Links 21 March 2012

The Japan debt disaster and China‚Äôs (non)rebalancing: a worthwhile read.  back in 2007 and 2008 when I wrote 3 of my four Capitalism in Crisis reports, I pointed out it was unlikely that China would rebalance in time to meet the demand and rebalancing requirements of the highly indebted nations.  In my 4th CIC report (2010), I revisited the global structural imbalance dilemma and still feel that you cannot make any economic judgement without understanding the severity of these imbalances.   We are, and remain, in an unstable equilibrium framework, or a low growth scenario with significant downside risk (negatively skewed with a low mean expected return if you wanted to put a statistical spin).  This piece from Prof. Pettis not only highlights very important global economic relationships, but something much more important, the relative inertia in terms of the ability to make meaningful change to these relationships.  

If Japan has not achieved what it has needed to in the last 22 years, how can we expect Europe, the US and China to achieve much more in a much shorter space of time?  Instead of change we appear to be reaffirming the form that has led to this point in time.

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