Economist Matthew C. Klein answers Nikhil Kamath's question regarding the long-term impact of persistent global trade imbalances.
Assertion Supported
Klein: Developing nations defy theory by running surpluses to buy Western assets
“Places that in theory ought to be, you know, a sort of standard theory should be having trade deficits because of their investment needs, actually having surpluses, and sending you know, buying financial assets, rather than borrowing, their net lending to plac…”
Opinion
Klein: There Will Always Be a Market for Crypto to Operate Outside Law
“If you take the cynical view that, that the appeal of crypto is the ability to operate outside of the law, then I feel like there's always going to be a market for that.”
Insight
Klein: 2008 dollar rally was driven by liability settlement, not safety
“The dollar shoots up and it's not because people thought the dollar was a safe place to be. It's because it happened to be the case that there were a lot of short-term claims denominated in dollars and there were long-term assets that were not. And you know, t…”
Assertion Partly supported
Klein: China's annual trade surplus surged to $1.1 trillion post-COVID
“If we look at China's external balance with the rest of the world in the years immediately leading up to the pandemic, the trade surplus, depending on how you measure it, was around, you know, 100 to two hundred billion dollars a year, which is, you know, In o…”
Insight
Klein: Crushing domestic consumption artificially forces a trade surplus
“If one guaranteed way to either reduce a trade deficit or to generate trade surplus is you just crush your domestic economy. If people can't afford to eat anymore, then, you know, but they still can sell things to people in the rest of the world, then you're g…”
Insight
Klein: Europe's Post-Crisis Shift to Under-Spending Harms the Global Economy
“Europe as a whole has had this massive structural shift in its behavior in terms of spending less relative, ah, to what they earn. Which, again, at the individual country level, it's understandable why you have that traumatic experience you want to avoid it. B…”