Blog de Paul Giacobbi - Député de la 2ème circonscription de Haute-Corse - Conseiller à l'Assemblée de Corse

Député de la 2ème circonscription de Haute-Corse - Conseiller à l'Assemblée de Corse


   
China’s wall and western fall
In a paper published this week-end in the NYT, Paul Krugman tells us about the economic trouble in China and the risk of financial slump in the western world.
“China is in big trouble. We are not talking about some minor setback along the way, but something more fundamental.”
In fact, quoting the economist W. Arthur Lewis, Paul Krugman thinks that China is now at the “Lewis point”.
For decades, the industrial and economic growth of China was essentially based on investment in order to increase exportations. While in USA 70% of growth domestic product is devoted to consumption, this number is only half that in China.
The “Lewis point” is the moment where the surplus labor is not sufficient to provide cheap employees for industry… On the other side of the world, we have probably reached the “Minsky moment”: a sudden collapse of asset values after a period of speculation using borrowed money.
Hyman P. Minsky died more than ten years before the Great crisis of 2007 but this exceptional economist explained the mechanism of the future crisis.
So the conclusion of Paul Krugman is that : “China is hitting its Lewis point at the same time that the western economies are going through its Minisky moment, the point when overextended private borrowers all try to pull back at the same time, and in so doing provoke a general slump”.
So, to sum up this awful moment, I will say that China is reaching its own wall while we are just before our financial fall.

Commentaires (0) | Rédigé par Paul Giacobbi le 22/07/2013

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