Michael Pettis On Class War & Role Of Chinese Yuan | Macro Hive Conversations | Podcast #28

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Michael Pettis is someone who I have followed closely over my career and he is one of the most widely followed China experts in the investor community. He is currently based in Beijing and is Professor of Finance at Guanghua School of Management at Peking University and is the co-author of the recently published book “Trade Wars Are Class Wars”. In this podcast we discuss:
1. How economists don’t understand debt
2. Understanding when high savings rates work for countries
3. How advanced economies investment needs changed since 1970s
4. How trade surplus countries like China and Germany suppress the household wages and income
5. Why China’s high savings rates will now only lead to higher debt, rather than growth.
6. How Spanish workers are harder working than German workers
7. How the US and UK are forced recipients of excess savings
8. Why high debt levels lead to low rates
9. The problem with official Chinese GDP data
10. The importance of the US dollar as reserve currency
11. Why the Chinese yuan will not collapse
12. Recommended books: the works of Kindleberger, Adam Tooze’s The Deluge, Eichengreen’s Golden Fetters, Mark Nelson’s Jumping the Abyss: Marriner S. Eccles and the New Deal, 1933-1940
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[@usmanchohan1444]

Very informative chat, Michael Pettis is a brilliant thinker, and Bilal conducted a thorough interview

[@nachannachle2706]

Very informative discussion.
Great observations and insights about how developed vs developing countries handle debt and growth prospects.

[@Worldly40]

It was hard to understand what savings were defined. For a while I was thinking of household savings.

[@3506Dodge]

So, the failure of Britain and America to invest in infrastructure, training, research and development is a political choice, not a financial constraint.

[@lukehua5989]

developing coutries are poor because they don't have proper infrustructure and also because they don't have good technologies. Chinese needs invest more, in my opinion much more on technology, education, healthcare etc.

[@labanyu]

Eyeroll. Not writing down bad debts has ZERO effect on GDP. Write downs are just accelerated depreciation. Not exactly sure why an investment in an uneconomic factory needs to written down while a pair of Air Jordan’s do not - because neither should be written down when calculating GDP. It all counts!
Michael Pettis knows this but he continues to flimflam because... hell I don’t know

[@connormullin4547]

His main point is that if you wanted to compare China's GDP accurately to that of the US, Canada, Australia, England, etc. You would need to adjust it by writing off all of these bad investments because they do that in these other countries to get their GDP number. China is the only country that doesn't do this, maybe because they want to meet their arbitrary GDP targets, and maybe because the scale of these bad investments could be an embarrassment to the government. If you calculate the measurement differently for each country then it can not be useful as a tool of comparison.