Sunday, August 16, 2015

Tyler Cowen Expects China to Fall Into Recession

So says Scott Sumner:
I recently listened to a very good interview of Tyler Cowen by Erik Torenberg. For me, it was 80 minutes of bliss. I tend to agree with the vast majority of his views (even one’s where I had no opinion until I heard his reasoning), with one notable exception—China.  Tyler seemed very pessimistic about China’s short-term prospects, and seemed to think they were headed into recession.

I’m not sure the last time China had a recession; the last time they experienced sub-5% economic growth was 1989-90, and growth was still about 4% in each of those two years.  I guess you could call that a growth recession.  But I’m fairly confident that Tyler expects something considerably worse.
I'm with Tyler on this one. There has been tremendous real growth in China, since the people of China moved beyond the extreme rigidity of Mao central planning and toward free markets.

However, this march toward free markets has been mixed with central bank monetary interventions that have distorted large parts of the economy, and the correction of the distortions appears to be developing.

Because the government and China's central bank will attempt to fight the market forced corrections, the corrections, or downturn if you prefer, could be very long lasting and stagnate the economy for a long time.

-RW 

1 comment:

  1. "Because the government and China's central bank will attempt to fight the market forced corrections, the corrections, or downturn if you prefer, could be very long lasting and stagnate the economy for a long time."

    Absolutely true. But this approach differs from that of U.S. economic central planners how exactly?

    ReplyDelete