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MarkGB 

"Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world" - Henry Kissinger

and yet...

"Sooner or later everyone sits down to a banquet of consequences" – Robert Louis Stevenson

Debt matters - now join the dots

In response to an FT article by Gabriel Wildau and Don Weiland on 24th April 2016, entitled 'China debt load reaches record high as risk to economy mounts'

http://www.ft.com/cms/s/0/acd3f2fc-084a-11e6-876d-b823056b209b.html#ixzz46j24huSU

Good stuff FT - two very telling comments if you join the dots:

- '“It is wrong to assume that ‘too much debt’ is bad only if it causes a crisis, and this is a typical assumption made by almost every economist," Prof Pettis wrote in a draft of an forthcoming paper shared with the Financial Times'

- 'Rodney Jones, principal of Beijing-based Wigram Capital Advisors...“The financial engineers have run amok again. They’ve run amok in the US and they’ve run amok here (China)”'

Some points:

1. The aforementioned economists make the assumption that debt doesn't matter because: 

a) They use equilibrium models that do not include debt

b) The majority of them have no experience of managing a business or even working outside institutions, and have very little grasp of ‘consequences’ 

2. The financial engineers have run amok under the cover of the intellectual credibility provided by these economists

3. I am pleased to hear that the FT has seen a copy of Professor Pettis work – please give it as much prominence as the views of Professor ‘Secular Stagnation’ Summers, who totally 'missed' the last debt crisis; indeed whose 'casino-friendly' policies whilst at the US Treasury, contributed to it

4. On the bright side, the FT is streets ahead of the NYT who dish up regular portions of drivel from Professor ‘Debt doesn’t matter, and the dollar is backed by men with guns’ Krugman.

In summary:

Debt does matter, economically, but also politically - for a very important reason:

The debt illiterate theories of this generation of neo-Keynesian economists provide the intellectual credibility to support a political class that uses debt to bribe electorates and to kick the disaster-can down the road. That’s why they continue to get the funding and that’s why they continue to get the column inches – because their guff is convenient for irresponsible governments and ethically challenged Wall Street CEOs.

Globalisation and free trade are not the same thing

'We don't obey politicians, we obey the law' says Mario Draghi