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Is the era of cheap money over?

David Frum: The era of cheap money is not over, but it will soon be over.

We had what has aptly been called a global savings glut that started in the middle 1990s and that has lasted to now. And it has been driven above all by the extraordinary economic rise of Asia, so that people in countries like India and China, had much more wealth than ever before combined with extremely primitive and unreliable financial systems in a nation. So they had more wealth and they didn't have good places in which to put it, and it was very difficult for Asian societies to tap the savings of their own country.

And so what we ended up doing was accumulating a lot of savings in places like central banks in these sovereign--let me start that again.

The era of cheap money may not be over, but it is going to be coming to an end. We had in the 1990s more savings worldwide than there are good places in which to put savings and there was an immediate demand for consumption with this huge accumulation of wealth in Asia and China and India, coupled with very poor institutions in places like China and India, for people to save their money.

Now, what is going to be happening is, as the planet ages, we are going to shift from being a planet of workers and savers to being a planet of consumers. And we are going to find that there are more and more demands for the accumulated wealth as we have to pay the pensions, not just of aging Americans and not just of aging Europeans, but of, again, Chinese. China is also a rapidly aging society.

There are going to be huge demands on medical care. Not everybody in the world is going to be able to pay for their own medical bills. Governments are going to step in. And so we are going to be moving into an era in which capital, having been very abundant, it's going to find it's got all kinds of new demands on it in the form of immediate consumption.

Question: Are you saying the world is shifting towards consumer-based economies?

David Frum: Look, when you are 40, what you are presumably doing, if you're making good decisions, is consuming less than you earn because you're going to get old, you may get sick, you have children to raise. So you earn a certain amount and you consume rather less.

And what also then happens is you get taxed, and if your government is doing its job right, it is not immediately consuming everything it taxes, it is also finding ways to put that toward investment, whether putting it in trust funds for future pension claims or for roads and bridges, those also represent wealth, they contribute to society's ability to create wealth in the future.

Now, you're 70. When you are 70, you are almost certainly consuming more than you earn because you've reduced your work effort and your demands. Not only do you need a pension, but through your demands on the health care system, you're probably consuming more.

A society with a center of gravity, where there are a lot more 40 year olds than there are 70 year olds, is going to be saving more than it consumes. A society in which the proportion of 70 year olds is growing rapidly is going to be one that consumes a lot more than it's able to save. Well, every country in the developed world, and many in the underdeveloped world, are going to be looking like more of countries of 70 year olds in the near future than they are as countries of 40 year olds. And that is true not just in the United States, not just in the developed countries, but in China as well.

Question: What does that mean?

David Frum: What does that mean? If you're a Norwegian pension plan, your members have been contributing to now more than they need to receive in return. And you've been taking their contributions and you've been looking for investments all over the planet and every year you are buying more investments than you are paying out in benefits because most of your members of the pension plan are in their 40s.

Now, fast forward to a world in which most of the members of your pension plan are in their 70s. Each year they're going to be cashing out more from the pension plan than they're paying in. So if you're a Norwegian pension plan in 1995, you are buying more than you're selling; if you're a Norwegian pension plan in 2025, you will probably be selling more than you are buying. And so, whereas in the 1990s you had a lot more savings and there were business opportunities, and so interest rates were low, in the 2020s there are going to be a lot more business opportunities than there are savings.


Recorded on: May 5 2008




No, but soon.

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A "very massive star" in the Kinman Dwarf galaxy caught the attention of astronomers in the early years of the 2000s: It seemed to be reaching a late-ish chapter in its life story and offered a rare chance to observe the death of a large star in a region low in metallicity. However, by the time scientists had the chance to turn the European Southern Observatory's (ESO) Very Large Telescope (VLT) in Paranal, Chile back around to it in 2019 — it's not a slow-turner, just an in-demand device — it was utterly gone without a trace. But how?

The two leading theories about what happened are that either it's still there, still erupting its way through its death throes, with less luminosity and perhaps obscured by dust, or it just up and collapsed into a black hole without going through a supernova stage. "If true, this would be the first direct detection of such a monster star ending its life in this manner," says Andrew Allan of Trinity College Dublin, Ireland, leader of the observation team whose study is published in Monthly Notices of the Royal Astronomical Society.

So, em...

Between astronomers' last look in 2011 and 2019 is a large enough interval of time for something to happen. Not that 2001 (when it was first observed) or 2019 have much meaning, since we're always watching the past out there and the Kinman Dwarf Galaxy is 75 million light years away. We often think of cosmic events as slow-moving phenomena because so often their follow-on effects are massive and unfold to us over time. But things happen just as fast big as small. The number of things that happened in the first 10 millionth of a trillionth of a trillionth of a trillionth of a second after the Big Bang, for example, is insane.

In any event, the Kinsman Dwarf Galaxy, or PHL 293B, is far way, too far for astronomers to directly observe its stars. Their presence can be inferred from spectroscopic signatures — specifically, PHL 293B between 2001 and 2011 consistently featured strong signatures of hydrogen that indicated the presence of a massive "luminous blue variable" (LBV) star about 2.5 times more brilliant than our Sun. Astronomers suspect that some very large stars may spend their final years as LBVs.

Though LBVs are known to experience radical shifts in spectra and brightness, they reliably leave specific traces that help confirm their ongoing presence. In 2019 the hydrogen signatures, and such traces, were gone. Allan says, "It would be highly unusual for such a massive star to disappear without producing a bright supernova explosion."

The Kinsman Dwarf Galaxy, or PHL 293B, is one of the most metal-poor galaxies known. Explosive, massive, Wolf-Rayet stars are seldom seen in such environments — NASA refers to such stars as those that "live fast, die hard." Red supergiants are also rare to low Z environments. The now-missing star was looked to as a rare opportunity to observe a massive star's late stages in such an environment.

Celestial sleuthing

In August 2019, the team pointed the four eight-meter telescopes of ESO's ESPRESSO array simultaneously toward the LBV's former location: nothing. They also gave the VLT's X-shooter instrument a shot a few months later: also nothing.

Still pursuing the missing star, the scientists acquired access to older data for comparison to what they already felt they knew. "The ESO Science Archive Facility enabled us to find and use data of the same object obtained in 2002 and 2009," says Andrea Mehner, an ESO staff member who worked on the study. "The comparison of the 2002 high-resolution UVES spectra with our observations obtained in 2019 with ESO's newest high-resolution spectrograph ESPRESSO was especially revealing, from both an astronomical and an instrumentation point of view."

Examination of this data suggested that the LBV may have indeed been winding up to a grand final sometime after 2011.

Team member Jose Groh, also of Trinity College, says "We may have detected one of the most massive stars of the local Universe going gently into the night. Our discovery would not have been made without using the powerful ESO 8-meter telescopes, their unique instrumentation, and the prompt access to those capabilities following the recent agreement of Ireland to join ESO."

Combining the 2019 data with contemporaneous Hubble Space Telescope (HST) imagery leaves the authors of the reports with the sense that "the LBV was in an eruptive state at least between 2001 and 2011, which then ended, and may have been followed by a collapse into a massive BH without the production of an SN. This scenario is consistent with the available HST and ground-based photometry."


A star collapsing into a black hole without a supernova would be a rare event, and that argues against the idea. The paper also notes that we may simply have missed the star's supernova during the eight-year observation gap.

LBVs are known to be highly unstable, so the star dropping to a state of less luminosity or producing a dust cover would be much more in the realm of expected behavior.

Says the paper: "A combination of a slightly reduced luminosity and a thick dusty shell could result in the star being obscured. While the lack of variability between the 2009 and 2019 near-infrared continuum from our X-shooter spectra eliminates the possibility of formation of hot dust (⪆1500 K), mid-infrared observations are necessary to rule out a slowly expanding cooler dust shell."

The authors of the report are pretty confident the star experienced a dramatic eruption after 2011. Beyond that, though:

"Based on our observations and models, we suggest that PHL 293B hosted an LBV with an eruption that ended sometime after 2011. This could have been followed by
(1) a surviving star or
(2) a collapse of the LBV to a BH [black hole] without the production of a bright SN, but possibly with a weak transient."