Damn, Krugman beat me to this yesterday. I thought I would be bringing in a fascinating piece from the fringes of the Australioblogosphere.
My basic take is the same as Paul’s:
I have no idea whether this John Hempton piece on China is at all right, but it’s a terrific read, and provides food for thought.
The logic of the piece is very much dependent on the loanable-funds model:
The Chinese kleptocracy – and indeed several major trends in the global economy – depend on copious quantities of savings at negative expected rates of return by middle and lower income Chinese.
As we saw quite clearly in The Great Keen-Krugman Debate, Paul is a firm believer in that model (and obviously Hempton is too). I and many others (notably Keen) have suggested that the model is ridiculous and nonsensical on its face.
If we look at the Hempton piece through other eyes — MMT for instance — does it still hold up? How can we rewrite it to explain things better while retaining its rather convincing insights?
Now here’s what’s fascinating: my hat tip goes to a post two days ago by Craig Tindale at … Steve Keen’s blog — a blog where you find little patience for the loanable funds model.
1. Why do we find an implicitly approving link over there?
2. How did Krugman come across this piece? Has he taken to reading Keen?
Cross-posted at Asymptosis.