This page has been archived and commenting is disabled.
World Will Feel the Drag of Europe’s Austerity
(Our recent guest commentary, “Britain Becomes the First to Choose Deflation,” drew a heavy response – more than 120 posts in the forum. Here are some further thoughts concerning Europe’s turn toward austerity and the potentially profound impact of this on the rest of the world — even on the U.S., which has yet to heave Keynesian quackery overboard. RA)
A young friend asked me yesterday, “What on earth does negative growth mean?” and I had to laugh because it really is a ridiculous term dreamed up by political economists to put a positive spin on really bad news. I had actually never given the term any serious thought until then. “It means,” I said, “economic contraction and recession.” It really is no wonder the kids cannot figure out what is going on with all the nonsense terminology flapping about.
With France, Italy, Britain, Spain and of course Greece all now seemingly embracing austerity measures to bring their economies into line with EU terms specifying deficits be no larger than 3% of GDP, they are all about to experience “negative growth”. A double dip recession is now hurtling our way and it will affect Canada and our housing markets in a very big way. Britain itself is targeting a debt reduction policy that it hopes will see that country’s massive debt fall to 40% or 50% of GDP by the year 2030. Prime Minister David Cameron has suggested that this will fundamentally change the lives of his countrymen for years to come. He is right.
Some economists and politicians are already spinning this development as a positive change and suggesting that inflation targets and growth objectives can be met while the engine of the economy is put into idle (if not reverse). That is nonsense, of course. And it is a hazard to your financial well being to believe it. We cannot have it both ways. We are headed for a deep correction and should just start telling it like it is. There will not be inflation, particularly if quantitative easing, debt monetization and stimulus are being abandoned. It is Contraction with a capital “C” and nothing less. Negative growth is coming.
Choosing Recession…or Worse
In other words, it spells recession. It is one thing for a single member of the European Union to choose a policy of restraint in order to bring its fiscal house back in order, but quite another when all of the heavy hitters of the EU do so at the same time. We are witnessing a sea-change of events unfolding that to my way of thinking spell a certainty of a global recession if not worse. Yes, that dirty “D” word is on the tip of my tongue: Depression.
The stars are lining up and they all have the same intention. Deficit-slaying to achieve balance, maintain bond ratings, and by so doing cap the costs of interest payments on the debts in which sovereign states are drowning. It may be a good thing, but you know what they say about too much of a good thing: It kills. And in this case, it kills growth. I will not even quibble over the outcome.
This is an important cumulative set of changes, and it has not been commented on enough by the wider media. It is happening with lighting speed, too. All of the countries I mentioned are now turning their backs on stimulus and Keynesian nostrums as solutions to their economic woes. Instead they are embracing pension reform, reductions in public-service spending, tax increases, program cuts, increasing the age of retirement, cuts to social service payments, and looking at national assets that might be sold to raise cash.
Media Missing the Big Picture
There are many business writers out there, and individually they have commented in detail on the policies of one country or another; at other times discussing single announcements such as retail figures, employment, CPI and related indicators of our economic health. They are missing the big picture, though. I think it may be a case of not seeing the forest for the trees. The significance of what is occurring in Europe cannot be overstated because it spells deflation with a certainty when you consider the events in conjunction with credit being restricted around the globe.
I have said before that I do expect a significant stock market correction to take place during June and leading up to the G8 summit — possibly even occurring as an outcome of announcements that flow from those meetings. I may be wrong, but I do suggest to any who are reading this that you take special care of your investments at this time. Being in cash is prudent right now. Backstopping is essential if you insist on staying in the wider speculative markets. Caution should be the order of the day.
The Speed of Events
We are getting signals weekly out of Europe that change is in the wind – signals that would be perilous to ignore. Europe is about to enter a period that will be marked by a major economic contraction. It will affect every country on earth. None will be immune to the ominous political undertakings there.
As I said, it is a surprise to me, the speed with which these events are unfolding, and it appears to be occurring in the absence of a media spotlight. Perhaps we have become immune or complacent when it comes to bad news? Connecting the dots is all the more difficult with distractions like the spill in the Gulf of Mexico and the Israeli raid on ships headed for Gaza clouding our media horizon and consuming most of the airtime.
We need to stay focused, though. Major events are shaping up in the background that cannot be ignored.
And they are about to bite us from behind.
»
- advertisements -
That EURO buying support has returned ...
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
glad to see a Rick Ackerman posting on ZH!
3 little words:
Baltic Dry Index.
Check out the chart on the service of your choice.
There is a better way....
It is called complete tax structure change.
For both the US and the other developed countries, part of the solution is very simple.
The input costs to production have to be lowered such that its goods and services are priced more efficiently.
What this means is that everyone must pay some tax (broad based as possible).
This means that a consumption tax must replace both individual and corporate taxes.
ie The consumption tax must be no more than 15%....and all other taxes have to be banned.
......................
Many think that the tax take from a progressive tax structure that includes corporate and individual taxes is the only secure means of reducing their deficits.
This cannot be .
Taxes come from those that produce goods and services. This means that sales must increase in terms of volume in particular. This means that prices have to be more attractive.
An economy that eliminates the progressive individual and corporate income taxes and replaces it with a max 15% consumption tax will see its tax producing businesses grow by leaps and bounds. The tax take from the consumption only tax structure WILL dwarf that of the progressive structure in less than 10 years....because the consumption tax economy will be much larger than the progressive tax economy.
Roubini has been pushing the idea of a consumption tax, but only gently. He seems to doubt it can get through Congress.
So...
How is this a "better way"? I'm sure it's a better way for the government to confiscate than have to rely on people to report incomes. But what you call "consumption" is just a transaction. It's just a 15% flat sales tax. And if it's a tax on every point of transaction, then advanced goods can be taxed multiple times as they go from production to consumption. Over time it will subsidize those production processes that have a shorter and less advanced production cycle (while at the same time throwing a massive competitive advantage to those entities that have vertically integrated the supply chain because you can't "transact" with yourself). So what do you end up with? A government that can efficiently confiscate wealth from the productive to the unproductive, an encouragement of consolidation of supply chains to avoid the tax, and an encouragement of less advanced production cycles (the really awesome shit tends to take a lot of steps and inputs like cars, trains, planes, ipods, electronics. As opposed to the service industry that "adds value" by being no more than a cataloguing of stuff service.)
This is very simple....
The developed economies need to become more efficient.
When one examines the tax rates with the BRIC countries where the labor costs are very low....one of the very few areas of further efficiency is taxes....
Also note the tax rates of Singapore....Hong Kong...Switzerland....
And do note that Singapore has a very high proportion of private millionaires.
Hong Kong is not far behind....
.........................................
Legal largesse and taxes are two areas that the US needs to focus...and can focus....
Just as the US formed its constitution which the current crop of polys does not respect....there should be a tax constitution...
It should never be the case that government constitutes the majority of the people's economy...and must be reduced to no more than 15%....
Another area of improvement is the securities markets.
They need to be made more trustworthy in the matter of public participation. This means defragmentation, a worldwide direct access electronic exchange whereby the costs are the same for all participants....ie no difference between large accounts and small accounts....Also information needs to be standardized....as well as listing costs ....etc...
Taxes, legal largesse, and labor have to be smaller components of price.
In terms of just a few firms controlling each sector....this is already happening today....
Efficiency will simply put more wealth in private hands....and less money in public hands....and more money in the pockets of those who are contributing to production by merit....
And this is just the beginning of the list....
......................................
However the core acid test is very simple....
Which economy will be larger than the other in 10 years ?
One whereby the progressive tax take and legal largesse component of price is greater than 50% ?
Or
An economy whereby no more than 20% of the price is comprised of legal largesse and taxes ?
The US and the UK are implementing policies that are akin to chopping down the orchard and expecting more fruit. Trees have to be planted....not cut down...if more fruit is the objective....
Sounds like Mr. Ackerman is channeling Mr. Krugman (to wit the recent ZH post highlighting the Tuetonic drubbing PK was receiving), which is not entirely a bad thing.
Austerity is coming. Managing it so it is properly shared (IOW all of us, not just the usual suspects at the bottom of the economic rung) and so that it does not tip us into a further downslide is the challenge.
Prosecuting the Perps of this crisis would go a long way to helping too.
I feel like we use the phrase "private industry" to imply that they operate without necessity from the existence of government. In the wake of TBTF bailuts, the very idea of what is private has become the domain of the public. There is no more seperation between public and private sectors, aside from a rewards program for a few select banks that are "systemically important."
At the heart of all of this is our fiat currency. And very little is said about the fragility of the US dollar. Aside from taxation, the US dollar lacks long-term credibility. Consider historic gold prices per ounce:
1920 : $20
1935 : $35
1980 : $800
2010 : $1250
Can a fiat currency ever be taken as a serious pledge for the "full faith and credit" of a nation? I hold no notion that the United States government is any less susceptible to the forces of revolution than the Chinese communists. Natons retain their power through complex social contracts developed through generations of humans, whereby the power to tax is exchanged for the assurance of peace and prosperity.
If an institution, such as a government, no longer honors the terms of the contract then the labor side of the balance of power will quickly revolt against the status quo. Greece became a great example of how a nation can unwind around the expectations of austerity. TBTF coupled with massive subsidies has exposed the lie of the fractional-reserve banking systems' debilitating purpose: to extract the value out of an economy by controlling a nations money supply. With the advent of most countries now in the thralls of the Bank of International Settlements, a race to control currencies lies at the heart of the economic question.
We have discovered the shadow banking system ... it is time to begin discussing the shadow government.
Most people want a reasonable amount of happiness in their existence. Very few ever aspire to "rule the world." But every father is faced with the dilema of how to pass his accomplishments onto his children. And each subsequent generation then must balance the costs of opportunity created through a de facto oligarchy that develops to protect ones wealth. Often, the question of the difficult balance between labor and capital is answered in bloodshed.
So far, history tells us that labor only wins when the line between "private industry" and "public sector" dependencies are blurred. It should be clear then, to the studied onlooker that the precarious tug-o-war between capital and labor hit an exponential aggitant with the collapse of the global banking system. And the beast of depravity that has emerged in it's wake carries an implicit guarantee from the government that no matter the cost ... central banking and devalued fiat currencies are here to stay.
Markets can remain irrational much longer than you or I can remain solvent. And that is now the new onus. How to maintain my own solvency in an environment that attacks my sovereignty at every turn?
I look at my balance sheet everyday. I watch with diligent concern. I write my Senators. But the problems of the new system are so dysfunctional that the fear driven public is simply incappable of facing the issue of solvency with any degree of seriousness.
Everyone is unhappy about the "economy" and no one is willing to do anything about it ... except print more money. So I guess, as we watch the Great Experiment cascade into insurmountable deflation, I say to the people, "Let them eat cake!"
I cannot be responsible for them, and I cannot convince them of the 800 lb gorilla. We have become a nation of dependents that seek for solutions from their government, and expect results. Is capitalism dead? Has it breathed it's last breath? Not likely. But the current economic paradigm has replaced capitalism with a fascist state of corporations destroying the wealth of our great nation, destroying the proud history of our accomplishments, and destroying our ability to maintain a position within the global economy to pass our wealth and accomplishments to our children ... a slave would ask himself, is this really the freedom I fought for?
This "austerity = negative growth" campaign from various economists and central banks over the past month has been the positioning for the arguments to be made during the G-20. In fact, the decision has already been made in the back channels. No one goes to these things to discuss anything. They go there to decide. Their lackeys through the back channels have already discussed everything.
This is what the lackeys have come up with... if you shrink your various government balance sheets, the GDP liar statistic is going to be negative from the previous years. The question is "do you want to present the impression that shrinking the government balance sheet is a negative on the mystical growth equation?" Imagine if the answer is yes. For GDP to mean anything and the warnings from various statist economists to mean anything, they have to engineer another collapse along with the fall in GDP from reduced government spending. They have to scare the living shit out of everyone to the point where people BEG for the government to "spend us out of the depression".
The issue that needs to be decided is "who takes this hit this round?" That's the positioning right now. I think they let sovereign debt take the hit so they can default on social welfare promises made decades ago. That's the best one. There's no real property transfer and they get to not pay the surfs people.
You guys need to put on your motherfucker hats and think "how can these guys fuck over the maximum amount of people while consolidating their power this time".
“You can’t just decimate the public sector and assume the private sector will step into the hole,” Blanchflower said in an interview on Bloomberg Television’s “Countdown” in London today. “The danger now is we’re certainly going into a double- dip recession. I think that’s absolutely certain given what’s coming.”
http://www.bloomberg.com/news/2010-06-21/ex-boe-panelist-blanchflower-sa...
The state is a toad that squats on our existence. Decimating the public sector would be a great start. Then stand back and watch the honest economy roar.
Do you think private industry won't squat on you and take everything they can get from you if given the chance? Do you think the energy market won't adjust to soak up any increased purchasing power you might obtain? How does any economy, honest or otherwise, roar under those circumstances?
The economy roared once because we had an abundance of natural resources to exploit. Those days are basically gone. And with it, I think, so are roaring economies. Unless we do what nations have historically done - set out to steal someone else's natural resources.
Unfortunately for private industry, without "Big Brother's" guns, they'll have a tougher time getting much of anything!
"Unfortunately for private industry, without "Big Brother's" guns, they'll have a tougher time getting much of anything!"
I don't think private industry needs Big Brother's guns to drive out competition and enable themselves to set prices pretty much as they please. This would happen very quickly if we decimated the public sector.
I keep telling all the right-wingers lusting over hacking govt to pieces and thinking that they'll slurp up the droppings, that the power that they think that they'll obtain won't exist because it's govt that gives them all that power in the first place!
"We must find new lands from which we can easily obtain raw materials and at the same time exploit the cheap slave labor that is available from the natives of the colonies. The colonies would also provide a dumping ground for the surplus goods produced in our factories."
- Cecil Rhodes, 1853-1902, British imperialist who founded Rhodesia (now Zimbabwe)
And that, my friends, is what we should think of when we hear the term "Rhodes Scholar!"
Recession is a polite euphemism for economic hangover. You go on a drinking binge, you get a hangover.
What a binge it has been!
Yeah but when you stop after a 30 year drinking binge, you don't just get a hangover.
Recession is economic hangover.
Deflationary depression is economic rehab.
I take issue with the deflationistas. How could decelerating the destruction of capital by cutting government spending hurt the economy? The opposite is true. Thought experiment: imagine the expenditures of the state reduced by 90% with a consequent decrease in taxes. Will those resources not be spent by their rightful owners? Of course they will, and invested most likely into profitable ventures. All without state intervention. When have any court economists not preached inflation, which they are preaching now in the guise of warning against the "perils" of deflation? It's a smokescreen for the status quo, a fear-based promotional meme and a Krock of Kretinous Krugmanite nonsense.
Reducing govt spending by 90% without an increase in taxes (ie keeping taxes at current levels) doesn't mean freeing up ressources for the private. It means reducing excess debt. Debt isn't a resource, it's money already spent in the past.
Moreover, it's not as if the private sector (households and businesses) doesn't have excess debt either. Actually, most of the excess debt is in the private sector who is forced to deleverage no matter what.
Alltogether in the West there is at least 150% of GDP of excess debt within the private and the public sector. Give or take a few trillions, that's at least $60 trillion of excess debt. Including interests, that means we'll have to pay back $8 trillion a year for the next ten years to get rid of it. And that's still not freeing up resources for future investments because that's just paying down all the excess debt from our overspending binge of the last three decades.
So when both the private and the public sector are forced to deleverage and by such huge amounts, you can be sure that asset prices are going to fall drastically, so investors are better off holding unto cash and waiting until assets have fallen before investing.
Example: you want to start a small retail business somewhere in Europe. A big chunk of the investment is in commercial real estate, even if it's just a right to lease. Today, those are at least 50% overpriced. Are you better off holding unto your cash for some years and wait until the required investment is half of what it is now or risk to invest 100% now in a depressed environement where private consumption is reduced?
It's true that over the long term, a deflationary depression is the only way to start private investment again. But first we'll have to go through the long painful depression no matter what.
I was in Berlin a few weeks back. The residents laugh that this city has been in recession since the wall came down....yet it is one of the finest cities I have ever visited.
German cities are generally very pleasant, apart from some knots of lowlifes standing and drinking in the parks all day.
I think that what people in Berlin learned is that you can shrink your wants to meet your resources. For the young especially, it's worth it to live in as cool a place as Berlin. You also see this effect in Amsterdam.
A problem in America is that it is hard to shrink your wants. For instance, you must have a car just to live, air-conditioning is more than a luxury, etc. Europe will suffer, but it is better adapted to the coming Big Squeeze.
Yes. Price stability in Berlin has reaped a lot of benefits to the locals. I foresee that the price stability will remain in Berlin as they have good control of rent rises.
There is an incredible dynamic within the city...arts, style and great dive bars. :) It makes Strasbourg and Paris feel like museum cities, which they are more or less.
Ha ha ha.... what a joke. There isn't going to be any growth anywhere, be it china, india, or the united states. The reign of abundant oil has come and gone. No amount of stimulus, welfare, austerity, blah blah blah is really going to matter. Demand destruction is going to strike at every turn as oil makes its final bull run till the last easy to get drop is over.
"The reign of abundant oil has come and gone."
And yet the price of oil has barely changed in five years. Measured against silver or gold, the cost of oil is dropping precipitously.
Not sure how you're figuring, but... The world's current infrastructure was primarily constructed on, and to be operated on, $20/bbl oil. Regardless, less oil means less work; less work means less output, which means less overall growth; if this doesn't sounds like contraction then I don't know what does...
Gold is not a currency at present times.
One big difference it implies is that gold does not have to circulate.
A guy buying gold can hoard all of it if he wishes.
When gold is a currency, the guy can no longer do this. No matter how rich he is, he has to circulate some.
Gold as a currency allows the supply of money control (which is what matters)
Lets circulate gold as a currency against oil to see what happens. You wont see oil dropping against gold.
wait... you think that 70-80 dollars a barrel in one of the greatest depressions this country is going through is cheap? Please look around... these are depressed prices due to demand destruction. If by some miracle, the economy even tries to recover, the price of oil will rise as well to squash any hope of a recovery...
Oil has been at 10-30 dollars a barrel for almost 3 decades. We are over 70 right now in one hell of an economic shit storm. We are in a death spiral. I don't know how much longer people have to prepare for a nightmare scenario that is going to play out as things unfold. I feel sad, but I sleep well because I have prepared the best I could.
It's not yet clear that politicians have given up on kicking the can the furthest they can to try and postpone a deflationary depression with more QE and stimulus.
Of course, we'll get there eventually, because a hyperinflationary death spiral is even worse. But I'll be more certain that our politicians have really chosen the deflationary route once the stock markets have plunged 50% and they haven't done anything to try and pump it back up.
We'll see, but for the time being I still give a 50/50 chance that we'll see yet another round of nonsensical QE and massive stimulus.
I don't think we'll see a third one though, because that one would have to be so massive that it would be a real capitulation.
All those who have claimed that it would be easy for central banks to create inflation when a deflationary depression takes place by printing enough money will be in for a surprise: the only thing they'll succeed is in creating a hyperinflationary collapse, like when you try to shake ketchup out of a bottle and the only thing you get is a big red splash all over your plate.
Also, it is a big problem that the general population and the dumm mainstream media hasn't yet understood what the two alternatives are, a painful decade long of deflationary depression or a sudden hyperinflationary collapse followed by an even more painful economic ruin.
I say it's a problem because I'm not yet certain that in either case we don't get social collapse and revolutions or civil wars.
Let's be at least clear on one thing : a delationary depression is particularly painful for all those who are indebted. A hyperinflationary collapse means all those who've saved are ruined. In both cases that means large segments of the population who may become very very angry...
I've got a nice blanket of cash and gold, so of course I'd prefer a deflationary depression. But I'm not under the illusion that even in that case I'll be able to sleep comfortably at night when the hordes of angry people come looting and blocking the streets.
Good luck to all.
My blanket of cash and gold also has a couple of shotguns with a 6 month supply of food. If the unemployment checks stop going out, I am sure that will be the catalyst that is going to start the party.
Juust like the world felt The USA's Austerity ..... No Doubt Still feeling it!!!
"What on earth does negative [economic] growth mean?”
Scientifically, it is meaningless.
If the entirety of goods in an economy one year comprises 100 pounds of gold and 200 pounds of butter, and the next year it comprises 200 pounds of gold and 100 pounds of butter, then has the economy grown or shrunk? For one who subjectively values gold more than butter, it may seem to have grown; but for one who subjectively values butter more than gold, it may seem to have shrunk.
Even if the entirety of goods in the economy remains constant, and you ask the same person their opinion one year and the next, they may give differing appraisals. There is no means to compare the subjective valuations of two different people or even those of the same person at different times.
For the same reasons, from the point of view of economic science, figures like GDP are nonsense.
GDP calculations suffer additional defects: they cannot possibly be correct as they invariably neglect important economic goods. One such good is leisure. Empirically, leisure is quite important for most people: one chooses to spend a good part of the day producing leisure as opposed to producing widgets. Yet it is not accounted for at all in GDP.
Valuation is situation.
Human production is producing value (not even goods etc...)
All that may be true, but the GDP number is still a number. If it is smaller this year than it was at the same time last year, that would be negative growth, shrinkage. Same thing for any other economic indicator. So long as you compare apples to apples, the change in the size of the number has some significance. Perhaps we can accurately state what that significance is; perhaps not.
Re: Perhaps we have become immune or complacent when it comes to bad news?
Or perhaps, American are so conceited they don't think it matters or so stupid they don't know where this Yerp place is.
True story: Person giving me a haircut asks: Is Paris near France?
"True story: Person giving me a haircut asks: Is Paris near France?"
I was riding on a train in Europe. Two American college students are chatting opposite me. One says that he recently visited Australia, whereupon the other asks "What language do they speak there?"
Boy, those French. They have a different word for everything.-Steve Martin
LOL. I can relate to this, I hear these kind of conversations all the time when I am overseas.
Or you cant spin it, you cant build a decent controversy on it.
If we are heading for a recession/depression, you can spin the consequences, you can build a controversy on the consequences but you cant change where we are heading.
In my book, that is why people are not interested in news pointing at where we go. No matter how controversial they want to be, if we are heading there, we are heading there.
As BRIC and other emerging nation economies surge, the Europe contraction will be offset considerably. Europe's contraction will be "felt" by other nations in that Europe will once again become an inexpensive tourist destination, but not for Americans.
Europeans have been living high on the hog on credit, like Americans, and the tab needs to be paid. No doubt many have enough lard on them to last for the next decade.
Brazil = commodities = leveraged play on developed world consumption.
Russia = commodities = leveraged play on developed world consumption.
India. OK, you may be right there.
China. I hope you are right there.
With India and China you have 2Bn people, mostly dirt poor and unskilled. I'm afraid I cant believe that their economic and political infrastructures are strong enough to survive and counteract a deflationary depression in the developed world. Maybe I need to read more GS research.
Ah well, the famous decoupling theory... We all saw how well that went after the first leg of the deflationary depression in 2008.
In the second leg of the deflationary depression, all assets (equities and houses) will plunge again whether in the West or the emerging economies. In that kind of environement cash is king and I doubt those who have some will want to dilapidate it by investing it in the BRIC in an environement of falling asset prices.
Forget it, the deflationary depression is going to be GLOBAL.
I agree with you. This is the point where the emerging markets take the lead and Europe, Japan and the USA fall back. Global growth will be fine but it will all happen in the emerging economies.
Growth is an oxymoron on a finite planet. I suggest watching Chris Martenson's crash course. Collapse is going to be global and BRIC is going to collapse as well due to the interconnectedness of the whole system. Sorry, no way out. Poverty is the future.
Bullshit!
Growth is very much possible within a finite space. With the exception of exponential growth, you may very well have almost infinite growth within a finite space.
The key word is deflationary growth.
In other words, producing the same amount of goods by using less and less factors of production.
This is the very essence of economic growth theory. Savings invested in capital which increases productivity, this allowing the agents to face the same demand using less, driving down the cost of production and thus prices, which then again increases the value saving.
The only sustainable growth is deflationary growth, and if you study economic history you will find that with exception of the last 100 years the economic progress was very much driven forth by the deflationary process.
I suggest you watch Chris Martenson again, because it seems you just didn’t get the point.....
All kinds of growth are possible in a finite world.
Evidence: the past.
What is not possible is endless growth. Exponential growth only signals that you will hit the bar sooner than later.
PhD: a broad data point: U.S. manufacturing output is essentially same percent of GDP with significantly fewer people.
goooooood deflation.
- Ned
Yes, theoretically possible. Good luck with that. The path from here to there does not exist in our life times.
Perhaps, but given the current state of affaris what constitutes a life time is getting shorter by the minute.
Its not only theoretically possible, its the only sink within the matrix. The system will converge towards it regardless of what Ben thinks or does.
The dam is on the brink of collapse and you better get ready to follow the flow.
Nature is headed towards its preferred state
In a very long term, maybe.
But at present times, it only mean that some segments of the population have to grow poorer.
Does not mean that all of them have to be poor. It also doesnt mean that the richest population can not increase in numbers (of course, not speaking of increase in hundreds of millions)