Macroeconomics

Snippets on the big picture.

Macroeconomics

Kotkin on China and Communism

  • Kotkin is a scholar of Russia and the Soviet Union. Most famous for his three-part (only two are published so far) biography of Stalin.
  • In this interview, he turns his attention to China.
  • There are a lot of interesting points made here.
  • “There are two subjects at Party School that are absolutely dominant in the Chinese case. One is the supposed decline of the United States … But the other big subject — in fact, it’s an even bigger subject for them — is not having a Soviet collapse in China“
  • Interesting to read this together with Dalio’s latest on the US v. China.
Macroeconomics

America’s Protectionist Turn is at least 15 years Old

  • It didn’t start with the Inflation Reduction Act or Trump.
  • It started as early as 2008, and took the form, as this article identifies, of four key forces.
  • Things in global trade wars move slowly.
  • “If this analysis is correct, it should be clear that the American protectionist turn has been taken for a long time and will last long, as one doesn’t see the main forces that provoked it changing direction, starting with the desire to push China back.“
Macroeconomics

Setting Global Balance Scene

  • For every deficit there is a surplus.
  • Studying these global balances helps understand and predict where the stresses of financial systems build.
  • To this end, Brad’s re-opening post from November 2022 is a foundational read.
  • The short summary – deficits are back to pre-GFC highs, have concentrated in autocratic regime countries but with none of the historic reserve growth.
  • Prescient conclusion – “By implication, private financial intermediaries somewhere around the world will need to absorb Treasury bonds. Just as financial intermediaries globally had to absorb U.S. “subprime” (household) risk prior to the global crisis, now they have to absorb U.S. interest rate risk.”
Macroeconomics

Composition of EM Debt

  • “Just between 2000 and 2021, the share of public and publicly guaranteed external debt of low and lower-middle income countries (other than that held by IFIs) owed to bondholders jumped from 10 to 50 percent, while the share owed to China rose from 1 to 15 percent. Meanwhile, the share held by the 22 predominantly Western members of the Paris Club of official lenders fell from 55 to 18 per cent. Thus, co-ordinating creditors in a comprehensive debt restructuring operation has become far harder, because of their greater number and their diversity.“
  • Source.
Macroeconomics

Conversation on China

  • Conversation between Tyler Cowen and Yasheng Huang on China.
  • Wide ranging and in-depth, especially understanding the cultural, historic and sociological drivers that help understand China and turbulence ahead.
  • “One reason is the charisma power of individual leaders, Mao and Xiaoping … they could do whatever they wanted while being able to contain the spillover effects of their mistakes. The big uncertain issue now is whether Xi Jinping has that kind of charisma to contain future spillover effects of succession failure.”
  • “This is a remarkable statistic: Since 1976, there have been six leaders of the CCP. Of these six leaders, five of them were managed either by Mao or by Deng Xiaoping. Essentially, the vast majority of the successions were handled by these two giants who had oversized charisma, oversized prestige, and unshakeable political capital”.
  • Also a super interesting discussion on “why Chinese and Chinese Americans have done less well becoming top CEOs of American companies compared to Indians and Indian Americans”.
Macroeconomics

Sources of Funds

  • Businesses have seen sources of funds (profits and credit) start to fall according to this Bridgewater analysis.
  • “As you would expect, when this happens, they cut back first on buybacks and M&A, then on capex, and last of all hiring.”
  • Once the latter happens consumer spending suffers and contraction ensues.
  • Though they do point out that earnings have yet to fall the required amount for this to start properly.
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