This week I will give several lectures on the nature & cause of “bubbles”.
One is with the Economics Honor Society at UFM: EN-601 at 2:30PM, Wednesday, 21 November.
Another is “THE RISE & DECLINE OF CHINA’S “BUBBLE” ECONOMY” on Thursday, 22 November from 12:30 pm to 2:30 pm in A-411.
China’s spectacular economic growth over the past 30 years can be explained as having 2 distinct causes.
The 1st part is a “good” story of an improved use of economic resources arising from the “marketization” of China’s economy combined with the triumph of globalization.
The 2nd part is a “bad” story that can be traced to China’s leaders choosing a defective economic model to guide their economic development.
Among the mistakes made by the Chinese leadership is an unshakeable faith in exports as the best way to drive economic growth that is responsible for serious economic imbalances. Unfortunately the best-&-brightest Chinese students that studied in foreign universities returned to oversee the implementation of Keynesian-inspired economic policies that are contributing to more imbalances.
However, the fundamental problem with China’s economic policies involve massive monetary malfeasance (i.e., excessive rates of growth of money supply & credit) that has created serious macroeconomic instability. Flooding the Chinese economy with cheap has blown an enormous domestic economic bubble while also spawning “mini-bubbles” in other countries that sell commodities to China.
Inasmuch as “anything-that-cannot-go-on-forever; will-not”, it is increasingly likely there will be an unhappy end to China’s economic success; perhaps sooner rather than later.