Economic Analysis

Global Imbalances and the Chinese Economy

Outside the Box

September 18, 2015

If we don’t understand both sides of China’s balance sheet, we understand neither
 – Michael Pettis

The most thought-provoking China analyst I know is Michael Pettis, author and economist, who is a professor at Peking University’s Guanghua School of Management as well as a rock music club owner and impresario. Conversations with Michael are always fascinating.

He has a fairly balanced take on China’s future, which is significantly different from most of what you read. That’s because he comes...

Needed at the Fed: An Inverse Volcker

Thoughts from the Frontline

September 12, 2015

“The world’s biggest problems are the world’s biggest business opportunities.”

– Peter Diamandis

One pill makes you larger
And one pill makes you small
And the ones that mother gives you
Don't do anything at all
Go ask Alice
When she's ten feet tall

When logic and proportion
Have fallen sloppy dead

And the White Knight is talking backwards
And the Red Queen's off with her head

Remember what the dormouse said
Feed your head
Feed your head

– “White Rabbit,” Jefferson Airplane, 1967 (The link...

Muddling Through Shanghai

Thoughts from the Frontline

September 5, 2015

“He who knows when he can fight and when he cannot, will be victorious.”

– Sun Tzu

A couple of weeks ago I was complaining about 47,000 China reports clogging my e-mail. The number now feels like it is well into six figures (perhaps a slight exaggeration). Maybe my memory is going, but there wasn’t nearly as much China talk on the way up. Funny how that works.

Weapons of Economic Misdirection

Thoughts from the Frontline

August 28, 2015

“Measurement theory shows that strong assumptions are required for certain statistics to provide meaningful information about reality. Measurement theory encourages people to think about the meaning of their data. It encourages critical assessment of the assumptions behind the analysis.

“In ‘pure’ science, we can form a better, more coherent, and objective picture of the world, based on the information measurement provides. The information allows us to create models of (parts of) the world and...

The Corruption of American Freedom

Outside the Box

August 26, 2015

This is going to be an unusual Outside the Box. I’ve been part of the political process, both as a practitioner and an observer, for some 40 years. I cast my first vote in the presidential election for George McGovern but by the 1980s had made a hard right turn. Over the last decade I’ve been far less involved but no less interested.

I’ve been struck during the past month by the continued popularity of Donald Trump and Bernie Sanders. A recent Michigan Republican primary poll had 55% of the...

Playing the Chinese Trump Card

Thoughts from the Frontline

August 22, 2015

“I know the Chinese. I’ve made a lot of money with the Chinese. I understand the Chinese mind.”

– Donald Trump, 2011

Back in the olden days (pre-2000 or so), information junkies like me relied on printed newspapers, paper magazines, TV newscasts, and snail-mail newsletters. All these channels still exist, but they can’t begin to compete with the constant stream of data rushing into our tablets and smartphones. And on some days the stream rushes faster.

Another Day Younger and Deeper in Debt

Outside the Box

August 19, 2015

My friend Neil Howe, author of Generations, The Fourth Turning, and other books and president of Saeculum Research, joins us today in Outside the Box with a succinct, eye-opening essay on generational differences in debt levels and attitudes towards debt.

I often write about the problems that come with overindebtedness, but we’re usually talking about public debt, here in the US or abroad. But personal or household debt in America is nearly as massive as government debt, as this chart shows:


Riding the Energy Wave to the Future

Thoughts from the Frontline

August 14, 2015

“Formula for success: rise early, work hard, strike oil.”

– J. Paul Getty

This week’s yuan devaluation was big news, but it’s really part of a much bigger saga. Events around the globe are combining to create huge economic change over the next few years. We are watching giant, multidimensional chess games played by some master players.

Commodity Weakness Persists

Outside the Box

August 12, 2015

In today’s Outside the Box, good friend Gary Shilling gives us deeper insight into the global economic trends that have led to China’s headline-making, market-shaking devaluation of the renminbi. He reminds us that today’s currency moves and lagging growth are the (perhaps inevitable) outcome of China massive expansion of output for many products that started more than a decade ago. China was at the epicenter of a commodity bubble that got underway in 2002, soon after China joined the World...

Closing the Sausage Factory

Thoughts from the Frontline

August 7, 2015

“Bureaucracy destroys initiative. There is little that bureaucrats hate more than innovation, especially innovation that produces better results than the old routines. Improvements always make those at the top of the heap look inept. Who enjoys appearing inept?”

– Frank Herbert, Heretics of Dune

“Economies naturally grow. People innovate as they go through life. They also look around at what others are doing and adopt better practices or tools. They invest, accumulating financial, human and...