1/10

This is a really tough problem to resolve, especially if the massive increase in inflows from the trade and financial accounts are sustained, as I expect they will be well into 2021.

Clearly the PBoC would like to see the RMB gradually...

1/9

While debt-to-GDP ratios already have a limited but very misunderstood use, it seems economists are finding bright new ways of misunderstanding them. Now we say that when nominal interest rates are lower than nominal growth rates, the

2/9

downward pressure on the debt-to-GDP ratio makes rising government debt and larger government deficits more sustainable and more easily justified.

This is totally confused. When the nominal interest rate is lower than the nominal GDP growth rate, it only means that net...

3/9

borrowers are getting a disproportionate share of growth relative to net lenders. This in and of itself changes the comparability of the debt-to-GDP ratio, so the fact that the ratio may decline tells us nothing about its sustainability which, I'm glad to say, isn't...

4/9

a mistake Olivier Blanchard makes in this article.

At least three things matter. First, whether or not rising debt is sustainable depends almost wholly on underlying conditions in the real economy, and only trivially on the arithmetical relationship between...

5/9

the interest rate and the growth rate. Second, this approach simply assumes away financial distress costs, in which case debt capacity is infinite anyway and the interest rate becomes irrelevant. And third, it assumes that the nominal debt level matters independently...

1/11

An article worth thinking about: “As changes to the world structure accelerate, China’s rule is in sharp contrast with the turmoil in the West,” says Beijing.

I agree, but I draw a different conclusion. The world is certainly currently

2/11

through "a period of turbulent change", in Beijing’s words, and great structural adjustments, but usually when that happens, what matters in the long run is not how stable a system seems but rather how successfully political, economic and social institutions adjust to...

3/11

the new conditions. In the past these adjustments have almost always been messy, chaotic, and disheartening to most, but ultimately they were necessary even if we were unable to judge them so at the time.

I would argue that the world today is undergoing both a reversal...

4/11

and rejection of the current model of globalization and an urgent need for most countries in the world, including China, to initiate a major rebalancing of the way income and wealth (and ultimately political power) is distributed, but there are few if any historical...

5/11

precedents in which this level of restructuring and rebalancing have been neat or orderly.

Beijing's response, which is to do whatever it takes to maintain stability, may look good in the short term, as this strategy always does, but if it prevents the necessary...

1/16

It is a little frustrating to see the response many analysts had to the GDP growth data Chinese released today. These numbers aren’t especially good, and they certainly shouldn’t have been surprising. Back in April and May, when most

2/16

were projecting negative or barely positive GDP growth for China in 2020 (the OECD, for example, expected China’s GDP to contract by 3.7%), I insisted that GDP growth for 2020 would be positive, and probably between 2% and 3%.

Today, it was reported as 2.3%. How did...

3/16

I know? Because I knew that while most of the healthy sources of Chinese growth would contract (except for exports, which would expand given Beijing’s intense supply-side response to the impact of Covid-19), Beijing was going to respond to a significant...

4/16

worsening of the healthy parts of its economy by unleashing enough of the unhealthy, non-productive growth it has long tried to constrain – basically real estate and infrastructure investment – in order to achieve as much economic activity as it...

5/16

needed for domestic political ends.

And that’s exactly what happened. While GDP grew by 6.5% in the fourth quarter, even with substantial tailwinds its retail sales measure – a proxy for consumption – was only up 4.6%, and it was down 3.9% overall in 2020.

1/9

Good article. But while growing international criticism and rising trade tensions may have had some impact, as the article suggests, I don’t think they really explain the great reversal in BRI lending of the past few years.

2/9

As I have been writing since 2011, China’s development lending was always likely to follow the pattern of other countries when they first “went out” (e.g. the US in the 1920s, USSR in the 1950s, Japan in the late 1970s). Because of little historical...

3/9

knowledge and no previous experience, an early rapid rise in development lending would be driven mainly by underestimating risk and an overestimation of their own business "success" in making loans, and would of course be further supported by geopolitical ambitions.

4/9

This combination would inevitably lead to bad lending decisions, followed just as inevitably by debt restructuring, loan losses, and a contraction in development lending. In the 1920s, for example, the US set off quite explicitly and aggressively to displace England in...

5/9

Latin America, and American businesses and banks assumed they “understood” Latin America much better than the English did, in spite of the vast English experience there, but their early displacement of British lending only resulted in the huge loan losses of the 1930s.

1/9

China is aging so rapidly that it urgently needs to address the problem of a rapidly declining work force in a slowly declining population. To give an idea of relative population changes among the three most populous countries, today

2/9

are 4.3 Chinese for every American and 4.7 Chinese of working age (ages 15-64), while there is just over 1 Chinese for every Indian and 1.1 Chinese of working age.

By the end of the century, however, there are expected to be 2.5 Chinese for every American and...

3/9

just 2.4 Chinese of working age, while there will be 1.4 Indians for every Chinese and 1.5 Indians of working age. Over the rest of this century, in other words, while China’s population declines quite rapidly relative to that of the two other most populous countries, it...

4/9

also switches from having a much better dependency ratio than either to having a worse one than either, with far more of its dependents being the elderly rather than children. In effect its working age population will drop by half relative to those of the other two.

5/9

This is going to be a very tough problem to resolve, although to the extent China succeeds, it will be very useful as an example for other countries. I am not sure they are going about it the right way, however. Making seniors make better use of smart technology sounds...

🚨🚨🚨 ANNOUNCEMENT 🚨🚨🚨

@AyannaPressley Unveils Historic Federal Job Guarantee

The resolution draws on historical Civil Rights leaders like Coretta Scott King & economists like Sadie Alexander, & is supported by a wide coalition including @policylink, @NatlJobsForAll, @thepublicmoney, @SEIU, @sunrisemvmt, @CPDAction, @ACREcampaigns, @ourmoneyus, @NelpNews

“It’s time to establish a legal right to a job for all people in America. For years, we have legislated hate, harm & injustice ... It’s long past time to pursue bold, intentional policies that affirm equity & recognize the dignity & humanity of all people.”

"A federal job guarantee is an important investment in the American people, our communities, & an equitable economy that works for all. It affirms the right to meaningful, dignified work & a living wage."

"I’m proud to build upon & honor the legacy & work of generations of Black women Civil Rights leaders by introducing this historic resolution.”

Why do we track institutional footprints? 🐘 (Thread)

Large institutions like mutual funds, hedge funds, banks, insurance companies, trusts, etc. amount for over 75% of all volume. These institutions move the market, not you and I.

It makes sense that if these guys are moving the markets, we would ideally want to buy the same stocks they are buying, but before they buy them? Right?

So, let’s get a clear understanding of how and why this is so important and what this might look like behind the scenes.

For starters, let’s discuss what we mean by a large institution. In this case, we are referring to the many funds, pensions, trusts, etc. that are responsible for managing tens, if not hundreds of billions of dollars.

Hence, they easily attract and can afford to retain the planet’s top talent, not to mention, their research budgets are enormous.

They have access to information and resources that the retail crowd simply does not, and if they did, it would likely be extremely unaffordable.

I’m beginning to think that the left has been too obsessed with GDP as a broken economic metric governing the global shitshow, when inflation is more insidious. Deflation may be a more radical demand than degrowth. Burst bubbles. Deflate the price of fossil fuel infrastructure.

It’s amazing just how much political economy is still determined by the threat of stagflation. This has created a weird metonymy in which as long as you’re fight inflation (preserving the interests of (older) savers) you’re also fighting stagnation (supporting (younger) earners).

To some extent the residual fear of deflationary spirals lies behind this, waiting in the wings for any suggestion that stagnation must be fought with deflation. This is entirely understandable, as uncontrolled deflation hits the poorest hardest.

The assumption that conjoins these fears into an engine of unbridled economic stagnation is that there’s a unitary market effectively mediating between the markets in different sectors, be this unity micro-economic or macro-economic in flavour. But this just isn’t how it works.

There is so much more logistic friction in the price system than the popular story of just in time production suggests, not least in the concrete details of differentiated trade between economic actors from local businesses to nation states.