Michael Pettis

I would recommend you to follow Michael Pettis[1]. He used to focus on China but recently also wrote about Europe. I find his explanation convincing but by no means is his view the consensus amount economists. I think much of your question can be answered by this piece: http://foreignpolicy.com/2013/05/07/no-the-spanish-cant-be-more-german… [1]:http://blog.mpettis.com/ In short, prolonged trade imbalances are mostly because of policy reasons, in this case suppressed German wages, and individual preference or things like "hardworking culture" are most likely results instead of causes.

Michael Pettis is one my favourite China commentators, with a big focus on the shifts necessary in the balance sheet and composition of growth, and whether that can be done smoothly or necessarily through some catastrophe. Not to mention a broader view of the political economy of the change. Here's a recent post he did that's worth a read (at least through the nine point summary): http://blog.mpettis.com/2016/01/will-chinas-new-supply-side-reforms-he…

Over 200%. That number is China's debt relative to its GDP, and its an unsustainably high number. In 10 to 15 years China's debt will be insurmountable unless painful steps are taken now to rebalance the Chinese economy. The possibility of demise for China is the intersection between those painful steps, and the CCP's fear those steps will threaten its hold on power - the entire political system actually. Great disparity in China has always led to great upheaval, which I suppose is what is really meant when people use the word "Demise". Source: http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable/

Note that actually, being a reserve currency isn't all that great, as you cede some control over your local economy. See http://blog.mpettis.com/2014/10/are-we-starting-to-see-why-its-really-… for more.

Pettit didn't even hypothesize this. I've never seen him even comment on the equity markets. His blog and book are about the rebalancing of the economy. He doesn't predict what will happen, he just lays out three different scenarios that may occur. Read his blog http://blog.mpettis.com

Economic policy is not designed for the benefit of "most Germans". I can assure you that life became much better for "some Germans" in the years since the Deutsche Mark, as cheap labor from Eastern Europe drove costs down and profits up, while less competitive countries within the EU couldn't devaluate their currency to rebalance trade flows. Actually, it became so much better that they didn't know what to do with all those euros. So they poured showers of them into said less competitive countries, fostering all kinds of bubbles. http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-187… When said bubbles exploded, those "some Germans" were bailed out, in great part by money from "most Germans", whatever little could be squeezed from "most Greeks", and "most" people from all countries rich and poor. "Most Greeks" never saw any of that bailout money. Alas, coming back to the Deutsche Mark will not bring back the good old times for "most Germans". Even if it did, it won't happen because "some Germans" are perfectly happy with the current situation and the power it gives them.

I'm sorry, I realize that you're asking for clarification, but it is really frustrating to keep hearing this kind of crap. Greece the country didn't borrow all (or even most) of that money, private borrowers borrowed it from German banks (or Greek banks that borrowed it from German banks). The money ended up as public debt because the banks got bailed out. The reasons for this were complex, but had a lot of do with German fiscal and labor policy. Once the loans turned out to be bad (because why on Earth did the banks expect that all of these funds could possibly to put to good, productive use, especially once credit standards were lowered), Greece was expected to deal with the situation. They did, and they bankrupted the country doing so (same with Portugal, Spain, and Ireland). There is, of course, plenty of blame to go around, but this is not a situation where the Greek government borrowed a ton of money and wasted it. They borrowed a ton of money to bail out their banking system including a bunch of German banks (which is where a lot of the money originated). This is exactly what the global economic elites were telling everyone to do in 2008. Then, once things got ugly, those same elites decided that the Greek people should collectively pay the price for two bad economic policies that were only partially the fault of their government. Suggested reading: http://www.amazon.com/Austerity-The-History-Dangerous-Idea/dp/01998283… - this book goes into great depth about…

The original article referred to here is this one, with the unfortunately esoteric title: Syriza and the French indemnity of 1871-73 http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-187… I really enjoyed reading this as it puts the Eurozone's current crisis in historical perspective. It dismisses the unhelpful rhetoric about financial probity which has come to dominate debates over Greek debt and which has obscured the real structural problems faced by a federal state which has monetary but not yet political union. One of his most important points was this: An awful lot of Europeans have understood the crisis primarily in terms of differences in national character, economic virtue, and as a moral struggle between prudence and irresponsibility. This interpretation is intuitively appealing but it is almost wholly incorrect, and because the cost of saving Europe is debt forgiveness, and Europe must decide if this is a cost worth paying (I think it is), to the extent that the European crisis is seen as a struggle between the prudent countries and the irresponsible countries, it is extremely unlikely that Europeans will be willing to pay the cost.

Well, what is the alternative? Germany admits they've juiced their export driven economy via an artificially depressed currency, then either (1) leaves the euro themselves, or (2) agrees to permanent support to the less-productive peripheral countries inside the currency union? You may find this interesting: http://blog.mpettis.com/2015/02/when-do-we-decide-that-europe-must-res…

It's a bit more complex than the Greek's have spent too much money and expecting Germans to bail them out. This situation was an inevitability [1] given the Eurozone's make up and the political classes being in denial has worsened it. [1] http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-187…

Michael Pettis presents a (to me) pretty strong-looking argument that the AIIB is not important http://blog.mpettis.com/2015/04/will-the-aiib-one-day-matter/ though he does believe that the post-war/post-'71 dollar economy is likely coming to an end, for other reasons. For one thing, it's easy to lend money to the developing world only if you're not careful about making sure you'll get it back. (I am not an expert.)

You may benefit from reading an expert on debt restructuring: http://blog.mpettis.com/2015/02/when-do-we-decide-that-europe-must-res…

Here's a good counterargument against reserve currency status as a positive thing and listing the negative effects. http://blog.mpettis.com/2016/05/the-titillating-and-terrifying-collaps… It's a long article, start from 'The effects of reserve currency status' The positive effects like seignorage are outweighed by other effects. Japan discouraged an attempt by China to hold the yen. Similarly Europe and China have opposed purchase by foreign central banks. > It turns out that foreign investment is only good for an economy if it brings needed technological or managerial innovation, or if the recipient country has productive investment needs that cannot otherwise be funded. If neither of these two conditions hold, foreign investment must always lead either to a higher debt burden or to higher unemployment. Put differently, foreign investment must result in some combination of only three things: higher productive investment, a higher debt burden, or higher unemployment, and if it does not cause a rise in productive investment, it must cause one of the other two.

I'm not convinced that China's state-owned enterprises are a useful proxy for basic income. Why not? The people employed by these SEO get income (for doing nothing of value to the country). These people arguably are not being able to be productive otherwise because they're stuck in an old industry and their skills are obsolete as such. If left to their own devices, without SEO income, they're likely on the streets and massive unemployment. It's not far off to say that the SEO employees are in a "special kind" of unemployment benefit. Exactly the kinds of people BI are supposed to help. So why won't it be a proxy? In what sense? Basic income is continually replenishes the economy with fresh money, lessening the role of unstable credit. That's not what's happening in China. Until it explodes (which hasn't yet and may not for another 60 years!), China is continuously replenishing SEO loans. It's fresh money to the economy if they are spent. The retail vendor accepting SEO earned yuan couldn't tell the different between that and the non-SEO yuan. So it's effect in the economy is approximately what your BI/GD seeks out to do. Yes on the surface, the difference may appear that in a debt driven approach, China may have a credit event in the future, and GD driven approach doesn't -- but I think it does, in a different way. The essence of what I'm about to say is highlighted by finance professor Michael Pettis blog entry "Thin air money isn't created out of thin air"…

This blog post explains why China's debt is a problem: http://blog.mpettis.com/2016/01/will-chinas-new-supply-side-reforms-he… From what I understand (something may be getting lost in translation) - The increasing debt is being used to keep up growth - The growth that is being bought by the debt isn't enough to service the debt - Some sector of the economy will have to pay for it, because growth will wither until it is paid. Quoting: China is also constrained from reducing the debt burden though monetization, financial repression, or taxes on households because in each case the cost is indirectly allocated to the household sector, which simply exacerbates the original imbalance. This leaves only two alternatives. First, Beijing can expropriate the wealth of small and medium enterprises directly or indirectly (in the latter case by raising taxes), although this means undermining the most productive part of the Chinese economy. Second, Beijing can liquidate government assets and use the proceeds to pay down debt. There are no other plausible options. edit: also: the process of deciding who gets forced to bear the debt will be highly politicized and contentious. The blog post explains how there are strong negative consequences to each choice.

"The current 'tech bubble' is just one of multiple bubbles being driven by an even larger bubble in public equities." I would be interested in how you reason to that statement. I enjoyed reading Michael Pettis' blog entry[1] about excess capital, which provided an alternative narrative to the rise in equities but it wasn't really a bubble so much as it was just an excess of capital. To your question "How many people are employed by these startups?" I believe the median size is <10 employees[2]. If you dumped 10,000 employees onto the market in the Bay Area it would probably sort out reasonably quickly. I'm still stuck trying to figure out if this is really just a capital excess or a bubble though. [1] http://blog.mpettis.com/2014/09/not-with-a-bank-but-a-whimper/ [2] Hard to get precise numbers but you can troll around Crunchbase and other 'tracking' sites and get an idea on the size for "Smaller Younger startups" which is what this question referred to.