The failure to forecast the Global Financial Crisis, has been widely seen as a major failure of mainstream (Classical) economics. Martin Wolf examines the issues around this: The tests of this discipline are whether its adepts understand what might go wrong in the economy and how to put it right. When the financial crisis that hit in 2007 caught the profession almost completely unawares, it failed the first of these tests. It did better on the second. Nevertheless, it needs r
An excellent article in the AFR on 20/3/2018 summarises some of the key things But first an observation: This technology race feels similar to the arms race between USA and the Soviet Union in the 1980s which led to the downfall of the Soviet Union which basically when bust in pursuing this race. I am not predicting that the loser will go bust in this race, but the winner will hold the keys to dominance in a range of technologies which are likely to determine economic power a
If you wish to understand the profound risks of private debt in the developed world (and in the Anglosphere in particular), I would recommend reading this excellent paper from the Institute of New Economic Thinking. https://www.ineteconomics.org/perspectives/blog/the-private-debt-crisis Here are some excerpts: One of the key and largely overlooked reasons for this disappointing growth is hiding in plain sight: the increasing global burden of private debt—the combination of
There are a range of sources of rising bond yields: Gradual "normalisation" after bond yields were suppressed by quantitative easing (and other central bank manipulation) and after a 5000 year low in interest rates. https://www.businessinsider.com.au/chart-5000-years-of-interest-rates-history-2016-6?r=US&IR=T After a very long bull market for bonds in USA and Australia, commencing in 1982, US and Australian bond markets may be commencing a bear market. https://www.puzzlefin
Warwick McKibbin ( https://crawford.anu.edu.au/people/academic/warwick-mckibbin ) in today's AFR points out some home truths about Trump's proposed trade war: The current account of a country is, by definition, the difference between a country's national savings and national investment. A country that invests more than it saves has relatively high interest rates and rates of return which drag financial capital from overseas. This capital inflow appreciates the currency an
http://foreignpolicy.com/2018/02/26/globalization-has-created-a-chinese-monster/ makes some very important points: For the West, the era in question started with the end of the Cold War, as old enemies became “emerging markets.” China had already started opening its markets to foreign investment since 1978 under Deng Xiaoping’s reforms. But only in the 1990s did the private sector take off there, and Western firms promptly rushed in to profit from the breakneck speed of Chin
Andy Xie is former Morgan Stanley star chief Asia-Pacific economist - now independent. Very smart. Here are some of his wise words: Commenting on the bubble in the global financial markets, this year the market is going to be volatile as liquidity is not there. "West is becoming a destabilising force. It is an unfortunate reality we have to live with for long". According to Xie, the key for all developing economies in East Asia is to trade among themselves to become richer. "