

“Not with a bang but a whimper” - mooreds
http://blog.mpettis.com/2014/09/not-with-a-bank-but-a-whimper/

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crapshoot101
Michael Pettis is one of the smartest guys alive covering China - well worth a
read. Though I wonder if he thinks the demand-side issues are truly fixable in
any systematic sort of way (ie, he doesn't seem like a Scott Sumner type) -
can we shift the basic nature of an economy?

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jval
If you haven't already you should read his book, Avoiding the Fall, there are
a number of prescriptions inside it on how to go about rebalancing the Chinese
economy. It's really well written (as is his blog, especially this post). The
central thesis of the book is that the Chinese economy has low consumption as
a total proportion of their GDP due to a number of hidden subsidies that
transfer wealth from households to businesses and governments in China.

He argues that by removing these subsidies China can rebalance their economy
from an investment driven one to a more consumption driven one and achieve a
'rebalancing'. Some subsidies are governments fixing bank interest rates for
lenders and depositors (in a way that takes money from depositors to subsidise
borrowers) and artificially pegging the exchange rate, which penalises
households (who typically in urban settings rely on imported goods) and
subsidises businesses (many of whom export their goods).

My economics knowledge is generally self-taught and I don't have the book in
front of me so you'll have to forgive any errors - but hope that helps!

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apostate
Wow, this is a long read but definitely worth it. I have never read anything
by Pettis, but I am thinking about picking up _The Great Rebalancing_ if it
explores similar stuff more deeply. It doesn't always come naturally to look
at country economies as a bunch of open systems all operating in a closed
system, but this read will certainly encourage that kind of thinking.

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crdb
His book "The Volatility Machine" was one of the best I have ever read on
global macro. Perhaps due to publication timing, it's managed to stay under
the radar.

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glbrew
Can I get TLDR?

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mooreds
It is worth reading in its entirety, because it is a interview covering topics
from 150 years of economics and politics.

The tl;dr for me is that our current global economic troubles are systemic and
demand side, and not easily remedied.

