economics

As we showed in chapter 7 German recycling of the German current account surplus through the banking system is not radically different from Chinese recycling of the Chinese current account surplus through the central bank. Policies that restrain consumption growth must push up the savings rate, and if as a result savings exceed investment, the

In the first half of 2025, annualized construction spending on manufacturing facilities is decreasing, not increasing, indicating that there is thus far no major investment into relocating supply chains to the United States in response to tariffs. Generally speaking, carrots (subsidies) have a bigger impulse to action than sticks (tariffs) because

But China also has an extraordinarily high investment rate, the highest in the world, and this is something that is in principle unlikely to be accompanied by a high trade surplus. After all the current account surplus is exactly equal to the excess of savings over investment, and any country with an extraordinarily high investment rate should

Deficit country austerity may indeed be part of the correct prescription, but if it is not more than fully matched with surplus-country reflation, it cannot possibly succeed without a sharp rise in global unemployment.

This was a direct challenge to a core thesis of the classical economists: “Savings are always beneficial because they allow greater accumulation of capital.

Emerging markets are responsible for the majority of marginal economic growth and commodity demand growth in the world, since they collectively have a larger population and have far less per-capita commodity usage as a starting point compared to developed markets. Emerging markets also have a lot of dollar-denominated debt, which is lent to them

As a measure of the industrial might of the United States in 1944 and 1945, the subsequent whirl of destruction told a better story than a thousand pages of statistics. If a plane needed minor repairs, it was pulled off the flight line and junked, and a shiny new replacement unit flew in to take its place. Hundreds of airplanes were flown into

The more I think of it, especially after the passage of the One Big Beautiful Bill, it seems more clear that we could be on a path much like in the 60s and 70s. In fact, there are a lot of parallels, not a perfect match, but striking:

Fiscal Policy:

Then:

LBJ’s Great Society + Vietnam → soaring government spending and persistent deficits.

Now:

Post-COVI

Nominal spending in the economy can originate from one of three sources: income, borrowing, or the sale of assets.