You have too much of a good thing. It’s a simple enough insight, which at one point undergirded much economic thought, but it’s been allowed to fall by the wayside. In a world riven by fears of shortages and supply bottlenecks, from oil to silicon chips via skilled labor — and amid growing alarm about government fiscal deficits — a surplus seems a problem we would all like to have. The ideas of Thomas Malthus, the British clergyman who thought population growth would inevitably lead to scarcity, continue to scare us; the notion that we have too much does not cause any such concern.

But the idea that there’s too much of everything, particularly capital, should not be lightly dismissed. Indeed, it’s possible to cast all the world’s current economic troubles, which are causing such discontent, as the result of a surplus. Not only that, but this problem doesn’t come from a cyclical process that can be corrected by adjusting prices in the classic capitalist fashion. Rather, a growing surplus of stuff might be a secular issue driving the current economic model toward crisis point.

That, at least, is the argument that Marc Chandler, a veteran foreign exchange analyst who these days plies his trade for Bannockburn Global Forex, makes in his new book, . It’s an ambitious undertaking that deserves a wide reading.

Charles Conant Chandler’s initial concern is to resurrect the late-19th century thinker and economist Charles Conant. He could scarcely have been more influential in his lifetime; Presidents William McKinley, Theodore Roosevelt and William Howard Taft all sought his advice on international economic policy and currency reforms. In the Philippines, one of many countries that he counseled in his campaign of economic diplomacy, the new coinage that was introduced to replace the old Spanish silver dollars was even known as “Conants.”

For the crucial period at the turn of the last century when the Gilded Age gave way to the Progressive Era and America supplanted Great Britain as the hegemonic economic power, Conant played a role as important as John Maynard Keynes and Milton Friedman would in later generations. Unlike those two titans, he has been largely forgotten. And as the world seems to be groping for a model that is neither the mixed economy associated with Keynes and the postwar era, or the Friedman-inspired laissez-faire model that has been in the ascendant since the 1980s, it makes sense to return to Conant now.

Conant’s key points were that capitalism could produce excessive savings, and not just excessive goods, and that when too much capital chooses too few opportunities, it can destabilize the economy — exactly a point made by Kevin Warsh, the new chairman of the Federal Reserve, to a G20 conference in August. Chandler himself believes that he’s “carrying on a dialogue that began in the middle-19th century but has fallen out of fashion.”This was why Conant embarked on a career advising foreign governments and trying to get them to make their countries safe for American investment.

He was alarmed that the US suffered from what he called “ruinous competition” that capitalism couldn’t resolve through the Darwinian survival-of-the-fittest process that preoccupied many thinkers at the time.

The fittest wouldn’t necessarily survive, he believed, because companies needed high fixed costs to manufacture and were also able to borrow high amounts — and this, to quote Chandler, “turned the classical paradigm on its head”: It is no longer the case that the companies that survive an economic downturn or a period of oversupply will be those that are the most efficient, or the most innovative, or those ones that are best placed to meet consumer demands. Instead, it is the businesses with the deepest pockets and the greatest ability to absorb losses that will live to fight another day.

Good companies would be forced out of business by bigger competitors prepared to produce at a loss. A surplus of capital would build up, both in the banks and in manufacturers’ balance sheets, and so the problem would grow ever worse. That capital would continue to be deployed ever less productively, steadily dragging down the economy but without triggering a purgative crash — and while continuing to make the rich richer.

Involution A century on from Conant, his “ruinous competition” sounds a lot like what the Chinese now call “involution.”Fighting massive unprofitable production is a priority for Beijing, but until they can curb the huge surplus in electric vehicles, solar panels and the rest, their best solution is to dump it on the rest of the world, spreading the problems still further.

China is trying to deal with this as a cyclical economic problem that can be reined in with appropriately aggressive economic policy. Conant’s argument, as recounted by Chandler, is that it’s an accumulative phenomenon, which will continue to ratchet upward. Without a corrective within the market system, it cannot be thwarted simply.

And while the analogy with Conant’s findings is clearest for China because it involves manufactured goods, the surplus is as great an issue in the western world. That is under-appreciated. “I think many economists see surplus as a special case — China, or autos, or steel,” says Chandler. “I think of it as offering a general theory or explanation.”He points out that excesses of capital looking for something to do can be viewed as driving the Great Crash of 1929, and indeed the Global Financial Crisis eight decades later.

Conant’s ideas drove profoundly important trends that now appear to be antithetical. The New Deal and the post-war Keynesian welfare states were ways to use surplus capital, which Conant encouraged. So was the growth of American imperialism in Latin America, also directly backed by Conant in an article called — a point of view that might at least in part help to explain why the man has fallen so completely from favor.

And perhaps even more disturbingly, the model of surplus capital as the critical driving economic force fits beautifully with the overarching history of the 20th century: The destruction of world wars twice allowed for new growth to commence, and then a resumed surfeit of money launched American consumerism after 1945 in a model that many now want to copy as a means to growth. Where Is the Surplus Now?

All of this seems counterintuitive when welfare-state systems around the world are in deficit. Protesters on the streets of France don’t think there is a surplus of anything. But the symptoms have long been there in low bond yields and proliferating forms of financing, making capital ever easier to come by and bankruptcy far easier to avoid. That has allowed investors to prosper, with overall economic growth that many find far short of acceptable.

Chandler reads this as a new means to deal with the excess that has been successful in its own way. Channeling the capital surplus into financial instruments acted as an economic “pressure valve” shielding business and workers from its negative effects. Thus the great financialization of the economy should perhaps not be viewed as an imposition, or a response to unwise deregulation, but as a natural response to the surplus of capital seeking a home.

The Reagan-era model of globalization, against which President Donald Trump has rebelled, can also be viewed this way: An informal pact…was dubbed Bretton Woods II by some commentators: Surplus countries would provide markets for American exports and safe destinations for American capital; America, in turn, would absorb their manufactured goods and provide secure liquid markets for their savings.

To the US and its financial system fell the privilege of recycling all this money from around the world. As it did this, imbalances grew, jobs left the country, and eventually the population came to the point of revolt. Trump and his tariffs, however haphazardly applied, have been the political response. Formal international arrangements are under attack, as is the informal Reaganite deal that Chandler describes.

It’s not certain that the Trump approach has any clear idea of how to deal with the surplus, but the market may be finding one in AI. The internet forced drastic change, rendering many business models obsolete, but also allowed capital to pile up among the few companies that won big. The effects of that excess of funding could be seen in widespread complaints about inequality, and growing unrest about the distorting power of social media.

It’s now visible in the breathtaking sums that the biggest internet winners are able to spend to build out artificial intelligence. Just this week Amazon.com Inc., arguably the single greatest champion of the last technological revolution, announced that it had spent $77 billion on largely data-center-related investments in the third quarter alone.

An immense excess of capital is being deployed in the AI boom. It might succeed in keeping the machinery running for a little longer, or it might just result in the kind of capital destruction that Conant would have welcomed.

After reading Chandler’s book, it’s very hard not to view the economy in terms of a bloated surplus of money seeking a purpose. There’s been a wave of books attempting to diagnose the problems of capitalism in recent years, and this is an important addition. These aren’t arguments that would normally be expected from a Wall Street financier, but they make frightening sense.