When economists reach a Copernican moment

How will the world’s present financial system end? Will it be with a bang or a whimper?

Increasingly, central bankers and ex-central bankers are coming out of the woodwork by saying that it’s going to end in a bang. The latest one is Mervyn King, ex-Governor of the Bank of England in today’s Sunday Telegraph. And, they say, it’ll be a bang that’s far worse than the 2008 Catastrophe because the indebtedness of the world is so much more lopsided than then. The big commercial (High Street) banks of the West — four in this country, two in most European countries and nine in America — are all on the cusp of bankruptcy with few reserves, and they’re all deeply interconnected.

However, it could all end in a whimper many years hence if the banks continue not to do what their governments have been desperately beseeching them to do for the past seven years. Lend much more money than they have been doing in order to get their economies moving again. But no, despite being rescued by their governments between 2008 and 2014, the major Western banks are still only going to lend prudently. After all, it was lending imprudently that caused the 2008 affair ! They’re bot going to be caught with their trousers down again !

Which will happen? Who knows? Take your pick. Either way, millions of people will lose their jobs in America, Japan and Europe, either very rapidly or over many years — and automation will continue taking over. The world’s economic system will adjust itself to maximum efficiency (‘Least Effort’) accordingly — not to a level of activity that governments and their economic advisors would like — but according to the laws of physics, how much energy is injected into it and how much less energy is required by successive designs of automata.

In either case, economists will have to be as brave as Copernicus when he said that the earth went round the sun. In other words, man’s economic system will finally be seen as subservient to the world’s physical and ecological environment, not superior to them.

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