Are Exports the Only Source of Growth?
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- čas přidán 5. 06. 2024
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As the global fight over manufacturing share and exports heats up, with surplus economies doubling down on exports, and deficit economies discussing protectionist strategies, the policies of the largest global economies are in clear conflict. Are trade wars likely, how do they work, and can the global economy regain balance?
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The Great Rebalancing: amzn.to/4bDIGKf
Trade Wars Are Class Wars: amzn.to/3I2xHMH
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At 1:35 you say the property collapse began in 2001. You mean 2021? I love your videos!
Patrick runs a sweatshop where Leprechauns toil night and day producing 'clover' in a grow house for international export . He knows whereof he speaks.
@@llynnmarks3382 Yes, I should have said 2021.
Raw economic activity in an (arbitrary) area is linearly coupled to the size of the work (-sharing) population and how many hours they actually work. Any change to that affects growth/shrinkage of EA - nothing else. GDP tracks this badly as the measurement unit "we" use to track that economic activity (and use to exchange the resources with) is very unstable for various reasons - most of them being caused by a technical flaw we make upon creating fiat, labelled the zero lower bound interest problem.
@PBoyle Another anti China video very biased. Pettis has been wrong on China for the last 15 yrs. he said they would only grow 3% avg after 2007 but they grow 9% avg 😂. Your anti China cope is so obvs
I don’t know how but you’ve managed to package an unbiased analysis that is more entertaining than the sensationalized segment of economic and financial news. Thank you for your efforts to be the signal and not the noise. I understand that the economy is currently in a downturn and that we must wait for things to get better
As hard as it may sound you can plan for the recession. If you are working, find extra work and get an Invest--advisor. Protect your deposits by having enough cash in short term fixed income. Then cut your expenses. Minimal insurance, cut utilities.
I think the current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner
It's often true that people underestimate the importance of financial advisors until they feel the negative effects of emotional decision-making. I remember a few summers ago, after a tough divorce, when I needed a boost for my struggling business. I researched and found a licensed advisor who diligently helped grow my reserves despite inflation. Consequently, my reserves increased from $275k to around $750k.
this is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’ Melissa Terri Swayne” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
My favorite rap-news channel by far
Lol
Same. I’m on 1.75x
Patrick the man who puts the "C" in Rap!?!
When it comes to "Econ-Rap" there is nothing better than this;
Fight of the Century - Keynes vs. Hayek - Round Two
czcams.com/video/LA1-1DlhuXU/video.html
I thought the Econ-Rap genre had grown stale, but DJ Boyle reinvigorated the genre.
I’ve never heard someone explain interest rates like this.
“Artificial low interest rate economy, transfers wealth from savers to borrows” 🤯
So now we're transferring wealth from borrowers back to savers?
Japan had the opposite problem back in the day.
As a saver, I figured this out in 2011 when interest rates started to drop and people started to borrow like crazy which pushed up asset prices. Asset prices therefore are overvalued as they are driven by debt. Now, in Australia, thankfully, we can get 5% on our savings in the bank. In the bigger picture, it's obvious that the Australian economy is driven by debt used to buy ever more expensive real estate. And because real estate is a non productive asset (or more usually, a liability) it is obvious that we are living in a false economy.
Borrowers to purchase working assets. All money is debt sence 1971 and government borrows at a rate faster than products can be exported.
@@manflynil9751 True what you're saying but don't forget false economies can run 100 years. Like the Romans drilled holes in the coins and mixed them with silver. We can say it's false but still got to work within it as it stands.
Wow - an entire semester’s worth of macro economics in well under an hour!
In half an hour
Agreed, it's his best video yet
Not being an economy major my head is hurting right now
@@pif5023 i had to rewatch parts, but still the amount of information here is DENSE!
@@mabaker which was enabled by a couple of Michael Pettis's books, namely "Trade Wars are Class Wars" and "the Great Rebalancing". Patrick is doing a great job communicating the contents of the books in video forms.
I had to pause the video to comment the biggest "THANK YOU!" possible for the part about the European debt crisis. As Greeks, we often hear how everyone here is lazy or useless because of how much debt our country owes. Even our political leaders treat us like that. And at some point, we have internalised this idea and started believing that we deserve to suffer for not being "productive" or "hardworking" enough.
Don’t worry. The Germans are going to have their time in the barrel and it will be delightful to watch! Greece spends on defence, the Germans still can’t quite find the ‘on’ switch. 😂
The Germans are not as hardworking as they think they are but the complex of superiority and the unability sometimes to even comprehend other's cultural differences is still there.. I love Germany and its people but it is sometimes hard to push people to be more open minded.
@@MissHouhou23 I think there is also remnants of propaganda/conscious proclaiming of German superiority because NATO and US during the cold war desperately wanted it to look better than East Germany in everyway, so West germans gets that superiority complex, while East germans becomes a steady supply for the working class and less desirable jobs
Whenever one of my countrymen says "Greeks are lazy", I remind them that we work the fewest hours per year in the EU, and the Greeks one of the most. Greetings from the Netherlands.
Must been those German sausages🥓🤰 You're fat now.
Patrick Boyle is the bees-knees of finance (and hip hop)
and slaying Goblin/sultry wood nymph
Came for the hiphop, stayed for the insightful analysis of financial news.
I am sorry. He is the bees-knees of hip/hop. Finance is a only a secondary hobby
Don't forget B action movies!
His legs and his arms
The period when Patrick opened his channel will be forever be remembered as the Golden era of youtube financial content.
This video needs to be sipped slowly like a good glass of wine. Every 3 minutes it delivers the amount of content that my brain can absorb in an entire day....
Facts.
I always remember my economic teacher in secondary school. "Here is an economy going well, then earthquake levels its and it rebuilds, gdp goes up but money burnt and wealth lowered, debt up. Then look at gdp per capita, goes up but your poorer.
The "broken window" theory. Or in the case of the Chinese economy, the "ghost city" theory.
Eventually nobody has money so the store just add the cost in a black book who is never repaid.
“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.”
-Adam Smith
In this case, the product is GDP bullshit and the pay is in the form of government subsidies.
We don't consume houses do we🤔
I do, nom nom
@@robertagren9360 by buy one and reimbursing all those that participated and invested in it's production we do, just like we consume cars.
@@robertagren9360
What if they are made of gingerbread?
Astounding and amazing! The mechanics of international economics in half an hour. Oh, and a view into how politics and economics mix. Thank you Patrick!
"Transfers" ... makes me think of the 3 card Monty game.
Initially read the title as "Esports" and was kinda confused. Most of my subscriptions are gaming related, but this was supposed to be the one about rap music!
Exports = extreme sports = hiphop
07:49 Government's interventions on the economy are simply transfer wealth from one economic sector to another:
1) Keeping *exchange rates artificially low (weak currency)* --> transfer wealth _from importers to exporters._
2) Keeping *wage growth below workers' productivity growth* --> transfer wealth _from workers to employers._
3) Keeping *interest rates artificially low* --> transfer wealth _from savers (mostly households) to borrowers (mostly businesses & governments)._
4) *Spread between saving and lending rates* --> transfer wealth _from savers to banks._
5) *Taxes* --> transfer wealth _from citizens to governments._
13:05 Countries which have pursued trade surplus (exports>imports):
1) USA in 1920's
2) Soviet Union in 1960's
3) Brazil in 1970's
4) Japan in 1980's
5) Germany in 2000's
6) China in 2010's
13:24 The German economic case study:
- *In 1990's* : Germany frequently *run current account deficits (import > export).*
- *In 1999* : The *Eurozone started.* German policy makers decided that *unemployment was unacceptably high.*
- *In 2000* : *The German labor union deal.* Trade unions, labor unions, & the government agreed to *seek high employment and stability above wage growth.* It means _productivity increases would not be used to push up real wages, but to increase employment instead._
- *In 2000's* : *The domino effect, part 1* _(positive for Germany):_ *restrained wages -->* reduced household income --> reduced household consumption --> *boosted export* _(to be continued)._
During this period, the _Germany's economic success_ was underpinned by _productivity growth over wages growth._
- *In 2011* : *The domino effect, part 2* _(negative for Southern Europe):_
*Germany boosted export* _(continued)_ --> Germany exported to Southern Europe with zero import tariff due to Eurozone --> Money flew from Southern Europe to Germany --> Southern Europe run on deficit account (import > export) --> on the opposite, Germany had surplus capital to invest --> European Central Bank could only adopt one interest rate, applied to all Eurozone members --> due to different macroeconomic conditions between Germany and Southern Europe, real interest rates in Germany were high (relative to inflation) and low in Southern Europe --> Southern Europe borrowed capital from Germany --> interests were compounded over time --> since Southern Europe run on deficit account, they did not have enough money to pay the loan --> *European sovereign debt crisis.*
The _difference between Germany and peripheral Europe_ contributed to the _European sovereign debt crisis._
15:26 Why open global economy failed?
*1) **_No country is_*_ actually _*_willing to reduce wealth._*
In an ideal world, open global economy is encouraged to form a *_global value chain,_* in which countries specialize in running certain parts of the value chain. Thus, making the overall chain as efficient as possible.
For examples:
- China is the world's factory
- India is the world's back office
- US and Western Europe are the world's R&D.
Less wealthy countries export their way to economic growth (run on _surplus trade balances_ ), while more wealthy countries buy the surplus production and issue necessary debt to finance the trade (run on _deficit trade balances_ ). Money would be flowing from the more wealthy countries to the less wealthy ones, achieving the utopian wealth equality around the world.
However, in real world there is no country, rich or poor, willing to reduce its wealth.
*2) **_No country is willing to increase dependency and vulnerability_*_ in the risk of global value chain disruption._
As proven during Covid-19 pandemic, disruption in small parts of the value chain negatively affect a lot of countries. Having learnt their lessons, a lot of countries put stability over efficiency and spread their supply chains to various locations.
*3) **_In the event of great depressions_*_ (like the pandemic), _*_most countries_*_ tend to _*_prioritize their own economic growth_* by reducing their deficit, or even aiming to become surplus countries.
18:45 Weapons of trade wars:
*a) Offensive:* Subsidies, forex manipulation, suppressed wages.
*b) Defensive:* Trade restriction/import tariff.
19:47 *Import tariff* could even still apply to _goods which are not domestically produced:_
- *If there are locally produced substitute goods* --> demand of the imported goods would be decreased --> _reduction in the country's deficit trade balance._
- *If there's no substitute good* --> demand of the imported goods would not be decreased --> people have to pay the import tariff --> transfer of wealth from citizens to the government --> the government uses the money to pay debts --> _reduction in the country's deficit trade balance._
25:54 Each country's weapon of choice depends on _its ability to manipulate its currency:_
*1) Forex manipulation (currency devaluation)* is used by _countries which abandon the gold standard._ They could manipulate/devaluate their currencies to boost export. In return, they see rapid improvement in their trade balances.
*2) Import tariff (trade restrictions)* is used by _countries which adhere gold standard,_ or which _cannot issue their currencies_ (like the EU members). Since they could not devaluate their currencies to boost export, they use the next best weapon.
26:56 Trade wars are harmful to all involved:
- Most *deficit countries* don't recognize _how difficult rebalancing their economy is_ (looking for new sources of goods, adjusting to alternative goods, adjusting to fewer goods or even none if there is no alternative goods).
- Most *surplus countries* don't recognize:
+) How _vulnerable they are to potential trade restrictions_ from deficit countries, and
+) How _limited their ability to retaliate_ would be.
27:23 Q: Who do _suffer the worst_ in trade wars?
A: The biggest *exporters of goods.*
For example:
- In current economy, a much higher percentage of Chinese, Japanese, and German jobs rely on exports than do American jobs.
- In the event of trade conflicts, Americans might find themselves with fewer goods, but that is better than high unemployment suffered by their trade partners.
Sources and reading recommendation:
19:30 Book: *The Great Rebalancing* by _Michael Pettis (2013)._
25:27 Paper: *The Roots of Protectionism in the Great Depression* by _Barry Eichengreen_ and _Douglas A. Irwin (2009)._
Thank you
@@johng8837 You're welcome. I love Patrick's videos, but a lot of them require repeat viewing from my side to enable me digesting all the important stuff. Hence, the summary.
@@tiararoxeanne1318 oh absolutely- by the time I reprocess a statement he already taken it and weaved it into a large narrative framework
Thank you for this🎉
There are more detailed ideas in "Trade Wars Are Class Wars" by Klein and Pettis, which is a bit newer than "The Great Rebalancing". Changes to labour law and social policy can also strengthen the position of consumers in order to create internal demand for goods and services. Would be great if you could present some of these ideas also. Otherwise, I will have to read it a few more times, which is not exactly easy 😀
i wonder if chatgpt can summarize them well🤔
And it assumes that a for-profit company will self determine genuine equity with the workforce. HA HA HA HA HA
@@HoneyBadger80886 Getting rid of hukou system, stronger labour law, shorter work hours - it all can create additional demand. And these are tasks for the state.
China reported retail sales of RMB44 trillion, or US$6.9 trillion, in 2021, ahead of the US at $6.5 trillion. Household consumption in the US - which includes non-retail sales expenditures like rent, healthcare, tuition and insurance - was expectedly much higher at $15.9 trillion.
Strangely, household consumption in China came in at $6.8 trillion, below retail sales. Chinese households apparently go on shopping sprees and neglect to pay for housing, healthcare, tuition and insurance.
What we are dealing with is a legacy of China having never properly transitioned from its Soviet-era Material Product System (MPS) system of national accounts to the United Nations’ System of National Accounts (SNA) standard. MPS accounting is only concerned with material production. Services are considered costs of production and excluded by design.
This is the best financial channel. Patrick offers cautionary tales and interesting stories that make for a fun time, without the kind of advice that is actionable to your financial detriment. Re. His finfluencer video
its a rap news channel not a financial channel
And Patrick is da shizzle ❤
he jokes around a lot with people like SBF and musk, then drops THIS video which is like a graduate course in economics! a man of many talents
Still not at a million subscribers. You doing it honestly. Salute. You are awesome 😊
This one was actually top drawer. I hope for another one explaining the switch from surplus exporting to stronger domestic demand.
It's not just that. Americans fixate on China has to do this, China has to do that. China isn't America's mother. They don't have to do anything. It wouldn't work anyway.
Instead of repeating Trump saying China is keeping CNY low, how about America just do what they can and devalue the USD? Increasing the CNY exchange rate might reduce China's exports, but it will not reduce US imports. It will simply shift to other countries. The overall US trade deficit wouldn't reduce, it will just be more spread out. Politicians might be able to boast _I reduced the trade deficit with China_ but it doesn't help the US economy any. They are simply shuffling it around to other countries.
The US screwed up Japan's economic growth well and good. But did it fix the US trade deficit? No. It simply transfered to China. Now they want to transfer it to India, Vietnam, and other countries. How is that supposed to help?
There is only one way to fix the US economy. It is to reduce consumption, lower living standards, spend less, and defocus away from non-productive sectors like finance, advertising, insurance, share trading, etc. Growing the real estate buble grows the GDP, but is not useful. These sectors have grown too big and is sucking too much resources away ftom actual economic sectors we actually want.
A note on Germany: the export surplus is at least partially mitigated (1/4 th) by it being the biggest net contributor of the EU budget. It's interesting to consider how the EU as an almost-state, with a substantial budget, has played a significant role in allowing certain EU countries to deal with their trade surpluses in a more sustainable way.
"Allowed"?
@@HoneyBadger80886 allowing as in making possible
Yes, it is interesting
@@HoneyBadger80886Yes, EU puts limits on both deficits and surpluses of EU-countries. Germany was exceeding the surplus limits for a long time, while there would've been plenty of easy investments to make... Fiber networks, nuclear power and Germany's !green policy's" achilles heel... the goddamn NIMBY infested powergrid.
? Germany controlled the EU by bankrolling it to its interests, not the EU's. Mainland Europe's energy dependence on Russia and Russia's recent invasion in Europe has "transferred" Germany's EU surplus to Germany's woeful defense budget and its energy sector, so now the EU has a big hole in its finances and money allocation is a big issue. "Lazy" Farmers are realising they have to be productive and won't be paid to do nothing and the like!?!
As a German i can tell that the mood is really bleak at the moment. We have a lot of people which didn't noticed that they got really poor in the last 20 years. Energy is expensive, housing is rare and our retirement system is running towards a wall with no breaks. It looks really bad right now. I do not believe in a turnaround, but I hope we can get a soft fall and stick a good landing. I have no idea why the DAX is so strong right now.
Not making more Germans has a long term consequence.
The DAX is probably going through a melt up, the same for the US financial markets.
Many company in the DAX are export focus, others are financials that benefit from high interest rates
Its beautiful. I hope it gets worse for the nazis
japan is in a recession and their stock market is doing well nothing to see here, the markets are usually lagging behind, thats not a unique problem to germany, most countries are going tru the same, housing is scarce because lack of investment because og gfc,recent influx of migrants and foreigner investors,even more people wanting to live in citie centers, again besides africa most continents are suffering with low birth rates leading to a problem with SS sustainability and no politician has the balls to abolish the current ss model because old people make up a huge portion of the voting base most young people don´t vote
I'm from the future ... both Metabo and Bosch ( German brands ) have moved most of their production to Hungry and China .
They can no longer afford to produce tools and equipment in Germany.
They used the Euro to keep the DM cheap. Time has run out on that strategy!
@@stephenlight647And cheap energy via nuclear and natural gas. Time is up on that front too.
Thank you so much for sharing content like this. I listened to the video twice in a row while doing yardwork. You’re better than any teacher I ever ever had in school. Thank you.
One of my favorite macroeconomists - thanks for the consistent content
Think you are being generous giving that title
He is not a macroeconomist lmao. His expertise is in finance, which is definitely not the same thing
Erm, he mentioned that his expertise is finance and he was/is an investor. But he recommended Money & Macro for macroeconomy. So check that one if you'd prefer that side.
Anyway, he's my favorite youtuber/professor as well.
I'm studying Economics in university, and your videos are my absolute favorite for financial and macro news.
Just don't expect to come out of it thinking you now know about the chinese economy.
Best you can hope for is learning about investment strategies in China as a foreign investor. But even then you'd probably be better served by just reading the 5-year-plan.
@@mirror452 Relax. It was just a comment.
@@sinkoprvi3477 Sure. Just saying, Patty is good entertainment and his content is nice if you want to be informed about what western investors think.
But especially if you want to understand China's macro economics, it's... uh... lacking :D
@@mirror452what do you reccomend for understanding China's macroeconomics? I'm studing international trade and I found the video really interesting, especially considering how strong China's presence is in my country.
Patrick has an old video very briefly explaining China's growth and how it came to be the giant that it is today and while there are some things that he didnt mention, I think overall it was a really good introduction, as good as you can get in less than an hour
@@lucamp1 That's a huge question... Hm, maybe you can check out Dongsheng News, especially their "chinese voices" archive, there's lots of great content there.
Another very valuable insight I've found recently are articles on Asia Times written by "Han Feizi".
I'm afraid that if Patrick continues to wear those glasses, I'll no longer be able to take him seriously as my primary source of hip-hop news.
I NEVER regret watching one of this guy's videos.
I wish I could like this video more than once. This is an excellent economic seminar. Thank you Patrick!
watch it again and reply to alllllll the comments.
do it.
No one explains macro economics better than Patrick. Thank you.
Thank you Patrick. I'm a first gen Chinese American from Shanghai. My relatives in China and I often talk in private about China's economy. I agree that global trade is a good thing, but too much of anything eventually becomes bad. Just as western countries became too reliant on authoritarian governments for cheap good and resources, authoritarian governments are also learning that they became too dependent on exports. The difference is much needed honest and frank discussion like yours are present in the west, while Chinese government resorted to more censorship on less than rosy discussions.
So relying on Indian goods is good? As its democratically cheap
China reported retail sales of RMB44 trillion, or US$6.9 trillion, in 2021, ahead of the US at $6.5 trillion. Household consumption in the US - which includes non-retail sales expenditures like rent, healthcare, tuition and insurance - was expectedly much higher at $15.9 trillion.
Strangely, household consumption in China came in at $6.8 trillion, below retail sales. Chinese households apparently go on shopping sprees and neglect to pay for housing, healthcare, tuition and insurance.
What we are dealing with is a legacy of China having never properly transitioned from its Soviet-era Material Product System (MPS) system of national accounts to the United Nations’ System of National Accounts (SNA) standard. MPS accounting is only concerned with material production. Services are considered costs of production and excluded by design.
Next move sell to african consumers🤣
Next move build a manufacturing base in Africa!
@@billweberx Except for Canada, they're not much on western radar. If I had really long term money, I'd put it in India. They haven't invaded anyone (that I care about), they're always the smartest in the room (American spelling bees??!) and Punjabi is the 3rd. most common language.......in Canadian Parliament. !! Plus almost all the sales and phone scammers ...........!!
The shift in your video topics from investment-specific content to global political economy is specifically to entice me to watch more, I am sure, and I am very much enjoying it.
This has been the best explanation of the complications of global trade and growth I have encountered yet! Well done! I learned so much from this! Thanks for sharing!
I have lots of compliments, but by far the best thing about your videos is how comprehensive/objective they are. They're always fair, and I always leave learning something new.
I have never watched a better crash course on economics that this and I've watched plenty on economics based videos on this platform before this. Amazing. Thank you Patrick, I feel that much closer to understanding global economics than ever before. I understand of course that there are many more players to this game than you could ever cover here, but this video highlights some of the most important basics of international trade interactions exquisitely. Thank you.
i am a physician from a poor southeast asian country , immigrated to USA and tried to take to the test to become doctor here. I often feel guilty for the "brain drain", i am just selfish, enjoy the US salary and not serving my "people"... But there is no way i can survive working that hard like the doctors in my previous country: they saw 30-50 patients /day; work day job in government hospital then come home opening clinic at night until 8pm.
Watching your video, i recognize that labor force can move from 1 country to the next too.. we cannot just let the government manipulate us too much. we love the country and want to contribute, but not being pushed over.
Time has a value as well.
Yeah, most economists don't understand that money velocity is completely unrelated to value creation.
My core socio-economic philosophy is different, but this was a wonderfully clear & concise video. Thank you for the effort you put into this masterclass, sir!
Given the excellence of your content, the depth of your analysis, and your wit, how do you not have over 1M subscribers? This mystifies me. You're one of the best financial channels that I've run across. Thank you for what you do.
5 minutes into this video and I knew Patrick will mention Michael Pettis
Not having studied economics my head freaking hurts when listening to this but I still want to finish the whole video - because this is the best finance rap channel !
This CZcams channel has been bringing me more educational and actual useful life content than my whole education journey. Love you Professor Boyle.
He's a bad, bad missus, in his skin tight britches, runnin economics into ditches, fit to bust my stitiches......Boyle Tight.
Without explicitly touching on it, the housing problem in the USA is a good example of holding interest rates too low and concentrating wealth in the holding companies, pricing households out of the real estate market. An increase in capital cost through interest rate rises would lower the price of housing and increase the savings rate of the household sector. In my monetary theory classes in 1979-81we saw analysis of the US economy 1776-1976 showed the long term stable rate for the US economy was ~ 3% + inflation for savings (and short term government securities) and 5% + inflation for collateralized loans. The current interest are approaching their long term stable point, with the associated pain after such a long term (2008-2023) government interest rate intervention that has favored the business sector,especially real estate.
Take a bow.... Boss...whole semester of macro economics infused in a 30min video...🙌
Beyond the, as usual, absolutely brilliant content and delivery, I want to commend you on the visual design of your more recent videos. The background, the lighting, the colours, the arrangement, the suit and tie, even the glasses. It's perfect, 10 out of 10. It's unique, immediately recognizable, consistent, very pleasant to look at, and it perfectly underscores your content.
Wow…it’s almost as if we’re all a part of one big, shared world. Whoduh thunk?
Everyone lives on one finite planet, but, because there is asymmetric technical advancement and resource availability, we are not all one people. To look at the world through the optimistic and amoral lens of economics, has proven fairly destructive because the economics changes faster than the culture and people. Economist like other scientists cannot use their science to determine what should happen only what will happen. The good and bad of economic choices cannot be measured in that system because economics has no right or wrong.
In reality, we should consider an iffy situation every time the real estate goes above 10-15% of GDP in a country.
China's real estate was already a drag on the economy, being a profoundly unproductive endeavour in which to sink capital.
The drag was just ignored in the bubble frenzy.
I'm so excited for this video! This is the sort of economics that I'm interested in. Not stocks or bonds, but production and trade.
Been waiting for this one for months. I'm Chilean; this is relevant to my interests (and potentially my future).
I did enjoy Pettis' Trade Wars Are Class Wars.
Best video out yet, always good quality but this is so important because it brings clear picture to the tensions and dynamics that will determine the next pivotal 100 years.
Very knowledgeable episode, can't thank you enough.
From Egypt with love..
I've been playing Victoria 3 recently and all of this makes a lot of sense to me right now
China reported retail sales of RMB44 trillion, or US$6.9 trillion, in 2021, ahead of the US at $6.5 trillion. Household consumption in the US - which includes non-retail sales expenditures like rent, healthcare, tuition and insurance - was expectedly much higher at $15.9 trillion.
Strangely, household consumption in China came in at $6.8 trillion, below retail sales. Chinese households apparently go on shopping sprees and neglect to pay for housing, healthcare, tuition and insurance. Household consumption in the US is 245% of retail sales while a mere 98% in China.
What we are dealing with is a legacy of China having never properly transitioned from its Soviet-era Material Product System (MPS) system of national accounts to the United Nations’ System of National Accounts (SNA) standard. MPS accounting is only concerned with material production. Services are considered costs of production and excluded by design.
What we conclude from all this is that on an apples-to-apples UN SNA basis, Chinese households are consuming much more than 38% of GDP. And investments are much less than 42% of GDP.
Most controversially, perhaps, we also conclude that China’s GDP is under-reported by an amount largely equal to household consumption outside of retail sales. If we had to ballpark it, we would say China’s household consumption is 50-55% of GDP, investment is 30-34% of GDP and total GDP needs to be grossed up by 25-40%.
Most controversially, perhaps, we also conclude that China’s GDP is under-reported by an amount largely equal to household consumption outside of retail sales. If we had to ballpark it, we would say China’s household consumption is 50-55% of GDP, investment is 30-34% of GDP and total GDP needs to be grossed up by 25-40%.
This has many implications. One is that China’s economy is not nearly as unbalanced as conventional wisdom believes - it is merely a peer of its Asian neighbors Japan and Korea. It explains why the government only seems to give lip service to increasing demand while all policies somehow favor supply. It explains how China has avoided the dire consequences of running such an unbalanced economy for so long - mostly because it hasn’t been.
This is the most important video on youtube, explains everything
No one ever explains this stuff. Thank you for making this video.
Thank you for this wonderful video! You're consistently one of the very best economics channels on CZcams.
It's interesting how countries everywhere are always so hesitant to raise wages. As your video shows, they're quite content to transfer wealth from households to other sectors of the economy. But when the time comes to transfer wealth _to_ households - well, then they become hesitant. Wouldn't want workers to get lazy! Got to watch out for inflation. They seem to think that income distributions need to be imbalanced, or the sky might somehow fall.
very helpful -- and i love the new glasses... stylish in a nerdy kinda way!
Sir , Thank you so much for your videos. Your insight and dry humor are a joy .
Only quibble is that if the US isn't saving enough to finance its investment, its cutting of the trade deficit against China will just be replaced by trade deficit with Mexico and Vietnam. China then exports to those countries.
This is one of the most interesting segments you have done. Very interesting information...
GCC once again being hero, Benefiting emerging & established markets by importing everything & exporting non.
+ Funding Ventures & Falling Firms.
Truly Peak Economy.
This is a video that is so interesting and relevant and I desperately wish had some charts or other visual representations of the content being expressed. I understand those might not play well in video, could possibly be linked in the description? Thank you again for the valuable content
I love Patricks Videos and I always learn from them. But this video was next Level, I learned so much, thank you.
Looking forward to this cause i'm in this sector; thank you Patrick
Excellllllllent video. Thanks for a deep dive yet informative and intelligible analysis of trade imbalances. Your summarization of the realities of the impact of economic policies really broadened my understanding. And thanks for the book recommendation
The amount of wisdom in this video is insane, thank you.
This is one of the most eye opening videos I have seen on the economics
I found Trade Wars Are Class Wars by Michael Pettis fascinating; however, some of the the concepts like excess savings and savings=investments took a while for my to wrap my head around.
One underlying idea behind free trade is national specialization of labor. Americans are good at that, Japan at this, etc. That works if competition is free from government intervention, a true free market. That market doesn't exist, only a distorted derivative that Patrick talks about.
Excellent video, well done. I am going to complain AGAIN that I wish your books were publish in ebook format. I like to take several books with me on business trips and they are much easier to carry on my ipad. I really have become a snob and only use ebooks. ABSOLUTELY LOVE YOUR CHANNEL AND CONTENT. I truly appreciate all of the time and effort you put into them. Well done
Literally just amazing stuff here Patrick. You're the best.
17:34 suppressing wage growth is by definition being hard-working and conservative, surely
What an excellent lecture, Patrick. I learned a great deal. Thank you!
Thanks, Patrick.
My Sunday morning droll with Patrick. Nice.
It’s interesting Patrick mentions net importers want to reduce their trade deficit so they can build foreign exchange to pay off their debt. One exception to this would be the US, I’m sure they still need forex but they probably have much less incentive to net export as they have the global reserve currency. What other benefits might incentivize net exports besides derisking authoritarian countries?
That is a special case and good point.
The US does balance its trade by exporting Treasury securities, a privilege no other country can manage by virtue of its world reserve status. If the dollar loses that status, then the US trade deficit might become meaningful to its impact on foreign exchange rates, inflation rates, and purchasing power parity.
The US has two possible workarounds, 1) Like in 1975 which booked a trade surplus, they could devalue their currency enough that US goods become cheap -- not likely to happen anytime soon, or 2) They could reshore manufacturing to the US (or nearshore to CA/MX) -- which is already in progress. 2) is proving difficult because in the process of offshoring, the US skilled labor pool retired and did not train their replacements.
It was an exception, but not anymore, because it's not the global reserve currency anymore.
Still widely used as countries get away from it.
Fantastic primer on global trade challenges.
Productivity and consumption create growth
Standard of living directly correlates to this via wealth distribution.
Money isn't productivity but can be a rough analog.
Middle class is super important because they are more productive and big consumers.
This is an excellent economics tutorial. It should be taught this way as a summary over iew before delving into detail. Very well done.
Superb video. I wish academic exonomists would weigh in on the content of this video. Patrick: perhaps you can discuss these ideas with some economists like Justin Wolfers, Paul Krugman, and Tim Harford. (And many others, perhaps on the conservative side of things. Maybe Ben Bernanke?)
I'd love to hear what they think. Where they agree with you and where they disagree.
one of the best episodes yet!
the deepest vedio ive seen since long , thank you for valuable information
Would love to see a video on the economics of New Zealand, which I know has its own quirks and major shortcomings
The theoretical economic model of manufacturing and import/export has been abandoned by the US as most corporations avoid any type of industry that requires manufacturing that relies significantly on labour and pay taxes from on-shoring.
Thanks for today's lecture on tariffs!
This is a really good summary of the problem, Patrick.
Exzellent.
Didaktisch raffiniert.
Spannend inszeniert.
Realitätsbezogen.
Economic investigator Frank G Melbourne Australia is following this very informative content cheers Frank 😊
Incredible video, one of your best.
Patrick, you've always been a phenomenal youtuber! Thanks for all the great videos
I watch a lot of your videos I dont know why but this one had a lot of youtube ads, I stopped counting after 5, great video BTW as usual.
Bravo, really
Interesting thanks
You were saying how Real Estate is 20% of China's GDP, which is in trouble right now.
Would be nice to hear your impressions on how housing represents 40% of all Canada's GDP today...
"But it's SuStAiNeD bY GoOd FuNdAmEnTaLs!" -Every real estate agent there
It's probably due for a good collapse But the government keeps finding new ways to keep it propped up at the expense of everything else.
I'd like to see Patrick's Take on this too!
@@vhateverlie or "Now is not a good time to buy" - said no real estate agent ever... lol
how do you episodes keep getting better?! outstanding 🎉
You’re awesome Patrick!!
This is absolutely great video 👏
Amen. Yes, less goods are better than unemployment. Great content. Tks
Absolutely top tier content + analysis Patrick. Bravo
Best ROI on youtube.
Brilliant content
Thank you Patrick ❤
Really well researched
Wow, everybody should watch this. I feel like learned a lot. I need more shit like this for sure