Category: Economy

Internal and external balance of savings and investment

By Michael Pettis I was recently asked by an Australian economics journal to write a review of a book I had already read, The Leaderless Economy, by Peter Temin and David Vines (published in 2013). Because the book is a great place from which to start a discussion on the links within the global economy, I decided to base this essay […]

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Trends and prospects for private-sector deleveraging in advanced economies

Trends and prospects for private-sector deleveraging in advanced economies

Major advanced economies have made mixed progress in repairing the private sector’s balance sheets. This column explores private sector deleveraging trends and calls for a set of policies that will return debt to safer levels. Monetary policies should support private sector deleveraging and policymakers should not ignore the positive impact of debt restructuring and write-offs on non-performing loans.

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How do you say “dead cat” in Latvian?

How do you say “dead cat” in Latvian?

By Frances Coppola This, my third post on Latvia, looks at its recovery from the 2008-9 recession. Latvia is often held up as the “poster child” for harsh austerity measures as the means of returning to strong economic growth. In order to hold its currency peg to the Euro, it embarked on a brutal front-loaded fiscal consolidation in 2009, sacking public […]

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What multiple should we give China’s GDP growth?

What multiple should we give China’s GDP growth?

By Michael Pettis Last week Derek Scissors, a think tank analysts at the American Enterprise Institute, published an articlein which he referred to an October, 2014, study by Credit Suisse that attempts to measure total household wealth by region and by country. Scissors argues that in the interminable debate about whether or not China will overtake the US as the […]

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Moral Hazard Taken Too Far

By Marc Chandler There is an element that links the terrible human tragedy in the Mediterranean and the ongoing Greek crisis.  It is Europe’s over-emphasis on moral hazard. Moral hazard is the idea that people will act irresponsibly if they do not have to bear the consequences.   No doubt, the concept offers valuable insight, up to a point.  The problem […]

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Greece: Irresistible Force Meets Immovable Object

By Marc Chandler Greece is expected to submit a more complete list of reforms in order to free up funds so the country can service its obligations.  Four times the Greek government has provided lists and four times the European group of finance minister rejected it. The IMF, which violated its own rules over the objections of its senior staff […]

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Is Greece’s Debt Odious?

There is a legal concept called “odious debts.” It can be traced back more than a century. The US helped create a precedent for it by denying Cuba’s responsibility for the debt incurred under Spanish colonial rule. The concept took on added significance in the post-colonial era more broadly. The issue here is the continuity of legal obligations from one regime to another especially as it pertains to the debt acquired.

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Albert Edwards on China

Albert Edwards on China

In the last post at Credit Writedowns Pro on the jobs number, I promised to talk about currency issues but I didn’t! Here are two issues then: the increasing current account surplus in Germany and the strong dollar’s effect on China. On Germany, it’s notable that merchandise trade as a share of GDP in Germany was 70.8% for the years […]

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Gauging the financial crisis end game

Gauging the financial crisis end game

It is quite possible that more than one end game will unfold in the months and years to come. For example, we could see a Greek Eurozone exit. Simultaneously, we could have a crisis unfolding across emerging markets, as the strong U.S. dollar begins to do damage to borrowers in those countries, of which there are many. Quite how it will all pan out is very difficult to predict. If I were a betting man, my money would be on the ‘permanent condition’ becoming the generally accepted view of the future economic environment.

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How might a China slowdown affect the world?

How might a China slowdown affect the world?

By Michael Pettis Two years ago it was hard to find analysts who expected average GDP growth over the rest of this decade to be less than 8%. The current consensus seems to have dropped to between 6% and 7% on average. I don’t think Beijing disagrees. After assuring us Tuesday that China’s economy – which is growing a little […]

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Consumption taxes, inflation and low wage growth in Japan lead to recession

Consumption taxes, inflation and low wage growth in Japan lead to recession

If wages in Japan are stagnant, how is increasing inflation going to help wage earners afford a better stream of good and services? It won’t. Ultimately, what we need to see are policies which maintain wages for median and lower-income wage earners with the greatest marginal propensity to spend. Without this, in a demographically challenged and indebted private sector, so-called secular stagnation is almost a certainty.

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Banks, Japanese trade, the currency wars and deflation

Banks, Japanese trade, the currency wars and deflation

There are no big themes dominating the news today. So it is a perfect time to hit a couple of themes with an economic and market theme approach. Let’s talk banks, Japanese trade, the currency wars and deflation.

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