Revisiting predictions on China on debt, growth and crisis

In 2006 I started making a number of predictions based on what I thought was the necessary and logical development of China’s growth model. Some of these predictions seemed fairly outlandish, especially to China analysts – Chinese and foreign – who had very little knowledge of economic history or other developing countries, but many of them so far have turned out quite well.

As more and more analysts are beginning to understand the constraints of the Chinese growth model I think it might be useful to list some of these predictions to get a sense of what might be still to come. Perhaps my bet with The Economist has caused me to throw caution to the winds, since a smart economist never makes his predictions explicit, but here they are

The Japan debt disaster and China’s (non)rebalancing

In this issue of the newsletter I want to sketch out a scenario in which rather than analyze policy announcements or make predictions I try to lay out what are the various possible paths open to China. The scenario concerns trade. China’s current account surplus has declined sharply from its peak of roughly 10% of GDP in the 2007-2008 period to probably just under 4% of GDP last year. Over the next two years the forecast is, depending on who you talk to, either that it will rise significantly, or that it will decline to zero and perhaps even run into deficit. The Ministry of Commerce has argued the latter and the World Bank the former

I am not bullish but I am not bearish either

Happy Friday. Here’s a quick gold-level note note on what I think is going on in the markets and the economy right now that I am making freely available. Turning to the paradigm I set out in 2009, the following points frame the secular environment

What were big-time pundits saying just as stocks were bottoming in March 2009?

Faber, Buffett and Grantham were bullish as stocks reached their financial crisis nadir

The Protein Bomb

Question for you: Which distinctly British asset class has offered the most attractive returns over the past decade? Central London property? Not even close, even if it has done rather well. UK farmland is the answer, having more than tripled in value over a decade which will otherwise not be remembered for its outsized returns (see story here). The rise in farmland values is not only a British phenomenon. All over Northern Europe and North America farmland values have responded well to higher commodity prices. Last year alone, farmland prices in the US Midwest appreciated by 22% on average

2012: The Year We All Learn To Live Dangerously

Thus the road ahead looks clear, if somewhat flat. The Euro Area’s two largest economies look set to escape “the worst of the worst”, but remain dependent on factors outside their control, in the US, in China, and in the Emerging Market world as a whole, all of whom could in their turn be badly affected by the impact on risk sentiment of any unfortunate “accident” in the Eurozone itself. Most of these issues are unlikely to go away any time in the foreseeable future, which is why I think 2012 will be marked as the year we learnt to live with the world we have, and stop dreaming about another one, which has long since ceased to exist

Poll: Can China avoid a hard landing?

There are a lot of different opinions on this one. What’s yours

Edward Harrison’s Ten Surprises for 2012 (short version)

Yesterday morning, I did the first weekly newsletter on my ten surprises for 2012. Here’s a brief version of the list

John Mauldin: The Matterhorn Interview

Investment advisor John Mauldin explains his attitude towards austerity measures; a return of the gold standard; the euro crisis; and the willingness to bailout everyone that makes capitalism and monetary systems stop working

On the ECB’s Long-Term Refinancing Operation and 2012 macro ideas for investors

The end of year is usually a good time for markets. There was a lot of angst about the European situation a few weeks ago, but there is less of that now because we’re hitting year-end (tape painting). Does that mean the credit crisis situation is stable? No, but it has stabilised somewhat. 2012 will be a different story though. I talked about the European sovereign debt crisis and my themes for 2012 with Howard Green of BNN and Ryan Avent of the Economist yesterday. The link to the video is below but let me say a bit more, particularly about today’s LTRO by the ECB. I’ll try to be brief

The 2012 Blind Side: China’s Housing Bust

Foreign Affairs has just posted a must read piece, “China’s Real Estate Bubble May Have Just Popped”, which will sound very familiar to Global Macro Monitor readers. We’re going to be spend a lot time over the holidays thinking how this plays out in China’s financial sector and the implications for markets

Forecasting misconceptions and the likelihood of European financial repression

Market participants, including economists and strategists are prone to confusing what they believe should be the case with what will be the case