Daily Archives: June 14, 2011

Just a few weeks ago, Barack Obama’s re-election bid was beginning to look like an easy downhill jog. The daring raid that the President ordered delivered Osama bin Laden to the bottom of the Indian Ocean. Economic prospects looked brighter. Perhaps most helpfully, the Republican Party seemed to be indulging some kind of collective death-wish, putting Donald Trump first in the polls and Representative Paul Ryan’s budget cutting at the top of its legislative agenda.

Mr Obama’s spring peak came at the White House Correspondent’s Dinner in late April, when he jovially deflated Mr Trump, while the Navy Seals were en route to Abbottabad. But since then, the political weather has turned less favourable. Unemployment rose to a treacherous 9.1 per cent, while the Dow fell nearly 1000 points from its peak. Most alarmingly, the Republican Party appears gradually to be going sane. Read more

China’s announcement today that inflation in May hit a three-year high of 5.5 per cent and industrial expansion exceeded expectations will buttress those who see an inevitable economic crash coming. But even those who remain confident that a soft landing is possible seem to agree that China’s economic growth is unbalanced, with these imbalances widely blamed for trade surpluses with the west. This view, however, is much exaggerated.

The conventional view leads many to propose a standard solution to “rebalancing”: China must increase consumption and dampen investment. This problem is this view is static. Growth, however, is inherently unbalanced. What matters are not indicators pointing to imbalances, but the direction of change.  Read more