The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy - Updated Edition by Michael PettisThe Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy - Updated Edition by Michael Pettis

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

byMichael Pettis

Paperback | October 26, 2014

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China's economic growth is sputtering, the Euro is under threat, and the United States is combating serious trade disadvantages. Another Great Depression? Not quite. Noted economist and China expert Michael Pettis argues instead that we are undergoing a critical rebalancing of the world economies. Debunking popular misconceptions, Pettis shows that severe trade imbalances spurred on the recent financial crisis and were the result of unfortunate policies that distorted the savings and consumption patterns of certain nations. Pettis examines the reasons behind these destabilizing policies, and he predicts severe economic dislocations that will have long-lasting effects.

Demonstrating how economic policies can carry negative repercussions the world over, The Great Rebalancing sheds urgent light on our globally linked economic future.

Michael Pettis is professor of finance and economics at Peking University, a senior associate at the Carnegie Endowment, and a widely read commentator on China, Europe, and the global economy. He is the author of The Volatility Machine: Emerging Economies and the Threat of Financial Collapse.
Title:The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy - Updated…Format:PaperbackDimensions:256 pagesPublished:October 26, 2014Publisher:Princeton University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0691163626

ISBN - 13:9780691163628


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 RatesStimulateorReduceConsumption? 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



Editorial Reviews

"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