I see with increasing frequency the erroneous assertion that Moritz Schularick and I were in favor of "Chimerica"--the symbiosis between the Chinese and American economies before the global financial crisis. But that is a complete misrepresentation of our argument. 1/13
The first time we published, in 2007, we said it was the key to understanding inflated asset prices in the West and China's inexorably rising share of global manufacturing. The whole point of the word was that Chimerica might prove to be a chimera: wsj.com/articles/SB117… 2/13
Here's the long version: jfki.fu-berlin.de/faculty/econom… 3/13
We followed this up in 2009, saying explicitly that "we believed this relationship was a chimera a monstrous hybrid like the part-lion, part-goat, part-snake of legend." nytimes.com/2009/11/16/opi… 4/13
"Like many another marriage between a saver and a spender," we wrote, "Chimerica was not destined to last." And: "Right now, Chimerica clearly serves China better than America. Call it the 10:10 deal: the Chinese get 10 percent growth; America gets 10 percent unemployment." 5/13
"Chimerica was always a chimera an economic monster," we concluded. "Revaluing the renminbi will give this monster the peaceful death it deserves." Longer version here: hbs.edu/faculty/Public… 6/13
But we were wrong. The financial crisis didn't lead to divorce, but rather to convergence: the odd couple grew more economically alike. After the crisis, both halves of Chimerica became hooked on monetary stimulus: wsj.com/articles/the-u… (2013) 7/13
By 2015 it seemed obvious to us that only a more transparent (and independent) Chinese monetary policy would avert a new crisis as the Fed tried to taper QE, while China gambled on yet another devaluation: wsj.com/articles/chime… 8/13
None of what we recommended was done. China's persistent reliance on currency weakness made an American backlash inevitable. It came in the form of the protectionist Donald Trump's election in 2016: wsj.com/articles/chime… 9/13
"The backlash against China was a more or less inevitable consequence of the evolution of Chimerica," we argued. "It would have happened ... even without Donald Trump." 10/13
As the trade war got going in spring 2018, we argued that China had to "give ground and commit itself to reducing its bilateral trade deficit with the U.S." If not, there would be a non-amicable Chimerican divorce. Well, that's exactly what we got. 11/13
Longer version here: onlinelibrary.wiley.com/doi/full/10.11… 12/13
By March last year it was clear to me that Chimerica was dead and Cold War II had begun. See here: bostonglobe.com/opinion/2019/0… and (later) here: nytimes.com/2019/12/02/opi… 13/13 Ends
