Friday, October 26, 2007

Past Crashes, Current Lessons, and China's Externalities

From Naked Capitalism:

John Plender in the Financial Times wrote a very solid piece, "Credit squeeze could be harbinger of a Chinese crash," which looks at the major financial train wrecks of the past century and finds a common element: immature but rapidly growing economies acting as major global creditors. The efforts to manage the resultant imbalances lead to asset price bubbles that eventually go boom.

It's a clever reframing of widely accepted facts, and paints China as the most significant of the immature economy causing instability. Plender believes that the sooner a crash comes in China, the less likely that global damage will result....MORE