Physics-Inspired Analysis of the Post Pandemic Global Economic System (Dec 2024)

International trade creates a closed-loop system of monetary and resource flows. In physics terms, one can think of the world economy as a closed system where certain quantities are conserved. For instance, a country’s trade surplus must equal another’s deficit, so globally current accounts sum to zero – one nation’s exports are another’s imports. This is analogous to a conservation law: if trade relationships are symmetric and stable, total inflows and outflows balance out across the system. Before 2018, major trade relationships exhibited a form of equilibrium (or symmetry) through large, offsetting imbalances. The United States ran persistent deficits (net inflow of goods, outflow of capital) while China, Germany, and other exporters ran mirror-image surpluses. The table below shows current account balances for key economies as of 2022, illustrating these conserved flows in the aggregate: Economy2022 Current Account (USD bn)Notes (Trade Position) United States–944 Large deficit (...