Thread by @michaelxpettis

I’ll gladly take the bet. Jeffrey Sachs is a brilliant guy but I don’t think he understands how the balance of payments works. His argument about why the RMB will become on par with the dollar in ten years is identical to the comments made...
scmp.com/economy/china-… via @scmpnews

@SCMPNews ...in the late 1980s about the yen. It accepts straight-line growth projections without taking into account the effect of enormous amounts of debt and the terribly difficult adjustments suffered by every country that followed the growth model China and Japan followed. It also...

@SCMPNews ...assumes that a global currency is an exorbitant privilege, rather than a burden.

There are also at least two factual errors. First, the piece says “The US now accounts for 15% of the world economy, down from around 21.6% in 1980, according to estimates from the IMF. By...

@SCMPNews ...comparison, China’s economy now accounts for around 19.2% of the world economy while the European Union Union is about 16 per cent.” In fact the IMF gives the US 25% of global GDP, the EU 21% and China 17% (and most economists, including many in the IMF believe China’s is...

@SCMPNews ...seriously overstated). The numbers he cites may be the much discredited World Bank PPP-adjusted GDP data, but it is nominal GDP, not PPP-adjusted GDP, that should matter in this case...

imf.org/external/datam…

@SCMPNews ...Second is the claim that the international use of the Chinese currency is rising. That used to be true, but it has been declining in recent years, and it is no coincidence, I think, that its rise and decline coincided with speculative interest in a rising and then falling RMB.