We live in a world convulsed by great, and seemingly increasing, instability. Thanks to the delights of 24-hour news channels, we also have legions of analysts and experts to dissect in painful and often erroneous detail the ills of the day. The trivialization of news, the explosion in amount of “information”, the disappearance of traditional forums for expert and reasoned debate all play a role in creating cognitive dissonance: people simply aren’t able to process so much information, and few have the time or inclination to devote themselves to sifting and sorting and researching in order to form rational judgments.
The Blindness of Proximate Causes
Very current is the sovereign debt crisis in Europe, and stubbornly high unemployment in the US. For the past four years, these two issues have been the highest priority of the respective regions and numerous policy cures have been attempted, so far fruitlessly. Yet there are many smart people studying these problems in many different capitals. Why have the answers eluded us?
A part of the problem is that we institutionally focus on proximate causes. A “proximate cause” merely means that the cause is “close” to the problem: A is caused by B, therefore I must treat B. There is a very human tendency to seek proximate causes because, not surprisingly, they are easier to find. Often, they are more amenable to the policy tools governments have at there disposal.
Unfortunately, proximate causes are usually wrong. Not wrong in a “totally misguided” sense: proximate causes are still causes. They are wrong in the sense that the chain of causation – the chain of related and interconnected factors – is almost always much longer and more complex than we would like it to be. By stopping at a proximate cause that is politically convenient or fits our embedded ideological preferences, we run a high risk of failure.
The sovereign debt crisis in Europe offers a good example of a proximate cause leading to a misdiagnosis and mistreatment of the fundamental causes of the problem.
The argument currently goes that the sovereign debt crisis was caused by the profligacy of southern European governments from Lisbon to Athens, their corruption, their failure to make timely investments in productivity enhancement, and generally wasteful public spending. Compounded by the bursting of real estate bubbles simultaneously in various world markets, these factors caused unsustainably high levels of public and private debt.
At this point the narrative usually stops. The conclusion drawn is that it’s all the fault of undisciplined governments and lax regulators. The policy solutions today being imposed from Berlin and Brussels are crafted on those assumptions, and this is the story sold to the public. The “virtuous” North must impose austerity measures on poor southern neighbors as a price for bailing them out. Growth will follow after wage deflation – through unemployment and plummeting incomes – has equalized factor productivity costs between Germany and the south. Yet these governments now find themselves in a classic debt deflation trap, where government revenues fall faster than taxes can increases due to a recession which only gets worse because of the very spending cuts and tax increases the government is imposing. The cure appears to be worse than the disease.
The old Protestant ethic that “pain is good” sells well, but it is right to ask how the asset bubbles formed, and why some countries became indebted but not others. After all, up until 2008, Spain had a lower debt-to-GDP ratio than Germany or France and a modest fiscal surplus. So clearly, the story is incomplete and the solutions based on them – grinding austerity – unlikely to resolve the real problems which are creating the visible symptoms. The large and sustained current account imbalances in Germany play a role, making German banks eager to loan German savings to southern markets and governments, not to mention the obvious deficiencies of the EU’s institutional structures.
The sovereign debt crisis, like all financial crises, has many and complex origins. The model I present attempts to summarize just a few of the key causes that have led, directly and indirectly, to our current level of over-indebtedness in the advanced economies. The lack of a global regulator, the multiplicity of central banks with better or worse regulatory oversight over their markets, the increasing velocity and volume of trading transactions, the growing volume of “fast” money versus direct investment…all of these have played an important role in both America’s and Europe’s asset bubbles, as well as those of Asia, Latin America and Russia.
Another current issue in all the advanced economies is that of ongoing high unemployment. In the United States, the story depends on which side of the political divide you are on. Roughly, it runs on about the evils of outsourcing and de-industrialization; which are in turn caused by wage and productivity imbalances between countries (think $1 per day Chinese workers) and a high cost environment for business due to excessive regulation, corporate taxes and social welfare needs. If you are a Democrat, you would emphasize the first factor, while a Republican would emphasize the second.
Lacking is a discussion of the impact of the increasing automization of the workplace, as computers and robots replace both white collar and blue collar labor. The rise of China narrative is easier to tell than one of global overcapacity caused by the triumph of capitalism and the adoption of the Asian export-oriented growth model by most developing economies. Government waste and bureaucracy are easier to peddle than the inevitable and necessary growth in social provisions due to a rapidly aging population, and how to mitigate that through immigration.
What’s important to realize is that both stories are just that: political narratives which more or less fit the dominant ideology, are easily transmitted and not overly complex. The lack of complexity is a problem: we live in a complex world, and our problems usually aren’t simple or easily solved. There is no lack of experts who are researching and explaining fundamental causes: the failure lies with politics and electorates.
These chains of causality are themselves simplifications – useful to illustrate my point, and as a thought exercise, but open to the same criticism as I just made. I don’t claim that structural unemployment or the sovereign debt crisis can be explained in only these terms or that there are no other factors to be considered. For example, in the sovereign debt model, I make no mention of the demographic challenge in advanced economies which has tended to increase the public sector over time (almost always leading to more public sector debt). But they are a step forward from the ideological nonsense we are currently being fed.
Return to Fundamentals
What are the fundamental factors shaping the world today? What are their characteristics, and how are they distinguished from proximate causes?
Characteristics of Fundamental Factors:
- Long gestation periods: 20 to 30 years;
- Large and wide-spread impacts: effects are global in scale and cross multiple industries;
- Large-scale value creation & destruction: effects are revolutionary, not evolutionary;
- Persistent impact: effects are permanent and require long assimilation periods.
There are today four fundamental factors shaping our world: Capitalism’s triumph, the onset of the Third Industrial Revolution, the revolution in global demographics and the momentous increase in global liquidity. They have been quietly developing for decades and the impact of each one as well as their interactions give rise to the policy challenges that have challenged us for the past thirty years.
The Triumph of Capitalism (a.k.a. “A Ton of BRICs”)
The first fundamental factor is related to capitalism’s historic triumph over communism. Today’s global financial crisis is far from being a sign of capitalism’s imminent collapse (echoes of Marx’s historical dialectic), but rather an affirmation that it is the only economic model in existence. Not even nominally communist nations like China or Cuba pretend to follow orthodox Marxist economic policies anymore.
This is an unprecedented event. For most of capitalism’s history, starting in the late XVIIIth century, it has competed with and been challenged by rival system around the world: feudalism, mercantilism, statist autarky in the 1930’s and communism during the Cold War. The fall of the Soviet Union meant that there were no longer any rival ideologies anywhere, and no sight even of an alternative to it.
Why is this important? Until 1990, about half of the global economy and a bit less than half of the world’s population were outside of the world market. With the fall of communism and the accension of China to the WTO, another 2 billion people suddenly joined the global economy. Most of these nations were and still are too poor to absorb large quantities of consumer goods from the advanced industrial nations; but all have been eager to grow through exports. Another characteristic of these “new” market economies is a very high rate of savings, which suppresses internal demand and the size of the national market. While the US has done well exporting capital goods to these markets, these exports have not balanced the flood of imports, and this situation has led to large and sustained current account deficits.
The rapid industrialization of so many export-oriented nations has created a problem of overcapacity of production. The world’s capacity to produce goods and services has grown far more rapidly than the world’s capacity to absorb goods and services. Advanced industrial economies are no longer willing to support eternal trade deficits and wish to create new manufacturing jobs at home; meanwhile, the new industrial economies are unwilling or unable to stimulate local demand and rebalance their growth away from exports and towards internal consumption. Since the global economy is a closed system, and one nation’s exports must be another nation’s imports, we have a serious problem. Unless we begin exporting to Mars.
Large foreign exchange holdings generated by current account surpluses and high domestic savings rates have also fed into another of our fundamental factors, the extraordinary growth of liquidity. We’ll look at these impacts later on.
Finally, the introduction of dozens of new states implies the creation of dozens of new governments, each with its own treasury, central bank and regulatory agencies. This expansion and fragmentation has increased the cost and complexity of the regulation of global financial flows. It has put an enormous strain on the existing international framework of Bretton Woods, which new structures, like Basel, seem ill-suited to deal with as well. Coupled with the increase in liquidity and the velocity of transactions enabled by the Third Industrial Revolution, the regulatory frameworks have been breaking down with increasing regularity. Each asset bubble has led to the next, with many smaller economies unprepared and unable to deal with the sheer size and speed of the financial flows. Now, even the largest economies are being affected.
The Third Industrial Revolution
Each industrial revolution has been characterized by massive and fundamental changes in the productive economy of the nations which have adopted it. The impact of these changes created clear winners and losers among economic actors and classes, leading to a period of widening income inequality and social dislocation as people and institutions struggled to adapt to the new patterns of economic life.
The industrial revolutions were driven by both technological innovation, but also by the presence of an institutional and economic environment that rewarded innovation and risk-taking, permitting the rapid adoption and proliferation of the new technologies by the marketplace. This is a critical distinction: the First Industrial Revolution originated in England, but most of the key technologies were invented previously in France. It was the English, however, who had the right combination of entrepreneurial risk-takers, financial investors, commercial class and non-confiscatory government to bring the technologies together.
Each industrial revolution has followed a similar pattern, involving three phases:
- Early Technological Development & Adoption: During this phase, a number of key discoveries are made which, individually, are innocuous, but when combined create a disruptive and dislocative force in markets. Gains from the new technology are highly concentrated amongst the relatively few innovators, losses also tend to be highly concentrated amongst a few traditional actors that face disruption and are unable to adapt;
- Rapid Expansion, Maturation, and Internationalization: The new disruptive technology is adopted in the country of origin, leading to revolutionary changes in that economy and a temporary competitive advantage across all markets. However, competitors quickly adopt most or all aspects of the new technology and begin to erode the first mover advantage;
- Exhaustion & Evolution: As the disruptive technology spreads throughout connected markets, and the pace of technological advancement slows, the system becomes “exhausted”, i.e. it is the new norm. Change continues, but is now evolutionary and incremental rather than revolutionary. Gains from the new technology now become more evenly distributed across populations as institutional and social forces are able to adapt to the new system and redistribute earnings.
The First Industrial Revolution was the Steam Revolution. As I mentioned, many of the key scientific advances that enabled it were made in France. But France at that time lacked the liberal economic model, institutional framework and entrepreneurial actors to transform these purely scientific achievements into profitable, productive processes. The English did, and reaped the benefit. Some of the key discoveries of the period included the steam engine, the mechanical loom, the mechanical reaper and the locomotive. The convergence of these technologies in the towns of Northern England and Southern Scotland transformed the British economy and made Britain the workshop of the world.
This revolution in production and distribution generated massive dislocations in the traditional economy. The winners were the capitalists who built textile mills, developed iron and coal mines, built railroads and steamships; the merchants who now marketed these wares across Europe and the British Empire; and the financiers who provided the credit to both capitalists and merchants. The revolution created an entirely new social class, the capitalist bourgeoisie, and concentrated wealth in their hands to an unprecedented degree. But during the period, the capitalist and middle class never represented more than 20% of the population even in Britain, and were far less in other “advanced” economies.
The losers were the agricultural workers displaced by mechanization, the small family spinners and weavers who had supplemented their incomes with piece-work, but who could no longer compete with the steam-driven factory looms; also the aristocrats who depended on traditional rents from their estates and failed to invest in the new industries. The native populations of the colonies were also losers, as the new technologies exacerbated the imbalances between European states and native kingdoms.
This First Industrial Revolution gestated over a long period, from the 1780’s to the 1830’s. By then, all the key pieces were in place for Great Britain, but no other nation had more than a few miles of experimental railroad track. By the 1850’s, however, railroad mileage had exploded in France, Prussia, Belgium, the Netherlands and the United States, and all of these nations were industrializing along the British pattern. Already, the dominance of British manufactures was becoming a relative one rather than an absolute.
By the 1870’s, the original technologies had exhausted themselves and technological change become gradual, gains incremental. Germany, the US and France had all emerged as major industrial rivals to Britain, while second tier nations like Italy, Austria-Hungary, Russia, and Sweden were actively fomenting and developing similar capabilities. At this point, a set of new technologies emerged to drive the next wave of change.
The Second Industrial Revolution introduced assembly line mass production and mass consumption. Both new technologies and new techniques of manufacturing vastly increased the productive capacity of factories over the traditional mills, resulting in a very long period of stable or falling prices for manufactured goods as per unit costs plummeted. This decline in prices, coupled with the expansion in employment and gradual improvement of wages, led to the phenomenon of mass consumption. Even poor industrial workers could now begin to consume some of what they were producing. This relentless expansion of internal and external markets drove the policies of the Age of Empire.
The technologies that fueled the second revolution began to be discovered in the1850’s, while the First Revolution was still at its height. The Bessemer Process revolutionized steel production and along with improvements in other building materials allowed the construction of New York skyscrapers and the Eiffel Tower; assembly line production, time studies, electrification of home and workplace, advances in the chemical industry, the internal combustion engine, radio and telephony all contributed to a new surge of revolutionary change a wide variety of traditional industries, as well as creating new ones. Time and distance collapsed as never before thanks to the steam engine, motor carriage, and wireless communications.
By the 1890’s, these technologies had converged in Germany and the United States, to produce the chemical, steel, and oil giants that dominated the end of the century. The United Kingdom and France kept up and stayed in the “Great Powers” club, but second tier powers like Italy, Austria-Hungary, and Russia struggled. Japan for the first time joined the club of industrial nations and before the period ended, had developed enough industrial strength to defeat the Russian Empire in a European-style war. Disparities in power between nations were accentuated: this allowed the United States to dismantle Spain in the 1898, while the Russian steamroller could be said to have been defeated as much by Krupp and I.G. Farben as by German grenadiers in 1917.
Between 1920 and 1950, all the major industrial nations we know today had caught up to the leaders as the technologies reached maturity. Even China and India had small, but growing industrial sectors.
The Third Industrial Revolution is the digital revolution and its guiding principle is Moore’s Law. Simply stated Moore’s Law predicts a doubling of computing power every 18 months with a consequent fall in costs per unit of processing power (gigahertz) and data storage (gigabytes). This seemingly simple explanation has profound implications which can best be represented graphically:
The digital revolution began in the 1940’s with card ordering machines representing the first simple computers. The development of transistors, microchips, personal computers, internet, satellite communications, lasers and robotics followed, and all combined in the United States in the 1980’s and ‘90’s to produce the next revolution. The impact of the digital revolution has profoundly impacted almost every aspect of the economy and society on an unprecedented scale.
The military applications of these disruptive technologies allowed the United States to win the Cold War and obliterate the Iraqi military – the fourth largest in the world at the time of the First Gulf War – while suffering less than 200 casualties. This was a historically unprecedented rout and a massive, though temporary rebalancing of the balance of power. Technology had finally trumped the numerical superiority of the Soviet Union.
The economic impact has been equally profound. Advances in computing, data storage, communications and robotics have fundamentally changed how we do business, and led to large, sustained gains in US productivity throughout the 1990’s. At the same time, however, these technologies have eliminated many jobs traditionally done by human beings – jobs that have not been outsourced, but will never come back either. The revolution in communications has been equally profound: never before have so many humans been so interconnected so cheaply, to the point where traditional definitions of “place of business” and “place of residence” have lost their old relevance. With the right equipment, one truly can live and work in the Sahara or Vanuatu.
Winners in this revolution include the entrepreneurs and investors in the new technology firms, most notably in Silicon Valley. But efficiency gains have been widespread across many industries, allowing companies in a variety of business to improve profitability and productivity with the same or fewer workers.
The main losers have been industrial blue collar workers and white collar administrative workers. In the one case, factory robots have automated factory floors and eliminated as least as many jobs as China. Computers have also replaced office workers in purely executing routine and repetitive tasks that once paid decent salaries. Certain traditional industries have also been more disrupted than others – just think of the massive disruption to print media and publishers. Those most affected are workers without the skills or education to adapt to the new high-tech job market.
For the moment, the digital revolution shows little signs of slowing down. The doubling predicted in Moore’s Law may now take 24 months instead of 18, but advances in exotic materials, superconductors and nano-manufacturing promise a whole new generation of computer chips that could operate on the atomic level. This exponential trend is so powerful, that within our lifetimes we will have to deal with questions that challenge the basis of human society: artificial intelligence, cybernetics, the “end of work”.
We cannot foresee the onset of the “exhaustion phase” in the near future. Our institutions, our societies, and human beings themselves are not capable of dealing effectively with changes so rapid and profound. The implication is that instability, inequality and global disequilibrium will continue and indeed accelerate.
To complicate things further, we are already on the cusp of the Fourth Industrial Revolution. It will be driven by our advances in biotechnology, genetics, nanotechnology and materials science. It is difficult to predict when the necessary “critical mass” for revolutionary take off will be achieved, but we are talking years not decades. The changes in the fourth revolution promise to be as profound, wide-spread and persistent as the Third, and could conceivably call into question our existence as a species. Homo sapiens superior? We approach the realm where science fiction becomes science fact.
The Dual Demographic Challenge (a.k.a.” No Country for Old Men” and “The Young and the Restless”)
The advancements in agriculture, biology and medicine have permitted the human population to surge far beyond any historical precedent. The 1940’s saw the advent of mass market antibiotics; the 1960’s saw the Green Revolution in agriculture. The pace of medical advances continues as new insights into genetics promise to revolutionize the entire science of disease treatment. Consequently, there are more people alive today than have ever lived throughout human history. Increases in the food supply, life expectancy and decreases in infant mortality are such that global populations have not only been doubling, but the time between doublings has been decreasing. Both the rate of growth and the absolute population have reached unsustainable levels.
This mass of humanity requires ever greater food supplies, leading to habit loss, species extinction, and environmental degradation. The juxtaposition of population explosion, the digital revolution and the triumph of capitalism has led many of the burgeoning millions to join the global middle class. This is all to the good in the fight against global poverty, but the middle classes consume far more of everything than the poor do, with predictable results on demand, supply and prices.
For many products and services, this is not much of a problem: haircuts, cement, even iPhones can be produced in almost unlimited quantities given time. Not so easy to expand is the production of products dependent on scarce inputs or short-term production limits: energy, rare earths, food. There are only so many fish in the sea, and the amount of tillable earth is close to constant – and agricultural production is no longer expanding faster than population.
Increasingly, one of the most challenging problems is the scarcity of good jobs. China, for example, must grow its economy at 8% per year to find adequate work for the roughly 100 million new workers that arrive in its factory cities on the coast from the interior.
What makes this a dual challenge? Population growth has not been evenly distributed. Developing economies are confronted by a mass of unemployed youth entering the workforce and clamoring for jobs. There are far more warm bodies than jobs, which can lead to disenchantment, pressure-cooker political instability, extremism, violence and terrorism. Meanwhile, developed economies face aging populations drawing down savings and investments, dependent on public finances, and not enough young workers to support them. This severely strains public finances as well as causing intergenerational strife.
The challenges of demography can be clearly seen in a nation’s population pyramid. This is the distribution of inhabitants by age and gender, which can be projected with remarkable accuracy far out in the future. Below are a series of population pyramids for the United States, the European Union, China and India. They show the 2010 population distribution and the 2050 distribution, barring unpredictable events.
These charts are revealing: both the EU and China face demographic “cliffs”: a rapidly aging population and a very low birth rate, leading to lots more pensioners than workers by 2050. This situation is well-known regarding Europe, but almost astonishing for a “young” nation like China. Here, the fruits of the communist regime’s One Child policy can be seen. India has a “typical” young nation pyramid: loads of young workers and very few pensioners. A high birth rate means that the base of the pyramid will remain robust even as the population ages. The US does not have a high birth rate; in fact, among non-immigrant Americans it is similar to Europe’s. However, the greater openness of the United States and high immigrant birth rates means that the US has the most sustainable population pyramid of any developed economy.
The obvious solution for countries facing a demographic cliff is to foster immigration from the “young” countries to “old” ones. This would provide an escape valve for developing economies while helping fund the public pensions systems of the advanced nations. Obvious is not the same as easy. Immigration is one of the thorniest issues facing electorates today. Unless workers are very short-term, like migrant agricultural workers, or else very culturally similar, like Italian workers in Germany, then the problem of assimilation, racism and religion become critical.
Countries that are able to receive and assimilate large numbers of immigrants peacefully will maintain a competitive advantage over those that cannot. Canada and the United States consistently top the charts of both the preferred location for immigrants as well as the most successful in assimilating them. Europe also ranks high as a desired location, but far behind North America in terms of assimilation of immigrant populations. The current economic crisis and its long-term effects will strain relations between Europe’s host populations and minorities. Finally, Japan and China remain largely closed to outside immigration for cultural and political reasons; in fact, China remains a net emigrant nation.
The Liquidity Tsunami
Historically, liquidity was in very short supply. Barter economies were notoriously inefficient: there was only so much one could do with one’s barley, hogs or lumber. Convertibility, transportation and storage were insurmountable difficulties until someone came up with the concept of currency. The introduction of metal coins as a means of exchange was a gigantic leap forward, but even then there were limits. Precious metals, by definition, have never been abundant, and authorities not only had to deal with short supplies of silver and gold, but also debasement of the coinage, hoarding, the loss of coins to exports, and other fluctuations in the money supply.
Mercantilism evolved specifically to deal with the problem in money supply arising from a fixed quantity of specie and a balance of payments problem. Even as European powers were struggling to prevent imports and foment exports, the merchant states of the Atlantic and Mediterranean were slowly building a network of commercial and banking relationships that permitted the flow of international credit facilities. These non-metallic instruments, like bills of exchange, were first developed by the Renaissance bankers of Italy, and depended on the growth of international trade to increase contacts between trading partners and thus develop the demand for these instruments as well as the necessary level of trust to make them possible.
The history of financial innovation has been the history of financial bubbles as well. Once credits not tied to a metallic standard became common, so did the opportunities for speculation. Lest one think that financial panics are a modern phenomenon, there is ample evidence of bubbles, panics and crashes going back to the XVIIth century Dutch Tulip mania, the South Sea Bubble, the Mississippi Company Bubble, and the panics of XIXth century capitalism that occurred with disturbing regularity and leading to the Great Depression.
In modern times, we have also been plagued by a rash of bubbles and manias 1980’s, beginning with the threat of Latin American defaults which was put off and finally resolved by the Brady Plan of 1989. The Mexican ‘Tequila’ Crisis, the Asian Crisis, the Russian-Brazilian Crisis, the Dot.com Bubble and the Great Recession have followed each other and been influenced by each other. Underlying these is the relentless growth in liquidity.
The funny thing about capital is that it is very mobile and always seeking a return. Advances arising from the Digital Revolution, coupled with innovation in financial instruments, have radically increased the velocity and volumes of monetary flows. These flows have become too much for central banks to handle, the regulators are being overwhelmed by the financial tsunami. World money supplies have been rising much faster than GDP for years. Meanwhile, the Bank of International Settlements publishes the notional value of the world’s derivatives at $648 trillion at the end of 2011, but other sources estimate that the true notional value could be twice as high. For comparison, global GDP is approximately $60 trillion.
Students of physics can tell you that force equals mass times acceleration. The mass of money has been increasing exponentially; the velocity of money has also been increasing due to ever faster computers, more sophisticated trading software, and more connected financial centers. The force with which monetary flows can impact an open economy is now unprecedented.
In the 1990’s, a run on the Thai baht was transmitted to neighboring Pacific Tigers in a matter of hours, too quickly for monetary authorities to interpret and react to the situation. Automated stop-loss programs can create massive market losses in a matter of minutes, forcing regulators to shut down trading with increasing frequency. Private money flows can overwhelm the currency reserves of even large nations. Asset bubbles can grow to historic heights with staggering rapidity.
The inexorable growth of money and the equally implacable demand for an ever higher return has overwhelmed the old safeguards established by the gold standard and Bretton Woods. Global imbalances are exacerbating the situation. Large, sustained current account imbalances create large, sustained capital flow: the growth of the global middle class and the world’s dependence on fossil fuels is contributing to very large flows from energy importers to energy exporters. The demographic challenge between emerging and advanced economies contributes to the imbalances in savings and consumption. The Triumph of Capitalism means many more open markets for investors and speculators. Today, there is no global lender of last resort, no regulator to moderate the volatility of capital markets.
The World Has Moved On
It is said that militaries always plan to fight the last war. The same can be said of politicians. They hark back to “the good old days” when things were better, and promise to recreate the conditions of the past. Sound bites and simple narratives are always easier to transmit to the electorate.
We all intuitively know that these promises are empty, but too often we let ourselves be deceived by them. It is tedious and time consuming to sift through the news reports, conduct research and come to conclusions about what the issues really are, or should be. But a facile adherence to the simplistic argument and the short-term solution is certain to lead to disaster.
We need to think about resolving the problems of the world our children will live in, not the one we are living in now. That requires understanding the deep currents that are at work in the world, and the capacity to predict causes, effects and reactions 10, 15 and 20 years out. Above all, it is imperative to accept that the past is unrecoverable: the world has moved on.
Sources and Notes
 How I lament the disappearance of the MacNeil-Lehrer Report and the McLaughlin Group!
 Greece, for example, has experienced a fall in GDP of 18.9% in the past 4 years, and is forecast to fall by another 4% in 2013. Unemployment has tripled from just over 8% in 2007 to over 24% in 2012. Eurostat data.
 This model is not exhaustive or meant to represent all possible factors involved in the sovereign debt crisis, which vary country-by-country.
 Hobsbawm, Eric, “The Age of Capital: 1848 to 1875”, Orion Publishing Group Ltd, 2010 edition, ISBN 9780297865285
 Taken from Eric Hobsbawm’s “The Age of Empire: 1875 to 1914”
 U.S. Bureau of the Census, International Programs, International Data Base, World Population Data
 Jeffrey, Terence P., “Still the Land of Dreams: 150 Million Want to Immigrate to US,” CNS News, 20 April 2012 and Mourdoukoutas, Panos, “Why China’s Rich Want To Immigrate To America,” Forbes, 11 September 2011
 Vigdor, Jacob, “Comparing Immigrant Assimilation in North America and Europe,” Civic Report No. 64, Manhattan Institute for Policy Research, May 2011
 Clipping and washing to reduce the metal content of a coin were endemic; even more so was the government itself issuing coins with less metal content to make the money supply “stretch further”
 The Crown of Spain had many loans guaranteed by the yearly treasure fletes that arrived from the Americas. The failure of a treasure fleet from storm or hostile fleets could result in the default of the Spanish treasury (1557, 1575, 1596 and 1607 are examples)
 Cohan, Peter, “Big Risk: $1.2 Quadrillion Derivatives Market Dwarfs World GDP,” Daily Finance, 09 June 2010