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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.

  To summarize the raw numbers, China’s population is expected to grow from 1.32 billion today to 1.46 billion in 2030, after which it will decline slowly, to around 1.42 billion in 2050.  Its working population is currently around 840 million.  This component of the population will rise in the next ten years to around 910 million and then will decline quite rapidly to around 790 million by 2050.

The graph below shows the composition of China’s population by age group.  Needless to say the most dramatic change is the explosive growth of the over-65 population, followed by the decline in the share of the young.  Another way of understanding this is to note that China’s median age basically climbs over this period from 24 to 45 (which, by the way, may have favorable consequence for long-term political stability).

I don’t have the figures yet from before 1990, but looking at other sources I would guess that China’s working population grew by about 2% or more annually during the 1970s and 1980s.  In the 1990s, as the table indicates, the growth rate of the working population slowed to 1.72%, declining further in the current decade to around 1.42% on average.  The number of working Chinese keeps growing until around the middle of the next decade, and then begins to decline by about half a percent a year.

. Masdar, the oil-rich emirate’s $15 billion renewable energy venture, and Spanish technology company Sener on Wednesday announced a joint venture called Torresol Energy to build large-scale solar power plants in Australia, Europe, the Middle East, North Africa and the United States.

The irony is too rich to leave unsaid: A leading oil producer invests billions in carbon-free energy while a leading consumer of fossil fuels - the United States - continues to subsidize Big Oil while while offering only tepid support for green technology

Torresol plans to build solar power plants using a technology it calls a Central Tower Receiver system. It’s similar to technology used by competitors like BrightSource in that fields of mirrors called heliostats focus the sun’s rays on tower that contains a receiver. In this case the receiver is filled with salt which when heated vaporizes water to create steam that drives an electricity-generating turbine. The company says it intends to have 500 megawatts of solar electricity online by 2012.

Surprised? Don’t be, as Lausten is part of a fast growing trend, if not a paradigm shift of potentially biblical proportions, that has ‘middle of the road' brands salivating, and sophisticated brands worried sick to their designer stomachs: a return to blandness.