Saturday, September 13, 2014

Doug Pancoast — Special interview with Michael Pettis

"ControversialTruths.com" is truly honored that Michael Pettis agreed to do an interview with our site. Michael Pettis, as many of our readers already know, is a finance professor at Beijing University (commonly referred to as "China's Harvard"). On his site, he mentions his experience as a "Wall Street veteran, merchant banker, equities trader, economist, finance professor, (and) entrepreneur." I've read two of his most recent books The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy and Avoiding the Fall: China's Economic Restructuring and I personally guarantee you that Michael Pettis is a leading thinker when it comes to both the Chinese economy and the overall global balance of trade. He's one-of-a-kind individual who throughout his books is passionate about trying to judge things fairly...and not see economic issues from a single country's perspective or from a single ideological framework. When he speaks, you know you should listen because you're going to get information that is not only based on decades of experience both in the private sector and academia, but you're getting it from a person who seems to have absolutely no biases whatsoever. Michael Pettis is a diamond and we're so thankful he took so much time to answer our questions. Here is a transcript of the interview. Both the questions and the answers are here in their entirety.
Controversial Truths
Special interview with Michael Pettis
Doug Pancoast

2 comments:

Ignacio said...

I find strange, being Pettis a smart guy and commentator, that he does not acknowledge the largely irrelevance of public 'debt' in a world that is driven by fiat monetary systems as long as there is a real output that back up's it, a (sort of) stable social medium and institutional arrangement, and the currency serves it's purpose (aiding the production and distribution process).

Long term BoP imbalances (as well as 'kick the can' policies that do not fix the underlying problems) certainly can distort or create co-dependences that can come to a sudden and violent end that will erode rapidly a supposedly stable meta-equilibrium (and so the debt or the currency itself will become a problem real fast), but we should not be too fast obsessing over arbitrary 'public debt' levels, as long as other parameters are healthy.

Japan usually comes to case: but should we really worry about Japan debt levels, or should we focus on the real economic underlying problems that could (eventually) make those debt levels problematic? (demography, dependence on certain class of imports, export-led growth, etc.)

It's the economy, not the finances, which we have to examine and ultimately fix and get out of this "thought trap" the economists have built that equates (selectively, as they ignore banks, private debt dynamics, assets bubbles etc. as their masters want to) macro finance with underlying economic structure.

Matt Franko said...

" First, as Americans become increasingly aware that when foreign central banks amass hoards of dollars and prevent others, including the Fed, from reciprocating, they aren’t doing the US any favors (and if they were, why are they so determined to prevent other central banks, including the Fed, from returning the favor?). Their purchases are aimed at boosting domestic employment, and for the US their purchases must result either in an increase in US debt or an increase in US unemployment. This may sound surprising to many people, including, shockingly enough, to many economists, but is actually quite easy to prove, either by using balance of payments arithmetic or by looking at the historical precedents."

This just describes sort of WHAT is happening but when he says "central banks amass hoards of dollars and prevent others, including the Fed, from reciprocating" he is heading into the conspiracy theory land...

I'd be very surprised if people at the Fed are going all around saying: "those GD Chinese won't let us accrue yuan those SOBs!" .... I dont see that at all...

seems to me it is the foreign firms that are the ones accruing the USD balances and then their home banks/CBs will accommodate them in exchanging foreign currency positions with them in a way that the banks/CBs will "make money"...