US President Barack Obama was elected on a promise of change and then kept Larry Summers on to manage financial fairytales. When the Wall Street facade cracked wide on Sept 18, 2008, Hank Paulson, then US Treasury secretary, walked up to the White House microphone and said he "had been dealt a hand" that went back before his time, forgetting to mention that time was when as head of JP Morgan he avariciously rewarded himself and his cronies while suckering genuine investors into toxic loans.

Let's naively ask the emperor the naked truth: In such crises, why are holes of hundreds of billions of dollars plugged with new bills of 1 trillion dollars made out of thin air? Why call in financial wizards who stuffed up the market while stuffing their pockets to provide solutions like "let's print more money".

In the US, the first $800-billion economic stimulation package was cavalier and no one asked where it came from. A year later another $600 billion, this time euphemized as "quantitative easing", was issued as stimulant. The eurozone has been a little more rational, with the pragmatic Germans trying to get the peripheral states to toe the line. And China has been supportive, not least because it wants a coherent European market.

Every good government tries to act rationally. After the chaos of the first half of the 1900's, ridden with rampant corruption, starvation, wars and hyperinflation, the Chinese have been frugal during their recent 30 years of boom, and are unsettled at seeing their foreign currency savings watered down.

As a nation, Chinese can be pragmatic. The deregulation on Wall Street beginning in the 1970s and the mushrooming of derivatives were seen to be unhinged from the reality of commodities and manufacturing that the Chinese economy measured itself by.

Even as Chinese policy moved toward a careful opening-up, researchers in the West were pioneering material flow analysis that checked the physics of ores to ingots, panels to manufacturing and even to garbage and recycling. If they had spent 10 minutes on Enron they would have known that there was no gas in the pipes.

What would a financial collapse mean to the physical economy? Chemistry Nobel laureate Ilya Prigogine, who is read much more in China than in the West, has inspired a fresh and terrifying insight. Prigogine's wide-ranging mind soared from theoretical global thermodynamics to a fascination with the social "economy" of an ant colony and wondered if the intense industriousness of human society could be objectively observed without being privy to human languages and financial accounts.

Ants don't use money. Their capital wealth is an integrated physical infrastructure unseen underground linked by a surface supply chain network of chemical signals intelligently laid out in unquestionable integrity and commitment. To wonder what a breakdown of global financial network of trust might look like in physical terms, try kicking an ants' nest.

The author is an Australian research scholar collaborating with Chinese academic and commercial institutions.

(China Daily 07/05/2011 page9)