice almost impossible to value derivatives, because there is no active market.
the pulse of the financial markets the most accurate grasp of famous people, and their pessimism, is it out of thin air from it?
CCTV reporter asked when the subprime crisis and the development of the next step, I said:
First, the United States will have more and more financial institutions bankruptcy. Second, the quickly spreading to the real economy, evolved from the financial crisis, the economic crisis. CCTV reporter asked me
subprime crisis which affected China. My answer is:
three implications. First, the subprime mortgage crisis led to the United States, Europe, consumer demand, will reduce the export of Chinese products. Either high or low value-added products, value-added products, the downward trend in exports is difficult to avoid, it is imperative to encourage domestic demand. Second, the subprime mortgage crisis, the dollar will continue to fall, the current commodities are priced in dollars, the depreciation of the dollar means that commodity prices. Meanwhile, a large number of hot money in the expected depreciation of the dollar or the impact of devaluation, will stir commodities, pushing up oil, iron ore and other commodity prices, increasing import costs of raw materials in China. Third, will China's capital market and financial sector implications, the loss of our financial institutions will continue to increase. Meanwhile, a large number of entrenched property of hot money in China, will leave. Therefore, the introduction of the policy can not save the property market, the result can only save the property market is so hot money fled high, will the Chinese economy a devastating blow.
there are many problems, my answer is too sharp, not broadcast, but given the time factor, and no longer add.
do CCTV Oriental Space in this program, the Chinese Academy of Social Sciences Cao Honghui, director of finance by the analysis of the market is very thorough, we subprime crisis and the prospect of harm to the same judge. However, one thing, and I view him differently. Mr. Cao Honghui that, in this sub-debt crisis, emerging markets such as China and India can make a difference. In fact, before this, some experts wrote that: The U.S. subprime crisis is just the opportunity.
I want to say is: It really is an opportunity, but there is a critical problem can not be ignored: China has long strips!
According to public reports: China's foreign exchange reserves of about 1 trillion in U.S. debt, including ABS 2000-3000 billion in bonds, plus the two mortgage companies companies $ 376,Positive and negative electron motion to convert miscellane,000,000,000 debt (according to the U.S. Treasury and the Fed in 2007 jointly issued the number one foreign creditors, holding 376 billion U.S. dollars of corporate bonds), foreign exchange reserves even at least more than 500 billion U.S. dollars in subordinated debt!
7 16, I was, , large potential risk. The report shows that from 2004 to 2007, China's holdings of U.S. securities from $ 341,000,000,000 to $ 922,000,000,000 three turned, and the emphasis on bonds. In 2006 to 2007, China held U.S. bonds increased to 32%, while Japan holds the U.S. bonds is only slightly increased by 8%. Be exposed in the subprime crisis on the eve of grim faces, Chinese holdings of U.S. bonds is based on what?
blocked my articles.
But then, our Hong Kong members of the CPPCC National Committee, financial experts, Liu Meng Xiong wrote Liu Meng Xiong asked about China's fiscal and financial regulatory authorities closed one: Now 'two rooms' is basically bankrupt, how will you explain to the nation? So there is no shady outrageous decision, the Standing Committee should conduct a thorough investigation immediately organized special investigation group, held responsible! He said: This is equivalent to most of the eggs in one basket. Current Asian financial crisis, Hong Kong and Southeast Asia property market collapse, but also sudden 'negative equity', owners and banks suffer together, that housing mortgage itself is very risky, even dangerous derivative securities products. Not just in one basket, this is the golden rule of financial investment common sense. Foreign exchange reserves investment principle is safety first, sound comes first, the proportion of dispersed structure yuan. But we are pretty heavy right hand SAFE, the Ministry of Finance, the People's Bank of China officials of the black sheep in general, all of these are master's and doctor!
about the terrible consequences of the credit crisis, as early as 2007, I passed a large number of publicly available data and information analysis, to conclude: subprime mortgage crisis is a terrible bottomless pit. However, a more systematic and complete data and information more abundant, with more experienced and more knowledgeable and more professional team of government, bank and other relevant departments, but do not see the subprime mortgage crisis, the seriousness of the consequences of it not strange? This is the process in the sub-prime crisis, the relevant departments and banks of policy makers, not only do not see the seriousness of the subprime crisis, but also with the idea of bargain-hunting again and again and again times jumped, hit the muzzle. If this approach can still be forgiven simply because the stupid, the question is, if it is intentional it?
how the introduction of these decisions? Why do many decisions against China on foreign but is beneficial. Opaque decision-making so that people lose the basic right to know and supervise some of the terrible secret operations so popular.
the most outrageous is that in May 2007, not yet established the China Investment Corporation commissioned its construction Huijin silver investment, 30 billion to buy the U.S. PE firm Blackstone Group, 10% of the total 101 million shares non-voting shares of common stock, the subscription price of $ 29.605 per share. Today, this investment has lost more than half. Not yet formally established a company, even such a big operation. The wealth created by the people do with sweat and blood just like garbage?
in the subprime mortgage crisis, China is extremely tragic loss, so even a chance that China could only stand and watch it flow away, because our quilt or a bad deal huge amounts of money, we have no longer be able to find and seize the opportunity, but a huge worm! - In the hundreds of billions of dollars in wealth lost the battle after being spurned by most can only be a wretch!
now, even if the U.S. subprime crisis has brought opportunities, the Chinese had a chance to protect themselves, the shortage of funds of domestic enterprises, suffer a great deal, a lot of money tied up in U.S. bonds, and some have been down the drain, where's the money grab the opportunity?
the stupid decisions, the amount of staggering wealth in China is used together with the United States buried.
the U.S. financial crisis worsening each of domestic financial institutions and foreign exchange reserves are like flesh, it is difficult to suppress the pain! - If they know how to feel bad people to create wealth is not easy, no pain is the basic function of the loss of words.
in CCTV in an interview yesterday, I highlighted the issue of transparency in decision-making.
our wealth to invest in the United States is based, even given the U.S. rating agency ratings, we fed so many huge team of experts doing? If our rating agencies, research institutions, not the status of the United States related businesses, profitability, potential risks, a full assessment of development prospects, and completely ready-made reference to the classification standards of foreign investment decisions, then our large and cumbersome bureaucratic experts, decision-making team, it should be dissolved, rather than continue to be parasites.
perhaps, only really care about this country, people who care about the future of this nation, the people can truly feel the pain out of hard-earned money to be lost.
in the subprime mortgage crisis spread from the financial sector, real estate, and is spreading to real economy, including manufacturing areas, including the time for anyone without Huitianzhili, we can only accompany U.S. quietly awaiting the ruling of God!
days of sin, still may be forgiven; human sin, can not live! Even if blocked, these words must speak out. National interests above all else, have a conscience who have no choice.
Yes markets are efficient at distributing scarce commodities, and they can fail at scale issues, and the real issue is much deeper.
Markets measure trade value, or scarcity value, the difference between desire and supply.
Markets do not reward abundance.
Abundance has zero economic value. If everyone has all they need, what point trade?
Human beings value abundance.
Markets tend towards a level of scarcity that maximises economic traffic.
To truly meet the needs of people, we must think beyond economic systems, and economic concepts, to building systems that deliver abundance of all essential human needs.
Then we can play as much as we like with economic systems at the margins - for non-essential items.
Essential needs are air, water, food, shelter, communication, education, transport, and health.
Beyond those, all else is choice.
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