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overtheedge
Member since May 2012
680 commentaries - 6 followers

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Michael Pettis Responds; Fantasyland Thesis vs. Reality; Counter-Challenge! - Mish - Global Economic Analysis

I gave you a 4 only because there was a lot of good arguments presented.

Now for the nonsense presented by Mr. Pettis.
1. "This is an assumption, ..."
An argument that requires making assumptions can neither prove or disprove anything.

1a. "... , that can be proven or disproven empirically. "
Utter nonsense. How many wealthy folks are you gonna test? How can it be tested? Should we assume that all wealthy will act as a herd?

2."In every closed economy savings is equal to investment. "
No such animal as a closed economy. Mr. Pettis has attempted to corner his audience into a make-believe economic model.
Countries print more currency (inflationary). Fractional reserve banking creates more digital currency (inflationary). And let us not forget that currency (printed and/or digital) leaks across national borders (deflationary).
It is also easy to forget that for the most part, government spending is orders of magnitude worse than malinvestment. Government spending, in and of itself, is an open economic system.
Mr. Pettis seems to be totally unfamiliar with the concept known as entropy.

Proposition #3 is an unknown. Who would have ever thought the level of debt we currently face could have ever gotten this large. All indications are that the governments of the world will continue increasing the level of debt. Again, an assumption. Well reasoned, but still just an assumption.

Therefore, Mr Pettis is grossly in error with his argument.
And both of you are effectively arguing over the color of unicorn testicles; blue or pink. If no closed economy exists, then it joins the list with unicorns and talking rabbits.
Why argue over make-believe?
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"I counter-challenge Pettis to work with me and others to come up with the least disruptive ways to end fractional reserve lending as well as the secondary problems that are the true source of the economic mess the world is in."

Least disruptive? No such animal.
Might I suggest that you refresh yourself with Newton's third law of motion.
The only counter to momentum is an equal and opposite force.
Generally speaking in the USA, everyone is part of the same stampeding herd. In all the movies, a cliff is just a few heartbeats away. There is no least disruptive way to turn the herd. Turning in and of itself is disruptive. Even more so to those who lack the wealth needed during the transition.

Commented 3675 days ago

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Beginning of the headline :In response to my article Pettis Proposes Savings Glut and Income Inequality are Source of Global Imbalances; Mish vs. Pettis: I Respectfully Disagree, I received an interesting reply from Michael Pettis. Before posting his response and my reply to his response, I reiterate my gratitude to Pettis. He has taught me much of what I know about trade. I recommended his book "Great Rebalancing", and still do. I also deeply appreciate even having this discussion and for Pettis to personally respond. ... Read More

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