• Why A Savings Glut Does Not Increase Savings

    May 02, 2017

    Contrary to conventional thinking, a savings glut does not necessarily cause global savings to rise. A savings glut must result in an increase in productive investment, an increase in the debt burden, or an increase in unemployment.

  • No, First Quarter Numbers Don’t Mean Growth Has Bottomed Out

    April 18, 2017

    As long as China has debt capacity, it can achieve any GDP growth rate Beijing requires, simply by allowing credit to expand. But debt levels are already high, and credit must expand at an accelerating pace to maintain growth. China is probably still a few years away from reaching its debt limits, but the more debt grows, the lower the country’s growth rate average will be over the long term.

  • Mexico’s Positive Impact on the U.S. Trade Balance

    April 03, 2017

    Contrary to what one might first expect, Mexico’s role in global trade is actually beneficial to the United States. While restricting Mexican imports will reduce the American deficit with Mexico, it will increase the overall American deficit.

  • China and the History of U.S. Growth Models

    February 28, 2017

    The Chinese development model is an old one and can trace its roots at least as far back as the infant industry protection, internal improvements, and system of national finance of the American System of the 1820s and 1830s. Understanding why the many precedents for its growth model have succeeded in some few cases and failed in others will help us enormously in understanding China’s prospects.

  • Is Peter Navarro Wrong on Trade?

    February 02, 2017

    Whether the U.S. current account deficit is harmful or not to the U.S. economy depends on the assumptions we make about capital scarcity. In a world awash with excess capital and insufficient demand, the U.S. current account deficit is a drag on growth.

  • My Reading of the FT’s “. . . Glimpse of China’s Economic Future”

    January 06, 2017

    The three scenarios listed in a recent Financial Times article set out the range of plausible economic outcomes available to China. The most likely is that China experiences a long, but orderly, growth deceleration as it grinds away at its debt burden, but under easily specified conditions each of the three is possible.

  • A U.S. Retreat on Global Trade Will Not Lead to a Shift in Power

    December 16, 2016

    Rejecting the Trans-Pacific Partnership should not mean the rejection altogether by Washington of the very idea of a stable, rules-based trading system. The world is better off with such a regime.

  • China: Choosing More Debt, More Unemployment, Or Transfers

    November 20, 2016

    China’s success will depend Beijing’s ability to centralize power, to begin to sell off government assets, to rein in credit growth, and to accept much lower GDP growth rates.

  • The Impact in China and Abroad of Slowing Growth

    October 02, 2016

    China’s rebalancing can only occur in a limited number of ways, and each of these has a fairly predictable impact. The path Beijing chooses to follow will likely be based on political decision-making.

  • Does it Matter if China Cleans Up its Banks?

    August 31, 2016

    China’s problem is excessive debt in the economy, not a banking system facing insolvency. Beijing’s reform strategy should reduce the debt burden as quickly as possible to minimize the economic costs.

  • Rebalancing, Wealth Transfers, And The Growth Of Chinese Debt

    June 22, 2016

    There is no way Beijing can address its debt problem without a sharp drop in GDP growth, but as unwilling as Beijing may be to see much lower growth, it doesn’t have any other option.

  • Will China’s New “Supply-Side” Reforms Help China?

    January 25, 2016

    China is embarking on ambitious economic reforms to boost its growth prospects. What is the rationale behind these new reforms and what are the prospects for their success?

  • China’s Rebalancing Timetable

    November 29, 2015

    A simple model can help illustrate the problems that China will face over the coming decade.

  • Thin Air’s Money Isn’t Created Out of Thin Air

    October 19, 2015

    Because savings and investment must always balance, the idea that the savings rate in any country is determined at home is nonsense.

  • If We Don’t Understand Both Sides of China’s Balance Sheet, We Understand Neither

    September 01, 2015

    While it is difficult to predict the nature and timing of the shocks buffeting China’s economy, China’s difficult economic situation makes such crises inevitable.

  • Do Markets Determine the Value of the RMB?

    August 18, 2015

    Some analysts contend that the RMB is no longer undervalued but is in fact overvalued. However, a more careful analysis suggests that the yuan is still undervalued, but perhaps not by much.

  • China’s Stock Markets and Revisiting 2011 Predictions

    July 31, 2015

    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.

  • Interpreting Information in China’s Stock Markets

    July 17, 2015

    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.

  • Please, Mr. Lew, Do Not “Diminish” Alexander Hamilton

    June 21, 2015

    Why Alexander Hamilton should remain on the ten dollar bill.

  • Internal and External Balance

    June 09, 2015

    A deep grounding in economic and financial history is important for modern economic analysis.

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