I remember some years back running into a friend who was a newly-minted PhD in physics and launching into a discussion of turbulence (which I’d suddenly gotten interested in while stirring cream into my coffee). She shuddered and said “Turbulence…is hard”.
Turbulence exists in all kinds of complex systems: the weather, politics, a coffee cup. And it’s particularly noticeable when more energy is introduced into the system whether that energy is in the form of heat, people, or money. Or a spoon.
There’s an interesting post over at macroblog on increasing turbulence in global economic conditions with a note on the use of institutions to facilitate stability. I suspect that any attempt to create more stability in the world economy by influencing the Chinese will depend very strongly on the willingness of the Chinese leadership to be controlled. Fasten your seatbelts. We’re in for a bumpy ride.
Controlled turbulance is even harder. Bumblebees generate vortices with their wings, producing both the buzzing noise and the unexplained lift which the old aphorism attributed to “not knowing they are unable to fly”.
Actually, on a number of the issues highlighted by the BIS annual report referenced by macroblog, the Chinese have been acutely aware of their own financial stability dilemmas and have been trying to navigate them with prudence, given their rather limited toolkit, both for managing macro policy and for reforming and supervising their financial system.