The Great Rebalancing
Trade, Conflict, and the Perilous Road Ahead for the World EconomyBook - 2013
A noted economist argues instead that we are not entering another Great Depression but rather are undergoing a critical rebalancing of the world economies.
Princeton University Press
China's economic growth is sputtering, the Euro is under threat, and the United States is combating serious trade disadvantages. Another Great Depression? Not quite. Noted economist and China expert Michael Pettis argues instead that we are undergoing a critical rebalancing of the world economies. Debunking popular misconceptions, Pettis shows that severe trade imbalances spurred on the recent financial crisis and were the result of unfortunate policies that distorted the savings and consumption patterns of certain nations. Pettis examines the reasons behind these destabilizing policies, and he predicts severe economic dislocations--a lost decade for China, the breaking of the Euro, and a receding of the U.S. dollar--that will have long-lasting effects.
Pettis explains how China has maintained massive--but unsustainable--investment growth by artificially lowering the cost of capital. He discusses how Germany is endangering the Euro by favoring its own development at the expense of its neighbors. And he looks at how the U.S. dollar's role as the world's reserve currency burdens America's economy. Although various imbalances may seem unrelated, Pettis shows that all of them--including the U.S. consumption binge, surging debt in Europe, China's investment orgy, Japan's long stagnation, and the commodity boom in Latin America--are closely tied together, and that it will be impossible to resolve any issue without forcing a resolution for all.
Demonstrating how economic policies can carry negative repercussions the world over, The Great Rebalancing sheds urgent light on our globally linked economic future.
Pettis (finance and economics, Peking U.) does not make the subject simple, but he does discuss the status of the world economy in a manner that affords serious general readers access to a clarifying historical and conceptual framework. He begins with trade imbalances and the global financial crisis, explaining the meaning and implications of underconsumption and destabilizing imbalances as well as pervasive misconceptions and "the inanity of moralizing." Subsequent chapters expand on the many forms of trade interventions, unbalanced growth in China, the mechanics of the crisis in Europe and adjustments necessary in Germany. The concluding chapter discusses when the global crisis will end. Annotation ©2013 Book News, Inc., Portland, OR (booknews.com)
Argues that the separate economic issues different countries are dealing with are actually all the result of trade imbalances, and that in order to end the global financial crisis, a resolution for all must be reached.