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The Bretton Woods 2 system – where China and then the oil-exporters provided (subsidized) financing to the US to sustain their exports – will come close to ending, at least temporarily. If the US and Europe are not importing much, the rest of the world won’t be exporting much.

And rather than ending with a whimper, Bretton Woods 2 may end with a bang. In some sense Bretton Woods 2 has been on life support for a while now. China’s recent export growth has depended far more on Europe than on the US. US demand for non-oil imports peaked in 2006. One irony of the past year is that the US was borrowing far more from China that it was buying from China. Campaign rhetoric that the US was paying for Saudi oil with funds borrowed from China isn’t far off – though it leaves out the fact that the US also borrows from Saudi Arabia to pay for Venezuelan, Mexican and Nigerian oil.

If Bretton Woods 2 ends in 2009 – if US demand for imports falls sharply in the last part of 2008 and early 2009, bringing the US trade deficit down – it won’t have ended in the way Nouriel and I outlined back in late 2004 and early 2005. We postulated that foreign demand for US debt would dry up – pushing up US Treasury rates and delivering a nasty shock to a housing-centric economy. As Brad DeLong notes, it didn’t quite play out that way. The US and European banking system collapsed before the balance of financial terror collapsed. Dr. DeLong writes: All of us from Lawrence Summers to John Taylor were expecting a very different financial crisis. We were expecting the ‘Balance of Financial Terror’ between Asia and America to collapse and produce chaos. We are not having that financial crisis. Instead we are having a very different financial crisis. Catastrophic failures of risk management throughout the entire banking sector caused a relatively minor collapse in housing prices to freeze up global finance to a degree that has not been seen since the Great Depression. The end result of this crisis though could be rather similar: a sharp contraction in credit, a fall in US economic activity, a fall in US imports and a fall in the amount of foreign financing the US needs.* The US government is (possibly) trying to offset the fall in private demand by borrowing more and spending more — but as of now there is realistic risk that the fall in private activity will trump the fiscal stimulus.

Usually, mobile homes are not associated with terms such as long-term quality or environmental friendliness. Now, a professor of architecture at Mississippi State University (MSU) wants to change this. He has developed the concept of the GreenMobile home, an ultra-affordable and ecological-minded, factory-built housing unit. The first prototypes of these homes, which could be used as regular houses or for disaster relief housing, should be built in March 2008. And their cost is expected to be in the $50,000 range. Not too bad, especially if the value of these houses increases in the future as expects the development team. But read more…

Biofuels, once seen as a useful way of combating climate change, could actually increase greenhouse gas emissions, say two major new studies. And it may take tens or hundreds of years to pay back the "carbon debt" accrued by growing biofuels in the first place, say researchers. The calculations join a growing list of studies questioning whether switching to biofuels really will help combat climate change.

The year 2001 brought an end to this, however. The new liberal-conservative government formed separate ministries for transport/energy and environment once again, 3 sea-based wind turbine parks were ditched, land based renewable energy was put in the freezer, energy research and development had their funding cut to almost zilch, and 800 people were made redundant in public environmental administration.