{"id":11917,"date":"2015-06-09T20:24:20","date_gmt":"2015-06-10T00:24:20","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=11917"},"modified":"2015-06-09T20:24:20","modified_gmt":"2015-06-10T00:24:20","slug":"how-much-longer-can-the-global-trading-system-last-michael-pettis","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2015\/06\/09\/how-much-longer-can-the-global-trading-system-last-michael-pettis\/","title":{"rendered":"How much longer can the global trading system last? | Michael Pettis"},"content":{"rendered":"<p>Michael Pettis quotes a Brazilian economist on the dilemna facing the US:<\/p>\n<blockquote><p>&#8230;.As the US becomes a declining share of the globalized world, the costs of imposing stability (and I have no illusions that this is done for charity) rise, and its share of the benefits decline. It is only a matter of arithmetic that at some point the costs will exceed the benefits.<\/p><\/blockquote>\n<p>Pettis describes how other countries have gamed the system \u2013 notably Germany and France in the 1960s, Japan in the 1980s, and China in the 2000s &#8211; and argues that the costs to the US already outweigh the benefits.<\/p>\n<blockquote><p>&#8230;.Many economists may disagree with me that the costs of the current role the US plays in the global trade regime exceeds the benefits, but the point of this essay is to show that even if I am wrong, as long as the world grows faster than the US, more of the world is incorporated into the global trading system, and more countries design growth models that suppress domestic consumption in order to subsidize domestic growth, there must of necessity be a point at which it makes sense for the US to opt out of its role as shock absorber, and \u2013 by raising tariffs, intervening actively in the currency, restricting foreign purchases of US assets and especially US government bonds, or otherwise reducing capital inflows \u2013 become simply one more member of a system with no automatic adjustment process.<\/p>\n<p>The current system, in other words, is inherently unstable and will sooner or later force the US economy into a position of choosing either to take on excessive risk or to abdicate its role as shock absorber&#8230;.<\/p><\/blockquote>\n<p>Sustained current and capital account imbalances are unhealthy except for the few rare instances where capital-rich economies invest or loan money to a capital-poor recipient. In most cases capital is used to purchase secure Treasury investments in the US in order to offset a domestic current account surplus. This has a destabilizing effect not only on the US economy, which has shed millions of manufacturing jobs and created a housing bubble of epic proportions, but on the global economy as a whole, destroying any benefit to the perpetrator.<\/p>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter\" alt=\"US Manufacturing Employment\" title=\"US Manufacturing Employment\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2015\/us-manufacturing-jobs.png?w=525&#038;ssl=1\" \/><\/p>\n<p>Read more at <a href='http:\/\/blog.mpettis.com\/2014\/09\/how-much-longer-can-the-global-trading-system-last\/'>How much longer can the global trading system last? | Michael Pettis&#039; CHINA FINANCIAL MARKETS<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Michael Pettis quotes a Brazilian economist on the dilemna facing the US: &#8230;.As the US becomes a declining share of the globalized world, the costs of imposing stability (and I have no illusions that this is done for charity) rise, and its share of the benefits decline. It is only a matter of arithmetic that &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2015\/06\/09\/how-much-longer-can-the-global-trading-system-last-michael-pettis\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;How much longer can the global trading system last? | Michael Pettis&#8221;<\/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":[41,5,17,33,34],"tags":[571,928,1574],"class_list":["post-11917","post","type-post","status-publish","format-standard","hentry","category-china-hk","category-economy","category-japan-korea","category-uk-europe-countries-regions","category-us-canada-countries-regions","tag-capital-account","tag-current-account-deficit","tag-global-trade"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How much longer can the global trading system last? | Michael Pettis - 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=\"How much longer can the global trading system last? | Michael Pettis - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Michael Pettis quotes a Brazilian economist on the dilemna facing the US: &#8230;.As the US becomes a declining share of the globalized world, the costs of imposing stability (and I have no illusions that this is done for charity) rise, and its share of the benefits decline. 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So far, thanks to the exorbitant privilege of the US dollar and the good\u2026","rel":"","context":"In &quot;China &amp; HK&quot;","block_context":{"text":"China &amp; HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"Adam Tooze","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/adam-tooze.png?resize=350%2C200&ssl=1","width":350,"height":200},"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":11917,"position":1},"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 &quot;China &amp; HK&quot;","block_context":{"text":"China &amp; HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":11513,"url":"https:\/\/thepatientinvestor.com\/index.php\/2015\/02\/01\/will-the-global-economy-follow-japan-michael-pettis-china-financial-markets\/","url_meta":{"origin":11917,"position":2},"title":"Will the global economy follow Japan?| Michael Pettis&#8217; CHINA FINANCIAL MARKETS","author":"ColinTwiggs","date":"February 1, 2015","format":false,"excerpt":"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\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":27410,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/08\/16\/michael-pettis-china-faces-an-impossible-challenge\/","url_meta":{"origin":11917,"position":3},"title":"Michael Pettis: China faces an impossible challenge","author":"Colin Twiggs","date":"August 16, 2021","format":false,"excerpt":"When it comes to the challenges facing the Chinese economy, Michael Pettis' insights are in a class of their own: \"The Chinese growth model has relied very heavily on investment which in turn has relied very heavily on debt. As China began to over-invest in nonproductive projects, as it has\u2026","rel":"","context":"In &quot;China &amp; HK&quot;","block_context":{"text":"China &amp; HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":40639,"url":"https:\/\/thepatientinvestor.com\/index.php\/2023\/01\/30\/michael-pettis-the-china-shock-is-coming\/","url_meta":{"origin":11917,"position":4},"title":"Michael Pettis: The China Shock is Coming","author":"Colin Twiggs","date":"January 30, 2023","format":false,"excerpt":"https:\/\/youtu.be\/QcdPMOMS7N8 Michael Pettis is a professor of finance at Peking University in Beijing and one of the foremost Western experts on China, having lived there for almost two decades. He explains the Chinese growth model, why it no longer works, and the hard choices ahead. China's Growth Model China's growth\u2026","rel":"","context":"In &quot;China &amp; HK&quot;","block_context":{"text":"China &amp; 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":11233,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/10\/30\/should-beijing-raise-subway-fares-michael-pettis\/","url_meta":{"origin":11917,"position":5},"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 &quot;China &amp; HK&quot;","block_context":{"text":"China &amp; HK","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/china-hk\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/11917","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=11917"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/11917\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=11917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=11917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=11917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}