The structure of investment strategies in the Chinese stock markets had always guaranteed that this would be a brutally volatile market that trades almost exclusively on “the consensus about the consensus”, and therefore prices will reflect very rapid shifts in this consensus.
Although China’s stock market panic in the summer of 2015 has subsided, the fundamental questions have not been resolved, which leaves it open to possible continued volatility.
Why Alexander Hamilton should remain on the ten dollar bill.
A deep grounding in economic and financial history is important for modern economic analysis.
The value placed on current and future growth says a lot about the quality of that growth. It also has important policy implications, especially for reforms.
For now, for all the excited chatter, the Asia Infrastructure Investment Bank is an institution laden with symbolic value and little else.
The biggest constraint to the EU’s survival is debt. Europe will not grow and unemployment will not drop until the costs of the excessive debt burdens are addressed.
European nationalists have successfully convinced the world, against all logic, that the European crisis is a conflict among nations, and not among economic sectors.
If the world does indeed face another decade or two of “superabundant capital” in spite of economic stagnation and slow growth, the historical precedents suggest a number of consequences.
Chinese economic growth will continue to slow. Although many economic analyses are based on the success of economic reforms, near-term growth is more accurately forecast in terms of balance sheet constraints.
China’s consumer price index (CPI) and producer price index (PPI) data suggest that China is facing deflationary pressures. Beijing must tackle the country’s debt and create alternative sources of demand to address them.
Economists tend to undervalue institutional flexibility, especially in the first few years after a major financial crisis, perhaps because in the beginning countries that adjust very quickly tend to underperform countries that adjust more slowly.
A slowing Chinese economy might be good or bad for the world, depending on domestic savings and domestic investment.
While China is a more integrated optimal currency zone than the EU, there are still frictional costs across provinces that will require Beijing to make some adjustments, which have their own costs.
Considering what would be the best subway fare in Beijing is a useful way to think about infrastructure investment more generally.
China’s disproportionate demand for iron is the result of its investment-driven growth model. In considering how Chinese adjustment will affect Australia, one must consider global savings imbalances.
The role of the U.S. dollar as the world’s global reserve currency has been regarded as a great advantage to the United States but actually it is a destabilizing burden rather than an “exorbitant privilege.”
The next few years could see a break-up of the current monetary and trading regime and a U.S. turn inward toward isolation.
Policies that affect the savings rate of a small country can have more-or-less predictable domestic impacts because the global economy is so large that domestic policies are not affected by external constraints. But with a large economy, the analysis changes.
Instead of a hard landing or a soft landing, the Chinese economy faces two very different options, and these will be largely determined by the policies Beijing chooses over the next two years.