1/5
One quibble. In spite of having terrible debt dynamics, I've always thought that China was unlikely to have a financial crisis because financial crises are caused by the sudden unravelling of balance-sheet mismatches. In China’s closed banking...
scmp.com/economy/china-…
One quibble. In spite of having terrible debt dynamics, I've always thought that China was unlikely to have a financial crisis because financial crises are caused by the sudden unravelling of balance-sheet mismatches. In China’s closed banking...
scmp.com/economy/china-…
2/5
system, liabilities are easily restructured by the authorities, and so mismatches on paper are not mismatches in reality. But too many economists – who really should know better – simply assume that “excessive” debt matters only to the extent that it might lead to crisis.
system, liabilities are easily restructured by the authorities, and so mismatches on paper are not mismatches in reality. But too many economists – who really should know better – simply assume that “excessive” debt matters only to the extent that it might lead to crisis.
3/5
This is not just wrong, it is circular. In fact both finance theory and most of the historical evidence suggests that over the medium and long term, countries with excessively-high debt levels that don’t suffer financial crises often sharply underperform those that do.
This is not just wrong, it is circular. In fact both finance theory and most of the historical evidence suggests that over the medium and long term, countries with excessively-high debt levels that don’t suffer financial crises often sharply underperform those that do.
4/5
It is the debt itself that is the problem, in other words, and not just the financial crisis the debt might cause. I’d argue that financial crises are probably worse mainly for countries with fragile social and political institutions, but being able to avoid...
It is the debt itself that is the problem, in other words, and not just the financial crisis the debt might cause. I’d argue that financial crises are probably worse mainly for countries with fragile social and political institutions, but being able to avoid...
5/5
a financial crisis does not mean avoiding the ultimate economic costs of resolving the debt problem, which include financial distress costs and the costs of writing down what Galbraith used to refer to as the “bezzle”.
a financial crisis does not mean avoiding the ultimate economic costs of resolving the debt problem, which include financial distress costs and the costs of writing down what Galbraith used to refer to as the “bezzle”.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
