Michael Pettis – Concerned Capital flowing out of China [Interview]

Michael Pettis – Concerned Capital flowing out of China [Interview]

Michael Pettis – Concerned Capital flowing out of China [Interview]

Published on Apr 5, 2016
Michael Pettis Blog http://blog.mpettis.com/
Huge debt adjustment impending in China
Debt problems lead to slow growth
Under fiat currency, debt gets out of control

RMB has strengthened

This Top Energy And Infrastructure Fund Is Bullish On U.S. Utilities

UtilitiesThe Electron Global Fund was up 2% for September, bringing its third-quarter return to -1.7% and its year-to-date return to 8.5%. Meanwhile, the MSCI World Utilities Index was down 7.2% for September, 1.7% for the third quarter and 3.3% year to date. The S&P 500 was down 4.8% for September, up 0.2% for the third Read More

3:05conversation that added the flavor and spice to that beer Michael Pettis the
3:09conversation continues what I’m curious about is what is market volatility
3:15telling us here in 2016 more than the actual price levels it depends on which
3:21market volatility you’re talking about
3:23market go to the within each other is indeed domestic stock markets reflects
3:29the start the Chinese markets are primarily specular the males have been
3:34really happen in 2015
3:38really sort of the summer of 2014 elizalde Ali is that not only is it
3:43primarily a speculative market for all top of it has been a real convergence of
3:48speculative strategies news basically one strategy and that is if you would
3:53ask most people going to be a rally why they were by Chinese stocks didn’t they
3:59know that the economy was slowing and profitability is coming down their
4:02attorney yes yes we know that but the government is more or less guaranteed
4:07that the stock markets are going to go up but we know the best can’t go on
4:10forever but we’re going to write this incredible and so what’s happened is the
4:17credibility of that guarantee weaken as you would expect to get the complete
4:21collapse the market until the government is able to get it going again but I
4:25really don’t think you can expect any sustained rally in the market because
4:30it’s part 2 jittery and 42 focused on any sort of government signaling in kind
4:35of an intense in the external markets are you think what’s really happening is
4:41not so much that foreigners are correctly interpreting the data coming
4:46out of China because the chinese adjustment is going to be much less
4:51painful for the world that many people expect this to terms with who was
4:55speaking about of course metal producers that have been very badly
4:59will compete to be hurt badly but in general the united states are going to
5:04be but not only affected by the Chinese are just as long as it’s not chaotic and
5:08disruptive but what’s happening there is that there’s sort of this rapid catch up
5:13to the kind of things that you live with discussing for many years it’s taking
5:17awhile I think for people to recognize just how difficult the Chinese
5:21adjustment was going to be and I would certainly lost your so pretty much
5:25everyone is sort of caught up towards china really is there is this issue
5:31massive indebtedness in China and I wonder if it’s possible to avoid the
5:37negative implications of over indebtedness including an increase in
5:40non-performing loans when the financial sector in China is largely guaranteed by
5:47the central bank
5:48well there’s no way to get around it have not been able to find any country
5:53in which debt levels to become high you know that they’ve closed the level of
5:56concern in China and in which the country was ultimately able to grow its
6:01where the historical precedent suggests that China’s not going to grow
6:07significantly it’s certainly not going to grow its way out of its debt until I
6:11get some kind of partial forgiveness on the debt whether this explicit or
6:15implicit and explicit way of course the defaulting to restructure the debt with
6:19a haircut that’s probably not going to happen it’s much more likely is the debt
6:24servicing costs are going to be allocated somehow the other through the
6:28state sector and that it’s mostly the provincial state sector because it’s
6:32really the only group that’s able to absorb the cost of the debt without
6:37significantly negative economic implications bill normally when you have
6:42a problem with the household sector because the school sectors politically
6:47not strong enough to protect themselves and I’m not just talking about china
6:50this would happen USA and Europe and everywhere else but in China that’s how
6:55they sold the last about ten fifteen years ago and during that period
7:01consumption as a share of GDP which started already quite low folder
7:06dramatically the most makes the house will start to clean up dead you can’t
7:11really ask for a surge in house
7:13salt consumption to drive growth so they’re not going to be able to
7:16allocated to the household sector and that pretty much means that they don’t
7:20have to allocated to the state sector that’s politically really tough to do
7:24when we were promised
7:26Beijing would make re-balancing a priority which people forget was all the
7:31way back in 2007 and Premier Wen Jiabao the imbalance was worse than it was
7:36during the period that the phrase vested interests became widely used in the
7:41Chinese cross because it was as they attempted to rebalance but they first
7:46realize the tremendous opposition but would emerge from the provincial the
7:50group referred to here as the US interests so that’s really the issue
7:55about the debt it’s going to be allocated to the provincial elites to
8:00the provincial states are to one or the other but when that happens very hard to
8:04say because it’s politically very difficult to do so what can we do know
8:08is that the longer it takes to do so the more costly the overall just work is
8:12going to be for charter in a recent article in Project Syndicate mention hey
8:18describes the speed and energy on display in the anticorruption
8:21campaigning for the current administration is this president disease
8:26consolidating power enough to sort of overcome the opposition of vested
8:30interests and thus be able to move forward towards that assignment of
8:36losses that you’re describing what he hopes to once again this work presents a
8:40pretty clear the only countries that are able to implement these types of reforms
8:44successfully tend either to be democracy for barry centralized to talk about
8:49these very much like China the 1980 so season centralized power to that point
8:56it’s simply not going to be possible to implement the necessary reforms or is he
9:01there yet I don’t really know and people like we are not going to others are
9:06really limited number of people who have a really good sense of that and all we
9:09can really do is after the fact whether or not the reforms will have said for a
9:15while though classroom particular that this was really the pier 2016 for me was
9:20the key in which we would see the real credible steps implemented by Beijing
9:26process if we don’t see them 2016 I get a lot more nervous would you say that a
9:32signing those losses is easier in an economy like China’s where there’s not
9:37the same democratically driven feedback loop as we have in the USA Europe well
9:42tell you what the historical precedent suggests somebody democracy come to be
9:47pretty good at adjusting in a highly centralized autocracies tend to be
9:51pretty good adjusting the intuition by that’s what makes sense but we do know
9:56is that countries that are sort of in the middle of always fail to implement
10:00these types of jobs or they done so with tremendous political ability to us so
10:06we’re still waiting to see how it turns out in a few years ago the Chinese
10:10economy was held to be superior economic model exhibiting a faster return to
10:15growth following the global financial crisis and it seems the Chinese playbook
10:20then was to drive demand massive government spending now the emphasis is
10:26shifting to the supply-side reagan would believe they were talking about china
10:33experimenting with some version of supply-side economics is there a reagan
10:38revolution happening in Beijing I think what’s happened is that the reforms that
10:44they’ve been working on it allows for five years have been recognized as local
10:48chain anything really because the keys to get growth under control and that
10:53hasn’t happened so I wonder of supply-side reforms represent something
10:57real or whether it represents nothing more than their goals but the first set
11:03of reforms that will work
11:04know if supply siders any media role I don’t see how it can be useful in China
11:09because supply-side reforms really focus on cutting taxes and taking steps to
11:15promote savings on the grounds that productive investment has been
11:19constrained by the lack of safety in addition supply-side economics tend to
11:24look distortion
11:26corporate production caused by taxes to change the tax structure but it’s really
11:31hard for me to see that those are the problems of China faces certainly we
11:35don’t have a problem with insufficient savings there but with way too much
11:38savings and the idea
11:40we gotta cut corporate tax rates corporate tax rates in China really have
11:44been quite negative for a long time recording artist subsidies especially
11:49the interest rate subsidy until about two or three years ago so it’s hard for
11:53me to imagine why we think we have a supply-side problem China I don’t think
11:57we do I think we continue inside it’s really not institution it’s really the
12:03structure of them and that’s been the problem in China so the fact that
12:06directive switch you explored relating to the implementation of the supply-side
12:12policies to me it seems that only one of them has an immediate and measurable
12:17effect reducing the real estate inventories essentially filling the
12:23empty sixty to seventy million apartments thereby improving household
12:27net worth by I think you penciled it out as anywhere from one and a half to three
12:32trillion dollars
12:33you know that’s the spirit because I would imagine that can be extremely hard
12:38to do that but it gives you a sense of the type of challenges facing the other
12:42big sort of reforms that they’re talking about that also makes production
12:46capacity and they specifically spoke about steel and coal
12:51China’s producing way too much of both of our timing of inventory so it’s going
12:56to be very interesting to see how seriously they take this reduction of
13:00capacity because if you cut back and capacity you are sold in one of the big
13:05problems that we have here in China you are resolving the debt issue because
13:09that’s a rise in order to fund all of this continued production rising
13:13inventories got the problem in china is that is you constrain the growth in the
13:19consequences going to be a rising unemployment and obviously you can see
13:23how that works if you close out all of these factories you by the fire the
13:26workers and if you don’t want to do that they need consumption prize and the only
13:31way to get consumption to lies when her closing factories and firing workers is
13:35increasing household income by some other armies the movie only other means
13:41involves transfers from the state sector or filling up the apartment but I just
13:46think doing it the empty apartment politically going to be very very
13:49difficult win
13:51we see a drop in foreign currency reserves in the run rate on a monthly
13:58basis is close to a hundred billion dollars a month it’s easy to sort of
14:02assume a slippery slope that you know next time frame
14:06they’re going to be running out the Chinese are going to be running out of
14:09foreign currency reserves are reaching a critical threshold what prevents that
14:14continued diminution of foreign currency reserves from happening
14:18well one of the things they’re trying to figure out is whether or not there is a
14:22current coltie that will reduce the outflow and I would say the answer to
14:27that question did opposing what’s guiding post some people seem to believe
14:31that what’s driving the outflows perception of overvaluation the rugby
14:35and if that’s the case then some form of depreciation whether it’s called simply
14:41creation 464 a maxi developed 10 percent followed by a peg or even if they stop
14:48intervening and left the current value that would work because of the current
14:53flows will debate that some point to get some kind of stable currency but I don’t
15:00think that that’s why capital leaving the country to the extent the capital’s
15:04leaving the country for other reasons
15:05concerns about financial risk political supporter but it seems to me that a
15:10weakening women being may actually out in which case there really isn’t the
15:15currency policies that will slow the outflow so my guess is what we’re going
15:20to see that we’re going to continue to see stability in the rather be than
15:24probable may be surprising as they continue to see stability because
15:27there’s also a but the remedy has been depreciating do it’ll be really hasn’t
15:31been depreciating dollar has been appreciated so against the dollar
15:36depreciated against a basket of currencies that really has a fairly
15:41stable and I think the governor of the Central Bank of a joke made it very
15:45clear that he’s going to continue that policy my guess who’s going to commit a
15:50policy for a few more months but if capital outflows will be very high that
15:55I think beijing has been a question house so so bad policies likely to be
15:58they’re going to look at other things it already started the other thing they’re
16:03not going to implement new capital to cool off for a while but they are going
16:08to implement just a couple of holes much more harshly and we’re seeing that
16:13there’s a lot of talk about some of the government related or government driven
16:17outflows them abroad that’s probably going to go down to the variety of
16:24measures aimed at cornell be open and if they don’t work there we really have a
16:29problem because as you know declining reserves of ability and credibility is
16:35undermined there’s a tendency for the outflows to increment through Colorado’s
16:39positive feedback loops looking to really be able i so we need to see what
16:44they do over the next three to four months and whether they can stop these
16:47least reduce these are for significant enough can be quite tough to a large
16:52extent it also depends on the external environment tus those things like that
16:57here the dead against the R&B is a trade that as you said earlier assumes the
17:02Army is overvalued and it assumes the current outflows are driven by that
17:06conclusion that the R&B is overvalued while there are few elements similar to
17:12the exchange rate mechanism that in 1992 it seems that Soros and druckenmiller
17:19knew where the line of defense was and pushed hard against that line maybe you
17:24could comment on this doesn’t seem as wise to bet against a nondescript line
17:28of demarcation yeah you know there’s different types of but if there’s the
17:34company with the tremendous amount of external like Mexico in 94
17:38it’s a pretty safe but once great because the depreciation will be very
17:45very violently pro-cyclical because the currency the dollar debt increases blow
17:50to the local currency assets but that puts pressure on everyone to buy dollars
17:55for what happened to England but in england you also had a pretty clear
17:59strategy in the sense that the german bundesbank was not going to lower
18:04interest rates they made that very clear those high interest rates was stifling
18:09the British economy the stock market had come down a little bit was
18:14so sorry but in the sense that it was almost impossible but starting to rise
18:18against the deutsche mark so you had a one-way bet it made sense to pile on
18:24them they could break it but in China I don’t think either will I know the
18:27former and latter condition of a place so we’ll see what happens when you look
18:33at the PBOC and the possibility of evaluation if the PBOC were to allow for
18:39some devaluation what is the biggest risk implicit to that the risk for whom
18:46he BRC I think both of the global markets and the perception of what that
18:52implies or what it means
18:54well for China the biggest risk is that some kind of depreciation program
18:59actually causes an acceleration of outflows and then we get caught up in
19:04that we passed the point at which you can pull it back you know some people
19:08call the tipping point but its point at which the depreciation causes further
19:13depreciation because of the outflows for the rest of the world the risk i think
19:17is really on the trade front because I don’t think china has been depreciating
19:22in an attempt to struggle the export sector in fact China’s export sector
19:26who’s done pretty well
19:27exports are down but experts across the world down the Chinese share of exports
19:32was actually expected the reason we’ve been seeing these are photos of the
19:37reason we’ve been seeing what looks like currency weakened includes within the
19:41country is really for domestic purposes they have to experiment domestically
19:45supplied but it’s not being interpreted that way abroad so three-time there’s
19:50weakness in Louisville be we see moves in all of the Asian currencies and in
19:55other currencies to weaken and that means that ultimately everyone’s got the
20:00same policies same sort of buried a neighbor policy and all of that ends up
20:04in the form of a rising you its current account deficit and I’m not sure the USA
20:09has a huge amount of appetite for that so the fear there’s that it’s awful
20:14world trade war looking at monetary easing that has been applied over the
20:20last several years is it possible that monetary easing may actually be causing
20:25deflation you look in china too PPI and its declined now for its forty seventh
20:30month in a row is it possible that again
20:33monetary easing could be causing deflation instead of curing the system
20:37either but very very possible and I think the reason most of us don’t think
20:43that that’s possible is because we implicitly assume every country is
20:49structured way to us’ or great britain or structured where monetary easing
20:54tends to increase consumption without lower to production but in China it’s
20:59the opposite in japan received the opposite and that is when you use
21:03monetarily most of the growth in credit flows into new factories new
21:08infrastructure etc
21:09modern steel consumption so we haven’t really seen this very very rapid body
21:15expansion and I was at a meeting yesterday with some of Colby that within
21:2010 two years depending on the definition of money you use fifty percent of the
21:25global money base might be Chinese is really extraordinary when you considered
21:29about 15 percent of global GDP by any money growth has been a very very rapid
21:36but we’re seeing pretty severe deflation in the manufacturing sector so I think
21:41it’s time to dust off some of these beliefs that we have dealing with debt
21:45capacity limits and I’m curious if you can only know what those debt capacity
21:50limits are in retrospect I think that that’s the only way this way too many
21:57moving parts including confidants husband no way to measure of confidence
22:02special places like China so unfortunately we all know that we’re
22:06approaching the limits but it’s too late and when you look at the Chinese economy
22:11today do you see more similarities with the USA in the nineteen twenties or are
22:19there some similarities with japan in that period of the nineteen eighties I
22:23think it’s closer to parity with the difference being of course that it’s
22:27very poor slow creates a different set of dynamics particularly on the tax side
22:31remember that the us-led just very quickly and very brutally Japan and
22:37didn’t apparent
22:38just in twenty-five years later and I suspect that china for political reasons
22:43is more likely to at least because I don’t think china can allow debt levels
22:50to grow to anywhere near that say they have it to crash so we’ll see what
22:55happens but I think the tendency curious to see of slow long drawn out of just
23:01would rather be a very quick Google work which speaks to the difference in
23:04character between how serious debt crises are solved and you might argue
23:10that not all of them are in an absolute or dramatic crisis it can be extended
23:15over a long period of time are we essentially witnessing that in China
23:20today where it’s a crisis but with the fireworks that some anticipate yeah I
23:26mean I think that’s an important point to many people think that a debt problem
23:30manifests itself in the form of crisis and no it doesn’t have to be usually it
23:36doesn’t and the problem emerges wall for you have an emergency program and it’s
23:43the debt itself I think that promotes the growth was being tried it seems to
23:49be an issue that almost universal having too much debt in the system and dealing
23:55with lower levels of growth and that this is both in China and Europe in the
24:01us- I wonder if we aren’t fascinated with this idea of perpetual growth as an
24:06implicit part of a healthy economy the growth dynamic is in fact at one point
24:12enabled or exaggerated by leveraged by high levels of debt how do you see
24:18policymakers coming to terms with the natural consequences of deleveraging a
24:24slow-growth no growth or negative growth environment with the expectation has
24:29become that we must have perpetual growth data politicians and policymakers
24:34deal with the social and political consequences
24:38well I think that we are able to have perpetual growth but what’s happened in
24:44recent years and the first time before in the nineteen twenties and eighteen
24:48seventies a number of times
24:50what’s happened is that when you have significant income inequality that
24:54consumption because of course the rich consume small for small share of their
25:01additional support and consumption is reduced private sector investment tends
25:07to be reduced so you get this reduction in total demand as this happens the
25:13first way to compensate for it tends to be with a surge in consumption among the
25:18middle class
25:19fueled by debt and once you catch the debt limits then the only way you can
25:24adjust to this reduced consumption caused by income inequality is in the
25:29form of rising unemployment a coincidence but that’s what we saw in
25:34the eighteen seventies that’s what we saw the late twenties and thirties and
25:37that’s what we’ve seen more recently so for me the key issue is we can’t
25:42continue to rely on debt to generate growth so one way or the other we’re
25:46going to have a redistribution of income downwards in the USA it’s usually
25:50occurred for political Jackson in the progressives
25:55thirties we all saw that happen if it doesn’t happen that way it has to happen
26:00in the form of massive bomb defaults and will probably going to get that or in
26:05the fall of inflation because bond defaults and inflation both you will the
26:10savings of the wealthy
26:11their wealth so one way or the other we’re going to have to get this
26:14redistribution and we always do the question is do we do it in a way that’s
26:19groups hold and non-disruptive or do we do it in the form of Miller collapse in
26:25the market right away inflation one of these other things because only a
26:29limited number of ways
26:31history shows that for this redistribution of wealth back down
26:34towards the group that needs to spend it you know it’s like murder echols the
26:39problem is that those who have been money don’t want to spend it and those
26:43who want to spend don’t have the money right back to the public political
26:49conflict between progressives at both ends of the spectrum here in the United
26:55are giving I think so anecdotal support for what you say we have Sanders and
27:01Trump who are surprisingly popular both of them headed to suggest that this
27:06issue of income inequality is alive and well and some form of redistribution
27:12whether it’s a market leveling or a top-down leveling of the playing field
27:20is in the process of happening I wonder if you could speculate on a different
27:25issue I would if you could speculate or guess what is the official chinese view
27:31of American foreign policy in Asia that’s not really something I can
27:35discuss partly because it’s politically sensitive and partly because my area of
27:40expertise but what I can say is that there was a very sort of mixed reaction
27:46to the USA little more goodwill child thinks it does but the same time there’s
27:51also a lot of suspicion of China’s sort of the way americans think about china
27:55you’ve got a lot of people who are very favorable towards china lot of people
27:59who are extremely paranoid towards it and that’s replicated Europe China but I
28:03think we should expect that geopolitical tensions are likely to get worse not
28:09just between China and the United States but more generally I’m very worried
28:13about Europe were you saying that strong anti-foreigner feeling of literature and
28:19these are things I think we should have normally expected as part of this
28:22process whatever you have these great big global crises you always see an
28:27increase in geopolitical tensions to see a reduction in international trade but
28:33you know we’re following the pattern pretty closely so at the time that I
28:36think we all have to be extra concerned about the possibility of things getting
28:41out of hand but it’s going to be an issue for a few more years and you
28:45mention this issue of Trump insiders I’m actually working on a paper right now it
28:50seems to me that the followers of problems this is a pretty permanent
28:56factual in American history it comes and goes but I sort of think of the Droid
29:00the Jacksonian function to include spree Andrew Jackson I think it was your tea
29:05partiers are a lot like this
29:08their group tend to get really wild by income inequality but the domination of
29:16the banking system by a number of things I think they’re right to get riled up
29:20about the problems we also have a history of those leaders
29:26proceeding that replicated again but it is interesting because they do tend to
29:32emerge when income inequality becomes a big problem in the united states and so
29:37I think it’s not surprising that we’re starting to see things but seems so
29:41unexpected to us you know that period of Jacksonian revolt against central
29:47planning you had the first and second central bank ultimately the second
29:53central bank allowed to just go away now we have this said the third iteration of
29:58a central bank in the United States and this changes that seem to be occurring
30:04at the level of money what is money is a question that is still difficult for
30:10many to answer and I thought it was very interesting as we sort of consider
30:15changes in the role of central bankers and a certain protest perhaps you know
30:20the Audit the Fed cries then getting louder and louder here in the United
30:24States we go back to the february fifteenth speech there in China the
30:29interview with soot he talks about the implementation of it digital currency
30:35exploring the benefits and drawbacks and wonder if moving towards digital
30:41currency doesn’t radically change the commercial banking space and in the
30:46process of changing the commercial banking space and to some degree the
30:50nature of money also the role that central banks play what are your
30:54thoughts about digital currencies the benefits to monetary policy the
30:59drawbacks negative rates and the greater likelihood of implementation in the
31:04environment of a digital currency any thoughts would go back a little bit
31:08further because I think one of the great mistakes that we made probably beginning
31:13in the 73rd maybe even the sixties was to start believing that monetary policy
31:18central banking is some sort of
31:21technical malfunction when in fact it’s highly political and americans have
31:26known this for most of our history
31:28you mentioned the fight over the Second Bank of the United States that was one
31:32of the most vicious political fights we have ever had in american political
31:37history only probs civil war and water to other things were worse we had in the
31:42eighties and nineties the food movement we had in the nineteen twenties and
31:47thirties ferocious debates about banking because back then it seems that we
31:52understood that banking policies to global policy was not moved from it in
31:57fact involve significant redistribution of wealth to one group to another also a
32:02lot of our political fighting was about how that distribution worker I wonder
32:08what is happening is that first quarter of rediscovering what we always used to
32:13though that is that it really does matter what kind of policy from the
32:17banks of figuring out what is the right policy for the economy at this point
32:23because there really isn’t a right policy is a series of policies and all
32:29the little different types of global distribution among different sectors and
32:33we’re returning to the days when that becomes part of the political atmosphere
32:37properly part of the political ads because it’s just as important fact
32:42maybe it’s even more important than the tax structure in determining who benefit
32:46from the case so maybe that’s what we’re going back to where we were we learning
32:51social policy matters a great deal and not just with technical purpose to
32:56probably a good thing is that cast any late again back into the shadows of our
33:01past where money and international trade relationships there is a greater degree
33:07of automaticity under the gold standard and less of a need for central planning
33:14and the potential for central bank policies not remaining neutral gold has
33:20less of a personality and maybe the period of 1862 1914
33:26gives an example of that growth in global trade currency that is universal
33:31in nature but is to some degree on autopilot yeah I think we’ve got to be
33:36very careful about remote area it was a very very difficult period we had
33:42bubbles those bubbles growth very pretty brutal in fact Barry Eichengreen makes a
33:47very colorful argument that one of the main reasons we can’t go back to go is
33:52because the adjustment mechanism of gold standard involved with terrible cost to
33:57workers and as long as workers with disenfranchised and as long as what
34:01caused worth of food you could get away with it seemed more like an active major
34:05I think that is no longer the case I think the kinds of gold standard
34:11adjustments that we used to experience the Little People Tree we simply cannot
34:16experience anymore certainly that and democracies because the brutalities deal
34:20just with its no longer to be accepted politically know that workers around the
34:25franchise so we don’t overestimate only certainly don’t wanna roll made to cope
34:30but we do have to recognize the one of the great difference between Baghdad is
34:37that in a period of credible fiat currency there isn’t automatic
34:42adjustments it is possible for debt levels to get much much further than
34:48they would have under tougher received so we certainly need to recoup after the
34:54global monetary regime will probably be a new blood and would but I don’t think
34:59that means returning to something like gold I think it means understanding the
35:03weaknesses of a fiat currency system adjusting for those weaknesses among
35:10other things also I think we need to dust off caves proposals during broken
35:15words because I think having the dollar as the dominant reserve currency was the
35:21cost of the United States could bear in the nineteen fifties when it was 43% of
35:26global economy but it will cost that I don’t think you know barry longer and it
35:31should we need to find some other way of managing that process to one of the
35:36things are definitely going to come out of a global crisis is
35:39a significant relief thinking of monetary policy of global currencies and
35:45it’s actually very interesting be part of this process but it’s also going to
35:48be very difficult as we’ve noted stumble towards a solution we are done with
35:53maybe digital curves be kind of solution but we have to be very aware that we
36:00don’t have constraints on the ability of debt to grow at least we don’t have
36:04automatic could have that means that can grow still it can grow along with you
36:10have a really really painful adjustments adjustments who have been talking about
36:14that are possible in China and other parts of the world as well
36:20appreciate you sharing some light on this and look forward to publishing your
36:25next book do you have a time frame for Win that’ll be through the Edit process
36:31and we can enjoy conversing about it I’ve written bits and pieces of it but I
36:37haven’t really sat down and started the book which I was last year because it’s
36:41been so incredibly busy I’m really going to me about it will focus is going to be
36:47on why actual biology lot of so much for the dead country that’s finished with
36:54your which we come out early next year but that’s what I said last year so
36:58we’ll see I will certainly let you go good with sounds like you building
37:03conceptually on the framework that you set out in the volatility machine kind
37:08of a crossover between corporate finance and macroeconomic policies is that
37:13fairly accurate yes that’s the point I think in corporate finance we have a
37:16pretty good understanding of debt balance sheet and shockingly we have no
37:20such understanding of microeconomics but I hope to be able to do this book is
37:25sort of create a bridge between four to it thank you for joining us from beijing
37:29a wonderful evening she time goes very well as you’ve been listening to the
37:34local daily weekly commentary along with David McElhaney and our guest today
37:39Michael Pettis you can find us at McIlvaine a.com see a movie

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