Full World

Something strange happened in the mid 1990s. Liquidity- especially that controlled by the more ballsy investment houses- began moving into the developing world, rather than camp out in its normal homes stateside looking for reinvestment. This liquidity especially enjoyed going to Southeast Asia, and formed the precarious foundation of the "little tigers" that arose there. It came down in a big thump, of course, but the inner question- in my mind- is why they abandoned the traditional market in the first place.

Since the East Asian Financial Crisis, that free-floating global capital has been like a fleeing Frankenstein monster set afire, running back and forth from industry to industry, chased by a mob only it can see. The late Dot Com Bubble, the Real Estate Bubble, the so-far successfully mitigated China Bubble . . that Creature gets around.

Economists disagree about what causes financial bubbles, but it's easy to define it as "too much given to too little". Money, after all, is supposed to represent value. The problem here is that the judgment call of "value" is not lining up with what the real world thinks is worthwhile. That's what makes that monster so skittish. When we get an idea of how the values are going to realign, we not only have a better handle on the future, but we are in a better position to make a whole lot of money.

Money represents stuff. It's a given, but it assumes a constant demand into the future and a constant influx of materiel. What happens when we don't need -or even want- more stuff? It can happen, even to Americans. Furthermore, you aren't guaranteed an infinite world. The Earth is a (relatively) tiny globe of silica and iron floating about in space, not a blue dome maintained by Jehovah. Even if it were, you can't trust the landlord with maintenance a lot of the time.

What happens is that you don't have such an overwhelming interest in making things that make other things, i.e., capital. When you lose interest in that, weird things happen, because capital is very important. We call it"capitalism" for a reason. When the ratio of capital to resources drops, the capital is deflated in real value, and an awful lot of money floats away from the value it was supposed to represent, looking for a bubble to fasten onto. There's that pesky monster again.

It's not a particularly new monster. Locally, this sort of thing has happened all the time- and I do mean all the time- throughout history. There are two things right now that make the monster a lot scarier: one, that the money is so liquid that it presses against the definition of the word "money"; two, the world, unlike a nation, does not have a Federal Bank Chairman.

Ultimately, the safest economic activity will be in those industries that can find resource value in capital. These go all the way from mining old dumps for strategic metals to mining asteroids, or setting up a power grid based on home-unit energy production (imagine a neighborhood where each house gooses the flow of the grid), or something no one has thought up yet. Closed world economics involves a different type of thinking, but it doesn't mean that there isn't money to be made.