global rebalancing

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Every Nation for Itself: Winners and Losers in a G-Zero World by Ian Bremmer

airport security, banking crisis, barriers to entry, Berlin Wall, blood diamond, Bretton Woods, BRICs, capital controls, clean water, creative destruction, Deng Xiaoping, Doha Development Round, energy security, European colonialism, failed state, global rebalancing, global supply chain, Global Witness, income inequality, informal economy, information security, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, Kickstarter, Martin Wolf, mass immigration, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Nelson Mandela, Nixon shock, Nixon triggered the end of the Bretton Woods system, no-fly zone, nuclear winter, Parag Khanna, purchasing power parity, reserve currency, Ronald Reagan, smart grid, South China Sea, sovereign wealth fund, special economic zone, Stuxnet, trade route, uranium enrichment, Washington Consensus, WikiLeaks, Yom Kippur War

China must find a way to shift its economy from dependence on exports toward domestic consumption. Europe needs to ensure that the Germans, Dutch, and Scandinavians don’t end up permanently bankrolling a social safety net for the Greeks, Portuguese, and Spanish. These are policy choices, if unpleasant ones born of necessity, but the world is also facing a global rebalancing between countries like America that consume too much and save too little and those like China that consume too little and save too much. This version of the trend is not the result of policy; it will be an order imposed by economic circumstances over which no one has effective control—and it is only just beginning.

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The limited international use of its language would also undermine any bid to expand Germany’s cultural influence. But its economic and diplomatic leverage, particularly within Europe, is considerable. This is potentially one of the world’s most important pivot states. With Europe’s most powerful and resilient economy, Germany might find enough common ground with China during a period of global rebalancing to sharply limit the need for China to partner with America. Nor are G-Zero crises that push America and China closer together necessarily more likely than those that might drive them apart. A full implosion in North Korea is as likely to produce U.S.-Chinese conflict as cooperation. U.S. officials would probably insist on Korean reunification—though that would come with a price tag no single state can afford, far in excess of Germany’s reunion, because today’s South Korean economy is not as strong as West Germany’s in 1990 and North Korea has nowhere near the resources that kept East Germany alive.

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Today’s China is in need of long-term economic and social reforms almost as ambitious, and its government will be undertaking these changes just at a time when the G-Zero is likely to supply the system with unexpected shocks. If Beijing can’t manage the growing social unrest described in the previous chapter, if it can’t cope with a rising tide of environmental disasters, if global rebalancing begins to cost China jobs and to benefit neighboring economies at China’s expense, if a more serious market meltdown inside Europe and the United States—China’s leading trade partners—puts tens of millions out of work, if public disgust with corruption takes on a life of its own on the Internet, if state attempts to quell another student uprising meet resistance coordinated with modern tools of communication, we might well see a fundamental change over time in how China is actually governed.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, Alan Greenspan, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, full employment, Glass-Steagall Act, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, Les Trente Glorieuses, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, proprietary trading, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, subprime mortgage crisis, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen, Tyler Cowen: Great Stagnation, vertical integration, very high income, winner-take-all economy, zero-sum game

A particularly important possibility is weakness in real commodity prices after almost a decade of elevated levels (see Figure 27). If so, that would certainly have a sizeable impact on commodity exporters, many of which are emerging and developing countries. GLOBAL REBALANCING The emerging economies confront one final challenge: global rebalancing after the crises. They were able to take advantage of strong demand growth in high-income economies before then. Afterwards, they had room, for a while, to promote their own domestic demand. But the weakness of demand in the high-income economies is likely to be permanent, not temporary.

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But there is no way for a single country to deliver this, so long as it has an open capital account and a monetary policy oriented towards domestic price stability. This is particularly true for a country that issues a reserve currency: it effectively loses control over its exchange rate. So this brings us to one of the biggest issues raised by the argument in this book, particularly in Chapter Five: global rebalancing. GLOBAL REFORM One way out of the apparent demand trap would be via global rebalancing. The evidence at present is that high-income countries are no longer able to absorb the savings that would be generated by their private sectors if their economies were running at something close to full capacity and were also not experiencing an unsustainable credit expansion.46 This is why activity has been persistently weak and real interest rates low.

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But there are also deeper structural issues in many countries, which interact unfavourably with the more adverse external conditions: poor quality of labour forces; ageing of the populations, slowing growth of productivity; and rising external imbalances. Sustaining growth means continued reform. In its absence, sources of rapid growth weaken. That is probably a sizeable part of what we are seeing.25 Managing China’s Inevitable Slowdown The challenge for emerging economies is not just managing the global rebalancing. It is also that of adapting to what might become a big slowdown in the Chinese economy. One of the reasons many emerging economies did so well after the crisis is that China itself did so well (see Figure 20). It is not only the world’s second-largest economy but significantly bigger than Brazil, India and Russia together.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, electricity market, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Again, the problem was not one of principle but of execution, as explained in such excellent books as The Trillion Dollar Meltdown by Charles Morris and Fool’s Gold by Gillian Tett, although sometimes belied by their sensational marketing (Tett’s subtitle was: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe.) The question of property speculation, on the other hand, demands more attention. House prices have far greater resonance for ordinary people than asset securitization or global rebalancing. Yet the public discussion of the role of housing in the crisis has been misleading and superficial. It is taken as axiomatic in all explanations of the crisis—from tabloid newspaper headlines to learned academic articles—that the rise in U.S. house prices in the years leading up to the crisis was one of the greatest financial bubbles of all time.

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But because the yen and the euro were both at least as ugly as the dollar, the Fed and the Obama administration were able to implement unprecedented programs of monetary and fiscal expansion without worrying about a flight of capital out of the United States. By doing this, they guaranteed an economic recovery and could afford to continue doing whatever it took to sustain growth in 2010 and beyond. The bigger challenges to the U.S. and world economies will appear from 2011 onward, when the longer-term problems of government and consumer debt, global rebalancing, and structural inflation may need to be seriously addressed. These are among the issues taken up in the last part of this book. Part V Capitalism 4.0 and the Future EVEN IF THE TRANSITION to Capitalism 4.0 occurs in a more orderly and peaceful manner than the previous great transitions of the 1930s and 1970s, many genuine risks will continue to face the democratic capitalist system.

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But as these countries move back toward full employment, the rebalancing of global growth will make them more prone to inflation than they were in the precrisis years. From this point of view, the sooner the world economy can be rebalanced, eliminating excessive trade surpluses and deficits worldwide, the smaller the risk of dangerous inflationary pressures. Unfortunately, as discussed previously in this chapter, the prospects of such a global rebalancing occurring quickly and smoothly do not seem bright. Protectionism and deglobalization therefore could create the conditions for stagflation to return. Big Government From the mid-1960s until the late 1970s, the world experienced a large upsurge of government spending and employment. This was clearly one of the major causes of stagflation.

The End of Medicine: How Silicon Valley (And Naked Mice) Will Reboot Your Doctor by Andy Kessler

airport security, Andy Kessler, Bear Stearns, bioinformatics, Buckminster Fuller, call centre, Dean Kamen, digital divide, El Camino Real, employer provided health coverage, full employment, George Gilder, global rebalancing, Law of Accelerating Returns, low earth orbit, Metcalfe’s law, moral hazard, Network effects, off-the-grid, pattern recognition, personalized medicine, phenotype, Ray Kurzweil, Richard Feynman, Sand Hill Road, Silicon Valley, stem cell, Steve Jurvetson, vertical integration

The conference room at the Lucas Center was overflowing. I was the only one without a tie. My being there was a surprise for Steve, who recounted a few old lines from some pieces he and I had coauthored way back when, about technology and the economy, blah blah blah. Mostly, he warned about the coming global rebalancing and labor arbitrage and I started nodding out. “What are you doing here?” Steve came up and asked at the end of his talk. “Slumming,” I answered. “Figured I would step in front of a tomato or two aimed in your direction.” “Funny. I see you haven’t changed. Speaking of tomatoes, there’s a dinner at John Bentley’s for a few folks—you should come.

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, bank run, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, deal flow, Deng Xiaoping, diversification, diversified portfolio, Dr. Strangelove, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, Great Leap Forward, guns versus butter model, high net worth, income inequality, interest rate derivative, it's over 9,000, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, power law, price mechanism, price stability, private sector deleveraging, proprietary trading, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, short squeeze, sovereign wealth fund, special drawing rights, special economic zone, subprime mortgage crisis, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, vertical integration, War on Poverty, Washington Consensus, zero-sum game

Suddenly the G20 breathed new life into the IMF by positioning it as a kind of Bank of the G20 or proto–world central bank. Its ambitious leader at the time, Dominique Strauss-Kahn, could not have been more pleased, and he eagerly set about as the global referee for whatever guidelines the G20 might set. Despite this heady start toward global rebalancing and President Obama’s personal buy-in, two G20 summits came and went in 2010 with no significant progress in the commitments of member nations to the Pittsburgh summit goals. The IMF did conduct extensive reviews of the practices of each country under the heading “mutual assessment” and continued allegiance to the framework was paid in the G20 communiqués, but the ambitious goals of rebalancing were essentially ignored, especially by China.

Earth Wars: The Battle for Global Resources by Geoff Hiscock

Admiral Zheng, Asian financial crisis, Bakken shale, Bernie Madoff, BRICs, butterfly effect, carbon tax, clean tech, clean water, corporate governance, demographic dividend, Deng Xiaoping, Edward Lorenz: Chaos theory, energy security, energy transition, eurozone crisis, Exxon Valdez, flex fuel, Ford Model T, geopolitical risk, global rebalancing, global supply chain, Great Leap Forward, high-speed rail, hydraulic fracturing, Long Term Capital Management, Malacca Straits, Masayoshi Son, Masdar, mass immigration, megacity, megaproject, Menlo Park, Mohammed Bouazizi, new economy, oil shale / tar sands, oil shock, Panamax, Pearl River Delta, purchasing power parity, Ralph Waldo Emerson, RAND corporation, Shenzhen special economic zone , Shenzhen was a fishing village, Silicon Valley, smart grid, SoftBank, Solyndra, South China Sea, sovereign wealth fund, special economic zone, spice trade, trade route, uranium enrichment, urban decay, WikiLeaks, working-age population, Yom Kippur War

., 42 McDougall Street, Milton, Queensland 4064, Australia Wiley-VCH, Boschstrasse 12, D-69469 Weinheim, Germany ISBN 978-1-118-15288-1 (Cloth) ISBN 978-1-118-15291-1 (ePDF) ISBN 978-1-118-15290-4 (Mobi) ISBN 978-1-118-15289-8 (ePub) Maps Africa Asia Southeast Asia Australia Middle East Europe North America South America Introduction What we are experiencing with the transformation of China is a once in a century or more event. It really is the start of a global rebalancing—a rebalancing that will continue to unfold over many decades. —BHP Billiton Chairman Jac Nasser, 9 May 2011 Six hundred years ago, China neither needed nor wanted anything from the West. It was the Middle Kingdom, the centre of the world, the seat of all that a civilization could possibly need to advance and prosper.

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge by Faisal Islam

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, bond market vigilante , book value, Boris Johnson, British Empire, capital controls, carbon credits, carbon footprint, carbon tax, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, credit crunch, Credit Default Swap, crony capitalism, Crossrail, currency risk, dark matter, deindustrialization, Deng Xiaoping, disintermediation, energy security, Eugene Fama: efficient market hypothesis, eurozone crisis, Eyjafjallajökull, financial deregulation, financial engineering, financial innovation, financial repression, floating exchange rates, forensic accounting, forward guidance, full employment, G4S, ghettoisation, global rebalancing, global reserve currency, high-speed rail, hiring and firing, inflation targeting, Irish property bubble, junk bonds, Just-in-time delivery, labour market flexibility, light touch regulation, London Whale, Long Term Capital Management, low interest rates, margin call, market clearing, megacity, megaproject, Mikhail Gorbachev, mini-job, mittelstand, Money creation, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, North Sea oil, Northern Rock, offshore financial centre, open economy, paradox of thrift, Pearl River Delta, pension reform, price mechanism, price stability, profit motive, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, reshoring, Right to Buy, rising living standards, Ronald Reagan, savings glut, shareholder value, sovereign wealth fund, tail risk, The Chicago School, the payments system, too big to fail, trade route, transaction costs, two tier labour market, unorthodox policies, uranium enrichment, urban planning, value at risk, WikiLeaks, working-age population, zero-sum game

As much as 60 per cent of China’s exports are made by foreign-owned companies, many from the USA. The iPad and iPhone are the most famous US-invented contributors to the USA–China trade deficit. So exporting China’s infrastructure boom around the world is China’s preferred route for the much-vaunted ‘global rebalancing’ agenda. Other post-crisis efforts at rebalancing the global economy have made minimal progress. One leading central banker refers to the discussions at the G20 as a ‘depressing waste of time’. The mere absence of a savage trade war in the aftermath of the crisis is the only notable but limited sign of success.