Tuesday, April 28, 2015

Some academics who are ex-bankers

thatb Itry to follow are Michael Hudson, Bill Black and Doug Henwood. Another I found recently is Michael Pettis. Apparently, he is also into music. Here is a portrait of him. Towards the end, there is a discussion of his ideas about China's position:
"Pettis' vision spans the globe, encompassing economic booms in postwar Japan , 19th century Argentina and the US. He positions modern China within a context broad enough that you start to see it isn't all as impossibly unprecedented as we might think.
He's certainly not afraid of being an outlier among commentators, having been one of the first to pick the scale of the slowdown China is now experiencing.
He has written that China's GDP growth rate will need to fall to between 3 and 4 per cent in the next few years if it is to successfully achieve the transition to a developed balanced economy.
As Bloomberg News noted recently, Pettis' research shows that "every investment-led growth miracle in the last 100 years has broken down". And it is very hard to escape the kind of enormous credit boom that China has just been through without a banking crisis.
The challenge for Beijing is to move fast enough with reforms to rebalance the economy before it hits what Pettis calls "debt capacity restraints".
But these days Pettis is not picking a GFC-style crash. He wrote in December that while a "banking crisis in China is always possible ... as long as Beijing implicitly or explicitly guarantees deposits, and as long as Beijing's credibility with Chinese households is solid, and I believe it is, I think we are more likely to see many years of Japanese-style 'zombie banks' than a banking crisis"."
Michael Pettis blog China Financial Markets. I do not think that I agree with his latest post.
"China thus is facing a universal problem of how to steer its economic surplus into new capital investment (including public infrastructure) and rising living standards to create a thriving domestic market. Its challenge will be to avoid repeating this fatal path that the United States and Europe have taken since the 1980s. The aim is to prevent the economic surplus from being absorbed by rising land rents, prices for monopoly goods and services (roads, commercial privileges, communications and the like), and banking charges for interest and fees.
Over the next twenty years China will have to cope with the same problems of urbanization, rising housing and land prices that Western economies experience. The most important way to view these universal problems is to ask who is to receive the economic surplus: the government as taxes, individual property owners as rent, or banks as interest? This is the basic trade-off. Whatever “free” rent-of-location the tax collector relinquishes is available (“free”) to be pledged to banks as interest."
There is more historical description of land rents in the west and then:
"But if land is not taxed – or if the real estate tax rate is lowered – this will leave the homebuyer loaded down with debt. The lower the land tax, the higher the mortgage debt, as rental income is turned into a flow of interest by new buyers as land prices rise – on credit.
This is the path that the United States and other Western countries have taken, while the post-Soviet states since 1991 have been the most extreme in taking neoliberal advice to favor real estate and finance over labor and industry. Their self-destructive real estate bubble has loaded down their labor force with high debt service and housing costs, whilst their giveaway of public infrastructure to insiders (with no price regulation) has led to high basic living costs. Their disastrous collapse, capital flight, emigration of skilled labor, shrinking GDP and corruption should serve as an object lesson for what China should avoid."
Apparently, there is a series of books edited by Michael Douglas and collaborators: "We founded this project over 20 years ago at the Peabody Museum, which is their archaeology and anthropology department. We wanted to do a series of books on how modern economies and practices began. Our first colloquium was in 1994 on Privatization in the Ancient Near East and Classical Antiquity; our second volume was on Urbanization and Landownership in the Ancient Near East, about how cities were created and how landownership and real estate patterns developed into a market for real estate. The third volume was on Economic Renewal in the Ancient Near East, about how debt cancellations restored the land to its citizen-cultivators to provide a means of self-support for the free citizenry.
These colloquia grew so popular that we added a fourth volume, Creating Economic Order: Record-Keeping, Standardization and the Development of Accounting in the Ancient Near East, on the origins of money and account keeping from Mesopotamia to Mycenaean Greece and Egypt. And then ten years ago we had our fifth colloquium on Labor in the Ancient World. There have been so many revolutions in archaeology and Assyriology and even Egyptology in the last ten years that we’re only publishing this volume now, to be completely up-to-date."

No comments: