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The Bill From The China Shop

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Anyone see the article by Anthony Hilton in the business section of The Evening Standard, Tuesday 24th? It was a review of a new book by Charles Dumas and Diana Choyleva "How Asia’s Savings Glut Threatens the World Economy". I couldn't find any link to it but, found the publishers website intro to the book.


"Alan Greenspan’s tenure at the US Federal Reserve coincided with a period of unparalleled global growth, stability and prosperity. But the world economy has been warped since the 1997 Asian crisis by excessive saving in China and developing Asia, as well as in Japan and north-central Europe. Unsophisticated economic policies and primitive financial systems, notably in China but also in other parts of Asia, have resulted in the global economy now depending on unprecedented current account deficits and the willingness of America, Britain, Australia and increasingly Europe, to import goods and capital.

This has led to a huge build-up of domestic debt The United States, for example, spends more than 106% of its annual GDP. Household debt is soaring relative to income. Easy money policies inevitably lead to over-stimulation and the risk of a slump. The confidence and capital gains needed to sustain large fresh take-up of debt, year after year, stoke the boom. Major interest rate increases are now needed to prevent inflation. When rates reach a level that saps confidence, with an overhang of excessive debt, household demand could collapse, probably in 2007. Then China too will have a violent economic downswing. The financial and geopolitical consequences will be profound."

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Just to add fuel to the book

"Bank deputy warns of global turmoil

Sam Fleming, Daily Mail

25 January 2006

RACHEL Lomax yesterday became the third Bank of England policy maker this year to highlight the potentially explosive tensions building in the world economy.

The deputy governor warned of the danger that convulsions in financial markets may result from growing 'imbalances' in the global economy.

Among the most glaring of these is America's reliance on a steady flow of cash from Asian governments to fund its ballooning deficit, she said.

While a major upheaval remains unlikely, the notion that countries such as China will maintain an 'open ended commitment' to plugging the gap in the US balance sheet by buying dollars seems 'implausible'.

'I am acutely conscious that a world of large imbalances carries some risk of disruptive market adjustments, even if the probability of them occurring is low. These could have a significant impact on economic activity,' she told a conference in London.

Governor Mervyn King said earlier this month that stockpiling of savings by Asian countries is helping keep long-term interest rates unusually low, a phenomenon that could unwind with dramatic results for economies including the UK. "

Link:Bank deputy warns of global turmoil

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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