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The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy
     

The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy

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by Michael Pettis
 

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ISBN-10: 0691158681

ISBN-13: 9780691158686

Pub. Date: 01/22/2013

Publisher: Princeton University Press

"Through the past decade of China's financial and strategic emergence, Michael Pettis has been a source of unfailing common sense about the possibilities and limitations of the Chinese model. Now he has put his analysis and recommendations into one concise book. I highly recommend reading and reconsulting his book to put the daily flow of China news into

Overview

"Through the past decade of China's financial and strategic emergence, Michael Pettis has been a source of unfailing common sense about the possibilities and limitations of the Chinese model. Now he has put his analysis and recommendations into one concise book. I highly recommend reading and reconsulting his book to put the daily flow of China news into perspective."—James Fallows, author of China Airborne

"This is a brilliant book, one that absolutely must be read by all who are concerned with globalization's future. Michael Pettis debunks the reigning conventional wisdom about international trade, finance, and globalization, and provides the most clear-eyed, unbiased, and unvarnished insights into how the Chinese economy works. From Chinese savers to Greek debtors to American bankers, Pettis shows how we are all connected—and what to prepare for on the road ahead."—Clyde Prestowitz, author of The Betrayal of American Prosperity

"Michael Pettis has written an essential guide to the macroeconomic imbalances that bedevil today's global economy. We ignore his message at our peril."—Dani Rodrik, author of The Globalization Paradox

"This is a profoundly interesting exploration of the causes of the trade and capital imbalances that produced the 2008 financial crisis. Michael Pettis argues that the structural gap between China's domestic consumption and production is the central reason for its pursuit of export-led growth through currency undervaluation. His analysis focuses valuable attention on the deep domestic reforms required in all the major trading countries for the 'great rebalancing' of their international accounts—and the avoidance of continuing crises."—Robert Skidelsky, author of Keynes: The Return of the Master

Product Details

ISBN-13:
9780691158686
Publisher:
Princeton University Press
Publication date:
01/22/2013
Pages:
216
Product dimensions:
6.10(w) x 9.30(h) x 1.10(d)

Table of Contents

Preface to the Paperback Edition xi
CHAPTER ONE Trade Imbalances and the Global Financial Crisis 1

  • Underconsumption 4
  • The Different Explanations of Trade Imbalance 6
  • Destabilizing Imbalances 9
  • We Have the Tools 11
  • Why the Confusion? 14
  • Some Accounting Identities 17
  • The Inanity of Moralizing 19
  • The New Economic Writing 22

CHAPTER TWO How Does Trade Intervention Work? 26

  • Trade Intervention Affects the Savings Rate 29
  • Currency Manipulation 32
  • Exporting Capital Means Importing Demand 34
  • What Happens If China Revalues the Renminbi? 37
  • Wealth Is Transferred within China 40
  • Does China Need a Social Safety Net? 42

CHAPTER THREE The Many Forms of Trade Intervention 47

  • How Changes in Wealth Affect Savings 50
  • Wage Growth 52
  • Trade Policy as the Implicit Consequence of Transfers 55
  • Financial Repression 58
  • Higher Interest Rates and Household Wealth 61
  • Do Higher Interest Rates Stimulate or Reduce Consumption? 64
  • Currency versus Interest Rates 66

CHAPTER FOUR The Case of Unbalanced Growth in China 69

  • What Kind of Imbalance? 74
  • Growth Miracles Are Not New 78
  • The Brazilian Miracle 81
  • Powering Growth 84
  • Paying for Subsidies 87
  • Limits to Backwardness 89
  • The Trade Impact 92
  • A Lost Decade? 94
  • Can China Manage the Transition More Efficiently? 96
  • Some More Misconceptions 97

CHAPTER FIVE The Other Side of the Imbalances 100

  • Can Europe Change American Savings Rates? 103
  • How Does Trade Rebalance? 106
  • Globalization Is Not Bilateral 109
  • The Global Shopping Spree 113
  • Trade Remains Unbalanced 115

CHAPTER SIX The Case of Europe 119

  • The Mechanics of Crisis 122
  • Too Late 125
  • German Thrift 128
  • Forcing Germany to Adjust 131
  • Two-Sided Adjustment 133

CHAPTER SEVEN Foreign Capital, Go Home! 136

  • Swapping Assets 139
  • It's about Trade, Not Capital 142
  • Trade Imbalances Lead to Debt Imbalances 144
  • The Current Account Dilemma 147

CHAPTER EIGHT The Exorbitant Burden 150

  • Why Buy Dollars? 153
  • It Is Better to Give Than to Receive 157
  • Foreigners Fund Current Account Deficits, Not Fiscal Deficits 161
  • Rebalancing the Scales 163
  • When Are Net Capital Inflows a Good Thing? 166
  • Can We Live without the Dollar? 168
  • Why Not Use SDRs? 172
  • An American Push Away from Exorbitant Privilege 174

CHAPTER NINE When Will the Global Crisis End? 178

  • Transferring the Center of the Crisis 180
  • Reversing the Rebalancing 183
  • Some Predictions 185
  • The Global Impact 191

APPENDIX Does income equality lead to unemployment? 197

Notes 217
Index 225

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