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The Smartest Man in Europe Is Very Cautious

blackstone.com

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Re: The Smartest Man in Europe Is Very Cautious

#21

Post by wisty »

TheSkeptic wrote: post #10

After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "auth…

They aren't more capable, but at least they are able to take responsibility. Banks will be nationalized the minute they look shaky. Local governments will be recapitalized, and the leaders might get punished. But there won't be as bad a crisis, because someone will foot the bill.

OK, it will cause a moral hazard. There will be a big need to reform. But there already is a big need to reform. And I think there's already a commitment (from the top, and from the general public) for reforms.

Plus, it's easier to grow when you are under 1/5th the GDP per capita.

Re: The Smartest Man in Europe Is Very Cautious

#22

Post by paganel »

> The Smartest Man in Europe Is Very Cautious

I first thought it was going to be an article about Grigori Perelman and about how we are all one step closer to Apocalypse because he was very close to finding that there is indeed no foundation for Mathematics (or any similar conclusion that is way over my head in even trying to explain). Instead I stumbled upon an article about a rich heir to "a mercantile family" who talks about money, money, money. Not that's anything wrong with talking about money, but if that's we consider as the "smartest thing" in an entire Continent I think we have a problem.

Re: The Smartest Man in Europe Is Very Cautious

#24

Post by nazgulnarsil »

aj700 wrote: post #8

I knew all this. Stocks are bound to be crap, they depend on making a profit from selling goods and services. There are only two types of people left in unequal economies. Those who can't afford the stuff and those who don't need to buy any more than they do. Consumption, profits and stocks would all be much higher if societies were more equal. There is tons of money locked up that never needs to be spent by the peop…

replicators won't get rid of status. holodecks, however, will. at least for anyone who doesn't care.

Re: The Smartest Man in Europe Is Very Cautious

#25

Post by azza-bazoo »

TheSkeptic wrote: post #10

After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "auth…

Agreed. These are the same Chinese authorities that refuse to publish key economic statistics, or blatantly make them up. They also have trouble keeping track of government debt -- just this week there were reports about regional government loans that have been kept hidden. And then there's the housing bubble developing in the major cities because it's been so easy to get private loans the last two years.

Chinese officials can do many things, but they aren't magicians, and won't be fixing anything overnight.

Re: The Smartest Man in Europe Is Very Cautious

#26

Post by stretchwithme »

azza-bazoo wrote: post #25
TheSkeptic wrote: post #10

After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "auth…

Agreed. These are the same Chinese authorities that refuse to publish key economic statistics, or blatantly make them up. They also have trouble keeping track of government debt -- just this week there were reports about regional government loans that have been kept hidden. And then there's the housing bubble developing in the major cities because it's been so easy to get private loans the last two years. Chinese off…

Seems like what they say about China echos what they used to say about Japan 20-25 years ago. And Japan kept on rising happily forever after.

Re: The Smartest Man in Europe Is Very Cautious

#27

Post by stretchwithme »

mmaunder wrote: post #9
JeffL wrote: post #6

"All the problems really started when the dollar was no longer convertible into gold. That happened in August 1971 and eliminated all currency restraints because money became only paper and not backed by anything real." Interesting to find that in the middle of the article.

There's a school of thought that blames the gold standard for the great depression. The French accumulated massive amounts of gold between 1928 and 1932 and some scholars say the global deflationary effects of Bank of France's policy during this time caused the great depression. The gold standard also ties money supply to gold production which is a little like tying fed policy to the quarterly flip of a coin. For exa…

The gold standard was not the cause of the Great Depression; the collapse of the investment bubble created by the Federal Reserve, along with the interruption of international trade by the Smoot-Hawley Tariff Act caused the initial problem. Subsequent interference in the economy by both Hoover and FDR extended the problems.

The gold standard merely prevented the government from inflating away the dollar and using inflation to hide the consequences of other bad policies. Its a form of discipline that the founders wisely put in place to prevent the disastrous policies that many other governments have perpetrated throughout history.

But now the constraint of the gold standard is off and much larger bubbles can be created.

The supply of gold changes very slowly. The vast majority of all gold ever mined is still part of the supply. Its the manipulation of the value of paper currency that causes demand for gold to fluctuate.

Re: The Smartest Man in Europe Is Very Cautious

#28

Post by roel_v »

wisty wrote: post #21
TheSkeptic wrote: post #10

After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "auth…

They aren't more capable, but at least they are able to take responsibility. Banks will be nationalized the minute they look shaky. Local governments will be recapitalized, and the leaders might get punished. But there won't be as bad a crisis, because someone will foot the bill. OK, it will cause a moral hazard. There will be a big need to reform. But there already is a big need to reform. And I think there's alread…

What are you talking about? Banks already are 'nationalized' for all intents and purposes (rather, they've always been under central leadership). And that's exactly the core problem with the debts owned by Chinese banks comes from.

Re: The Smartest Man in Europe Is Very Cautious

#29

Post by azza-bazoo »

stretchwithme wrote: post #26
azza-bazoo wrote: post #25

Earlier quoted context omitted.

Agreed. These are the same Chinese authorities that refuse to publish key economic statistics, or blatantly make them up. They also have trouble keeping track of government debt -- just this week there were reports about regional government loans that have been kept hidden. And then there's the housing bubble developing in the major cities because it's been so easy to get private loans the last two years. Chinese off…

Seems like what they say about China echos what they used to say about Japan 20-25 years ago. And Japan kept on rising happily forever after.

Um, no. Japan's economy has been stagnant for close to twenty years now. China's economy has plenty of growth left in it.

Although you're right that much of the scared-of-China crowd are just people who've transplanted their fears away from Japan.

Re: The Smartest Man in Europe Is Very Cautious

#30

Post by roel_v »

meric wrote: post #4
rajpaul wrote: post #3

Why should I believe that "The Smartest Man in Europe" is anything other than a sock puppet talking up Blackstone's book?

Still, an interesting read nonetheless.

Depends I guess on how often one reads finance articles. There's nothing new in there, there is an entire 'school of thought' that has been saying what's in this article since 2008. New economies are the future, fiat money is bad mmkay, US and Europe don't have enough room for growth to out-grow debt.

The appeal to authority with the Baghdad real estate deal is one of those tell-tale signs of a sensationalist article. If the building in case had been blown up and nothing could have been recouped because nobody wants to insure a building in Baghdad, nobody would've ever heard about the whole deal. Survivor bias at its most obvious.

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