{"id":11513,"date":"2015-02-01T18:52:55","date_gmt":"2015-02-01T23:52:55","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=11513"},"modified":"2015-02-01T18:52:55","modified_gmt":"2015-02-01T23:52:55","slug":"will-the-global-economy-follow-japan-michael-pettis-china-financial-markets","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/","title":{"rendered":"Will the global economy follow Japan?| Michael Pettis’ CHINA FINANCIAL MARKETS"},"content":{"rendered":"

More from Michael Pettis on \u201cJapanification\u201d of the global economy. How abundant capital and investment in unproductive works may lead to long-term stagnation:<\/p>\n

\u201cPanics do not destroy capital,\u201d John Mill proposed in his 1868 paper to the Manchester Statistical Society. \u201cThey merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.\u201d Our ability to postpone the recognition of the full extent of these unproductive works depends in part on our ability to expand the supply of credible money. If we are constrained in our ability to expand the money supply, one impact of the crisis is a contraction in money (velocity collapses) that forces lenders to write down debt. If money can expand without constraints, however, debt does not have to be written down nearly as quickly.<\/p>\n

With the main central banks of the world having banded together to issue unprecedented amounts of credible currency, in other words, we may have changed the dynamics of great global rebalancing crises. We may no longer have to forcibly write down \u201chopelessly unproductive works\u201d, during which process the seemingly endless capital of the globalization phase is wiped out, and we enter into a phase in which capital is scarcer and must be allocated much more carefully and productively.<\/p>\n

Instead, the historically unprecedented fact of our unlimited ability to issue a credible fiat currency allows us to postpone a quick and painful resolution of the debt burdens we have built up. It is too early to say whether this is a good thing or a bad thing. On the one hand, it may be that postponing a rapid resolution protects us from the most damaging consequences of a crisis, when slower growth and a rising debt burden reinforce each other, while giving us time to rebalance less painfully \u2014 the Great depression in the US showed us how damaging the process can be. On the other hand the failure to write down the debt quickly and forcefully may lock the world into decades of excess debt and \u201cJapanification\u201d. We may have traded, in other words, short, brutal adjustments for long periods of economic stagnation.<\/p><\/blockquote>\n

Investment in infrastructure is essential to rescue an economy from a contraction of aggregate demand following a financial crisis. The unpalatable alternative is a deflationary spiral and significant contraction in GDP. But we need to ensure that investment is made in productive assets — that generate market-related returns — rather than investments in social infrastructure that cannot generate sufficient revenue to service, nor be be sold to repay, debt funding.<\/p>\n

Read more at Can monetary policy turn Argentina into Japan? | Michael Pettis' CHINA FINANCIAL MARKETS<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

More from Michael Pettis on \u201cJapanification\u201d of the global economy. How abundant capital and investment in unproductive works may lead to long-term stagnation: \u201cPanics do not destroy capital,\u201d John Mill proposed in his 1868 paper to the Manchester Statistical Society. \u201cThey merely reveal the extent to which it has been previously destroyed by its betrayal … <\/p>\n

Continue reading “Will the global economy follow Japan?| Michael Pettis’ CHINA FINANCIAL MARKETS”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,15,17],"tags":[570,1371,1838,1980,3547,3744],"class_list":["post-11513","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-investment-infrastructure","category-japan-korea","tag-capital-abundance","tag-fiat-currency","tag-infrastructure","tag-john-mill","tag-unproductive-investment","tag-zombie-banks"],"yoast_head":"\nWill the global economy follow Japan?| Michael Pettis' CHINA FINANCIAL MARKETS - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Will the global economy follow Japan?| Michael Pettis' CHINA FINANCIAL MARKETS - the patient investor\" \/>\n<meta property=\"og:description\" content=\"More from Michael Pettis on \u201cJapanification\u201d of the global economy. How abundant capital and investment in unproductive works may lead to long-term stagnation: \u201cPanics do not destroy capital,\u201d John Mill proposed in his 1868 paper to the Manchester Statistical Society. \u201cThey merely reveal the extent to which it has been previously destroyed by its betrayal … Continue reading "Will the global economy follow Japan?| Michael Pettis’ CHINA FINANCIAL MARKETS"\" \/>\n<meta property=\"og:url\" content=\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/\" \/>\n<meta property=\"og:site_name\" content=\"the patient investor\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/profile.php?id=61572934660810\" \/>\n<meta property=\"article:published_time\" content=\"2015-02-01T23:52:55+00:00\" \/>\n<meta name=\"author\" content=\"ColinTwiggs\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"ColinTwiggs\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/\"},\"author\":{\"name\":\"ColinTwiggs\",\"@id\":\"https:\/\/thepatientinvestor.com\/#\/schema\/person\/cb072791ac83e8bae585007c133d54a5\"},\"headline\":\"Will the global economy follow Japan?| Michael Pettis’ CHINA FINANCIAL MARKETS\",\"datePublished\":\"2015-02-01T23:52:55+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/\"},\"wordCount\":452,\"commentCount\":6,\"publisher\":{\"@id\":\"https:\/\/thepatientinvestor.com\/#organization\"},\"keywords\":[\"capital abundance\",\"fiat currency\",\"infrastructure\",\"John Mill\",\"unproductive investment\",\"zombie banks\"],\"articleSection\":[\"Banks & Interest Rates\",\"Investment & Infrastructure\",\"Japan & Korea\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/\",\"url\":\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/\",\"name\":\"Will the global economy follow Japan?| Michael Pettis' CHINA FINANCIAL MARKETS - the patient investor\",\"isPartOf\":{\"@id\":\"https:\/\/thepatientinvestor.com\/#website\"},\"datePublished\":\"2015-02-01T23:52:55+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/thepatientinvestor.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Will the global economy follow Japan?| Michael Pettis’ CHINA FINANCIAL MARKETS\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/thepatientinvestor.com\/#website\",\"url\":\"https:\/\/thepatientinvestor.com\/\",\"name\":\"The Patient Investor\",\"description\":\"Smart. 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China's Growth Model China's growth\u2026","rel":"","context":"In "China & HK"","block_context":{"text":"China & HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"China Non-Financial Credit\/GDP","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-01-30-china-credit.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-01-30-china-credit.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-01-30-china-credit.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":11511,"url":"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/infrastructure-opportunity-michael-pettis-china-financial-markets\/","url_meta":{"origin":11513,"position":1},"title":"Infrastructure opportunity | Michael Pettis’ CHINA FINANCIAL MARKETS","author":"ColinTwiggs","date":"February 1, 2015","format":false,"excerpt":"Interesting view from Michael Pettis: Excess liquidity and risk appetite makes it easy to lock in cheap, long-term funding for investment projects. Countries that have weak infrastructure, or whose infrastructure is in serious need of improvement, have today an historical opportunity to build or replenish the value of their infrastructure\u2026","rel":"","context":"In "Investment & Infrastructure"","block_context":{"text":"Investment & Infrastructure","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/investment-infrastructure\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13249,"url":"https:\/\/thepatientinvestor.com\/index.php\/2016\/05\/08\/the-titillating-and-terrifying-collapse-of-the-dollar-again-michael-pettis\/","url_meta":{"origin":11513,"position":2},"title":"The titillating and terrifying collapse of the dollar. Again. | Michael Pettis","author":"ColinTwiggs","date":"May 8, 2016","format":false,"excerpt":"Michael Pettis explains why the US dollar as reserve currency is a burden rather than a privilege for the US: Historically, neither Europe nor Japan, and certainly not China, have been willing to permit foreigners to purchase significant amounts of government bonds for reserve purposes. When the PBoC tried to\u2026","rel":"","context":"In "China & HK"","block_context":{"text":"China & HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":11233,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/10\/30\/should-beijing-raise-subway-fares-michael-pettis\/","url_meta":{"origin":11513,"position":3},"title":"Should Beijing raise subway fares? | Michael Pettis","author":"ColinTwiggs","date":"October 30, 2014","format":false,"excerpt":"Michael Pettis' argues that not only are SOEs \"destroying value in the aggregate on a huge scale\" but misallocated investment is endemic in China. I have to confess that the reason I started saying in 2006-07 that China was eventually going to replace 1980s Japan as the global archetype of\u2026","rel":"","context":"In "China & HK"","block_context":{"text":"China & HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":62958,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/10\/26\/china-is-breaking-the-global-monetary-system\/","url_meta":{"origin":11513,"position":4},"title":"China is breaking the global monetary system","author":"Colin Twiggs","date":"October 26, 2025","format":false,"excerpt":"Key Points President Trump hopes to cement a trade deal with China's Xi Jinping at their meeting on Thursday. China is unlikely to abandon its investment-led growth model that has delivered much progress in the past 25 years. However, China's model is damaging the global economy and monetary system. 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