How Financial Repression in China Helped Cause the Trade War

for the US China trade war. But it's October one, and that is the National Day of the People's Republic of China. And this year it's even more important than usual because it's the seventieth anniversary of the founding of the PRC ah Okay that that I didn't realize, Okay, And this tends to be a sort of politically sensitive date for the Chinese authorities. It usually comes with a big military parade and they seed the clouds to a couple of days before to make sure that the skies

are blue. And it's a big, huge holiday, but it's also a chance for the authorities to sort of evaluate or more likely, um sort of crow about everything. They've done to improve China, including the economy. I like how you just sort of casually throw in there that they affect the weather for the day. Yeah, it's really interesting. Everyone knows it's going to be good weather on October one.

That's amazing. So I thought, in connection with the October first state, we could talk about how far China has or hasn't come when it when it comes to the goal of rebalancing their economy. Right, And this is something that people have been talking about for a long time because people look at the Chinese economy and they see, at least on the service all kinds of crazy things

going on. There's very historically, there's been extreme fluctuations and asset prices, real estate prices, claims of real estate bubbles, an economy extremely geared towards investment, and so forth. And so people look at an economy that's grown extraordinarily, well, that's brought all kinds of wealth to people over the last several decades, going from one of the poorest countries in the world to uh, you know, building up this

significant middle class. But they still see extraordinary imbalances and skewed forces domestically. That's right, and The big one is, of course, the the imbalance between an investment driven economy on the way to becoming more of a consumption driven economy. That's the big one. And to talk about this, we we really have the perfect person are. Our guest for today is Michael Pettis. He's finance professor over at Packing

University and also senior Fellow at the Carnegie Endowment. He's also a former banker and a trader and has been watching exactly this and writing about it for a very, very long time. So we're very happy to have Michael on the show today. I can't wait. I've been I've been wanting us to have a podcast with an episode with Michael for a long time, So really looking forward to jumping into this one. Yeah, no pressure, Michael, Thank

you so much for coming on. My pleasure. So maybe just to begin with, we we could talk a little bit about what we mean when we talk about an investment driven economy versus a consumption driven economy. What does that actually mean and how does it pertain to the

case of China. An investment driven economy can also be thought of as a savings driven e company, and China is not the only country that's followed this growth model at least two dozen countries that since the Second World War, and you could argue that this model was more less invented in the nineteen thirties in the Soviet Union, but basically in a consumption driven economy, and the classic case that is probably the United States in the nineteenth century.

Um you had very high wage levels. It was high wages that drove high levels of comment, which then drove high levels of investment to those consumption needs. And it also grow productivity growth and a bunch of other things. In in the savings economy, what you do is you force up the savings rate, which is usually a good thing to do in a developing country because developing countries tend to have insufficient investment, and they tend to have

insufficient investment because they have insufficient domestic savings. So you force up the savings rate in order to increase the amount of savings that are available for domestic investment, and you can get very, very rapid growth as long as you continue to be under invested in that's really the problem in China in the nineties, China had gone through five decades of Maoism, the Civil War and anti Japanese war, and it was hugely under investment for its level of development,

for its for its the its ability to absorb investment productively. And so a model found that really focused on pushing up investment as rapidly as possible was the right model. And for that you have to push up the savings rate. And here's what I think. There's a huge amount of misconception about China. China, as everyone knows, that's the highest savings rate in the world. But that's not a cultural propensity to save. It's got nothing to do with what

households want to do. China has the highest savings rate in the world because it has the lowest household share of GDP. In other words, they produced a hundred dollars of GDP and their total compensation is roughly fifty dollars, and so of course their consumption is less than that. That's why China has such a low consumptions and such

a high saving ship. Now, this is a great model when you have significant amount of investment that you need to do when you're severely under invested economy, which China was in the eighties and nine nineties. But at some point, perhaps at the end of the nineties or beginning of the two thousand's trying to reach the level of investment

that it could productively absorb. And and in that case, what it should have done is that could have switched this growth model towards more of a consumption driven growth model, and that's what has been trying to do. But the the the important point to remember is that if you want the consumption share of GDP to grow, then you've got to get the household income fare to grow. And if you want the household incomes share to grow, you've got to reduce someone else's share. And that's why it's

such a politically difficult problem for China. So, Michael, you've been writing about this problem or this challenge for China for several years, and I went back, I was over the weekend doing so propriating your book from You're like, it's pretty clear that in the coming years they're reaching the absolute limits to the existing investment driven model. They have to make the change now, because if they don't

make it gradually, it's going to be a painful adjustment. Eventually, explain to us the sort of specific mechanism by which the investment driven growth model has to come to an end. Why it can't last forever, why it uh, why it must run into a wall? And then since then, like

in recent years and before the trade war. So before we get to like the sort of immediate stuff, how has China done with its domestic rebalancing in your view models, But lean have significant amounts of productive investment that you need to do. And the way it works, since you borrow dollars, you invested in building a factory, of building a road, building bridge, that increases the value of the

economy by a hundred and ten dollars. So you're fine, your debt's going up, but your your debt burden is actually going down. That's healthy growth. But when you reach the point at which you can no longer absorb all of this investment productively, So again, you borrow a hundred dollars, you build something, but there's something only creates twenty dollars worth of value for the economy. Now you have a hundred dollars of additional debt, but only twenty dollars of

additional debt service and capacity. So now your debt burden is growing, and that's you know, you can argue it's been this has been the case of the last ten years, of the last twenty years or whatever. It's certainly been the case. And that's why China. China's debt burden has exploded to becoming among the highest developing countries. What do we think about China's debt burden at the moment, because we've had China bears warning about it for I mean,

over a decade at this point. And yet even though we we see these concerns and we see the authorities you know, occasionally try to reduce credit in the wider economy, um, they tend to give up after a couple of years, and if the economy starts to slow, they just ramp up lending again. So is this something that can keep going for for a while longer? It probably can for

another two or three years. Now. There are types of China Bear warnings about the debt I would say a lot of them have looked at the debt problem said if that continues going, China will have a debt crisis. I don't think that's what the history tells us. Debt crisis one of the ways you resolve the debt problems, but another way you resolve it have failed to resolve

it is through a really long, slow adjustment. So for example, Japan after never had a debt crisis, I think that's the moon likely outcome in China because that crisis it was really a balance sheet problem, it's not a debt problem. And in China, as long as the system was closed and the regulators to be powerful, um, they can always restructure liabilities, in which case you will never have a debt crisis. But that doesn't mean you won't have a debt problem. As the debt level grows, the debt itself

becomes a constraint on on the future growth. And the problem is can only continue growing as long as debt continues growing even more quickly. Now we don't know where the limit to debt capacity is, but we certainly don't want to find out, and I think in Beijing there's a growing sense that wherever that limit is, we're getting awfully close to it. So we started to see in the last two years a much more serious attitude towards

trying to reign in debt. They haven't done, so that continues to grow much more faster than any measure of debt servicing capacity, but at least it's improve it. The Chinese investment led growth model has been built on several foundations which keep household household spending, household consumption, household income unnaturally. Low interest rates are said artificially low, punishing or hurting savers. Savers don't have very good investment opportunities. Worker rights aren't

particularly strong. There are other things built into the system that is essentially create a lot of household procarity and drive the savings rate up. Has China done anything structural in the last few years to make a meaningful change towards this domestic rebalancing in your view? You know, not, really, there has been some improvement. If you look at the consumption share of GDP, it's risen pretty significantly in the last four or five years. But there are two things

that account for almost all of that growth. The first thing is just that GDP has dropped to grow than GDP has dropped significantly, so the consumption share, just as a matter of arithmetic, gets larger and larger. The second thing is, you know, there's two ways you can increase the consumption share of GDP for any country, not just for China. One way is to increase household debt. The other way is to increase the house that income share of GDP. Now four or five, China had very little

household debt and since then it's really exploded. But that's not sustainable because if you're trying to solve for a debt problem, obviously additional debt isn't the way you're going to fix the problem. So we're probably reaching a limit there. What they really have to do is do the transfers. But when you go through all of the mechanics, ultimately they have to transfer well from local governments and local

elites to the household sector. And there's you know, a dozen different ways you can do it, and now I have to do them all. But the problem is a political problem, and that is the local government's the local

elites very very strongly resist these wealth transfers. Well, I wanted to press you on this issue, and you mentioned this already, but one thing you often hear is that the Chinese are culturally prone to excess savings, possibly because of recent history where there was a lot of turmoil in the country, possibly because of a lack of social safety net in China. So are there political solutions to this problem and what could those realistically actually be well.

The key is increasing the household share of GDP. One of the ways of doing so, of course, is strengthening the social safety net, although it depends on how you

pay for it. So if you strengthen the social safety net and pay for it by borrowing at negative real rates from household sector, then what you're doing is you are uh you know, with one hand you're giving them additional income in the form of the stone safety net, and with the other hand you're taking it away from them in the form of a negative return on their savings. The key is that it has to be funded by transfers from the household sector. Let me let me give

a classic case of how this could happen. Very unlikely because it's politically quite difficult. But as you know, in China you have what's called the Huko system, which means that as a Chinese you're only allowed to live and work in the area for which you have a permit called the hukoh So when you think about all these migrant workers and saying Beijing, most of them here are

technically illegal. Now they're allowed to work here, but the problem is they have a limited ability to access city services, schooling, medical, treatment. They have limited standing and law if they ever get into a conflict with their employers c So imagine that you eliminate the Hukoh overnight. Immediately, migrant workers would be richer because they would now have full access city services. Also, immediately, the city would be poorer because it now has to

cover all of these services. This would be a classic transfer mechanism, and it's something the Chinese have been talking about for many years. It's just too politically difficult to pull it off. So let's fast forward to the present day.

Because obviously, and this is something you've talked about in your writing, is that you know, the the growth model can continue even with all the dead even with all the domestic imbalances, so long as there's a significant amount of foreign demand for Chinese goods and as long as

someone is out there buying in. For a long time, really for the whole world, but for China in particular, the US has been a major contributor of demand for goods of all of all sorts, and we see that now running into an obvious problem, which is President Trump and the trade war and this sort of general feeling maybe in the US that the current system is going on too far, and we don't want to be the the demand creator of last resort for the Chinese economy.

How is that contributing to what we're seeing domestically? I mean, we know the data for China has not been particularly good. Some talk recently about giving up on the six percent GDP growth goal. Talk to us about how you know there's all these all these challenges, and how the additional challenge of the US no no longer wanting to play its UH the role it has been for the last

few decades. How that is affecting things. Everything that China produces, everything that any countries has to be evolved in one of three ways. It's either consumed domestically, or it's invested domestically, or it's consumed or invested abroad, which is through the through the trades, or plus. So the total UH, total GDP that's produced in China goes into one of those

three things. Now, the consumption shares we discuss is very very low, so much of it goes into investment and the trades built plus investment we want to bring down as quickly as possible because China is investing primarily and stuff that's not productive. So that's just represents a growth

in the debt um But here's the problem. If the US were to put in constraints that forced the Chinese trade surplus to contract, then China either has to accept lower growth because now it can't sell everything that it's producing, so it has to close down factories and fireworkers, or it has to make up for that growth in some other way. And the only other way it can make up for that growth is by increasing investment even further, which means increasing the debt burden even more quickly. That's

why the trade conflict is so important for China. It's sort of it sort of mediates the pace at which they can bring down investment, and the smaller the trade surplus, then the more slowly they're able to bring down investments. And that's the big problem now, the the overall trade problem. You know, China is not even the worst defender of this case. The Germany and Japan have bigger current accounts surfaces than China does, and the problem there is really

on the capital side. No, this gets a little bit technical, but what ends up happening if you have a very very high savings rate, uh and and and all countries really high stavings rates. Contrary to popular opinion, they don't have high savings rates because there are countries that value drift. The Germans aren't particularly more thrifty than other Europeans. They have high savings grades because the household share of DDP is low and the share the controlled by businesses or

by the government or by the wealthiest quite high. So those are high saving entities. You take money away from a low saving, high confirming part of the economy and give it to a high saving, low consuming part of the economy, your savings right to automatically goes up. Now, if your savings exceeds your investments, then you have to export the excess savings, which is just the flip side of running a current account or trade surplus. So countries

with excess savings have to export those savings somewhere. Trade theory tells us that they export them to developing countries that need the savings, but of course we know that's nonsense. Most of it goes to wealthy countries that don't need the savings, for example, the US, and as a result, because the US is forced to absorb foreign capital that's that's exported to the US. Then it must also run

the corresponding um current account or trade deficit. Now it's a little pedantic, but the point of all of that is to suggest that the reason the US runs a trade deficit is because it runs a capital account surplus over which it has no control. If that's the case, then putting tariffs on Chinese goods is worse than useless.

It has no impact at all. It will reduce the US deficit with China, but if Chinese savings continue to pour into the US, China will continue to run a surplus and the US will continue to run a deficit, just not with each other. The only impact the tariffs have is to shift trade around. They don't really affect the overall sir plus of China or the overall deficit of the United States. And you can see that in

the data. The US deficit with China has gone down, the US deficit with the rest of the world has gone up by even more, exactly as you would expect. So, just to be clear, is the suggestion here that the trade war between the U S and China is basically sort of an excess money problem, and the US is maybe indirectly trying to shrink these capital inflows by targeting Chinese goods, because that's one way that it could possibly alter those inflows. Yes, it's just the wrong way of

doing it, but but that's exactly right. So the country like China has such a high savings and it's not an accident. It's because when you have policies that force the household sector to subsidize manufacturing, then of course that means that ultimately the part of product she retained by the household sector goes lower and lower. So you can take the case of Germany in two thousands three, two

thousand four the Hearts reforms. Basically the Hearts reforms represented a transfer of income from German workers two German businesses. The households share went down profits sword that's why Germany was so competitive in the international markets because basically workers subsidize their exports. It's the same thing in China. And that's really what the US has to address, not the

not the not through tariffs. So if you're President Trump, or sorry, if you're advising President Trump, you'd say, don't uh, you know, forget about all the terroraffs and soybeans or and all these things. Pressure j and pink to get rid of the JUCO system, transfer the domestic wealth of the country to the workers, eliminate this excess savings that causes all the excess money to come to the US and actually put money in the hands of people who

might over time by stuff from the US. Absolutely, of course, the US can't really go insane right right now, I know, just exaggerating, But that's sort of like the contours here, which is that And I have to admit just I know, like you have a book coming out next year with Matt Klein who's at Barrens, and I remember reading this,

I think a year ago. He had a really good column sort of making this point, which is that the real way for the US to make progress on the trade war would be for essentially the US to pressure a that domestic realignment that you've been talking about, so that more of the money in China is in the hands of consumers as opposed to people with a lot of extra cash to put somewhere exact exactly right, you know, when when the Chinese sell us something from a hundred dollars,

that's a hundred dollar flow from from that the US to China. Ideally we want that money to flow back in the form of imports of goods, it will flow back, but it typically flows back in the form of imports of capital. So the Chinese will buy US treasury bones rather than US manufacturing equipment, and that's surely caused because

of the way income is distributed in China. Um. Now, they're the only way the US can really pressure China and Germany and Japan and the rest of them to fix their domestic problems is by somehow refusing to allow that capital to flow into the US, perhaps by taxing and perhaps by quotas. I don't know, but that's really the kind of pressure that the U s should be able to resort, right, So this is something that keeps

coming up. And just to play Devil's advocate for a second, can you walk us through both the positives and the negatives of having a lot of foreign money basically poor into the US, Because on the one hand, clearly it affects employment through manufacturing, but on the other hand, it does lower the US is funding costs and you know, helps people maybe spend more than they would otherwise. So there seem to be pros and cons. So could you just walk us through them and how you see it?

Net net as a positive or negative. Yeah, So suppose the rest of the world exports one hundred dollars to the US. You know, we start from from balanced payments, and then for whatever reason, their savings go up and they export a hundred dollars to the US. That means in the US we will have a hundred dollar capital account of surplus and we must have a hundred dollar

current account deficits. So how do we get the deficit. Well, if the US are developing country, then, for example, the way it was in the nineteenth century, then investment in the US there would be huge investment needs that would be strained by the lack of domestic savings. In that case, foreign money coming into the US would be a good thing. It would cause American investment to go up. That's exactly what happened in the nineteenth century when the US depended

very heavily on British capital for its domestic investment. But the US isn't a developing country anymore. Uh. Now we have a different problem. We have too much capital interest rate. Sorry, historically historically low levels. American businesses have huge hordes of cash on their balance sheet which they are unable to invest so then they do stock buybacks and things like that. Um So, if you increase the amount of um of foreign savings, the increasing amount of capital and the US

by hundred doors, will US investment go up? Well, clearly it doesn't, and we have evidence from other countries. So for example, again Germany after two thousand three, two thousand four, when they're savings went up and the cost of capital declimbed, their investment didn't go up. It actually went down. And I think that reflects the fact that we're no longer

living in a capital constrained world. We have even negative interest rates to drive down the American savings rate, either you increase unemployment, or you increase household debt, or you increase the fiscal deficit. None of those are good things obviously. So that's why for the US running a current account deficit in a capital account surplus is a real problem. And so that's why I think it does make sense

for the Trump administration. And Bernie Sanders said the same thing, and and Liz with Orans said the same thing for them to address the current account deficit. It's just that they're addressing it the wrong way. Yeah, I thought it was pretty striking that during one of the recent Democratic debates, the moderator asked the candidate, who would uh immediately reverse Trump's terror on China? And none of them raise their hands. And so even to your point, maybe that's not the

right that's not the right approach. There is this political alignment in the US between Trump and the Democrats where none of them want to go back to the old relationship with China right away. It's no one thinks it's as simple as just reversing trumps um and that everything's fine. And I know again, I know you have an upcoming book sort of exploring this dimension or the sort of the connection between class warfare and trade warfare, domestic inequality

and trade wars. Regardless of whether Trump is pursuing the right approach, everything that you've laid out on what all of our political leaders seemed to intuit is that there really was something truly broken about the existing or the the old relationship. Absolutely, it's the imbalances were much higher than than than trade theory will submits. They last much more more than trade theory would permit. They were created by significant distortions. And you mentioned the book that Matt

Klein and I are are publishing. Sometimes I think it may and and in in the book, what we try to argue is that what looks like a conflict between nations is really a conflict between economic sectors. The same groups in China and in the US, or in Germany and in Spain benefited from the imbalances, and the same groups paid the cost of the imbalances. Who's the biggest culprit when it comes to economic sectors? You mentioned both in the case of the US and China, this idea

of corporates having a large size of national wealth. So I'm just wondering, is there one particular entity that you would say is worse than others? Well, you know, I've spent most of my career on one street, so I hate to say this, but the fact is, the global banks benefit tremendous and this system from these international capital flows. Large, large businesses that are easily able to move their operations

around benefit from it. Small producers and workers are there, and household savers are ultimately the ones that pay for this system. Before we go, we have to wrap it up. Surely, I want to just turn to one other thing. It's not directly related to this, but it touches on all this stuff, of course, but these days there's a tremendous amount of discussion and political pressure on Germany specifically to

expand engage in fiscal expansion. That when people look at the imbalances in the world right now, obviously the U. S. China trade relationship is all its issues, but that there's this sort of obvious issue in Europe where the richest country really should be spending a lot more and they have this, uh, you know, obsession with balanced budgets doesn't make any sense, and um, well, how big of a deal, like how big of a problem is German fiscal rectitude

right now? And how what could happen if if they don't do something to address their own imbalances. It's it's a huge problem because you know, the problem that we have globally is a demand side problem. We have insufficient demand. And one of the reasons we have such weak demand is because, thanks to income inequality and also thanks to our cantilsm, the consuming part of the world is too small, so there is insufficient consumption unless it's boosted by debt,

which of course is unsustainable and risky. And with that insufficient consumption there's insufficient business investment to serve that consumption. When Germany says that the solution for the world is for everyone to be like us, that's a huge problem because what that means is that everyone should continue lower ages in order to become more competitive. But if we all lower wages to become more competitive, we just get poor.

We run into the problem of the nineteen thirties, which the then governor of the FED, a brilliant man by the name of Mariner Echoes, explained it. He said that as you keep pushing down workers wages in order to benefit the wealthy, you're not even benefiting the wealthy because if workers are unable to consume the things that the wealthy produced, then everyone gets caught him this downward spiral, and that's sort of what Germany forced onto the rest

of Europe. So I think that they're going to have to change your fiscal rectitude, because I don't think they really have a choice. Once the world is unable to absorb all of Germany's excess production, and it's huge, it's about nineotone percent a g d P, then what can Germany do if it is unable to consume it domestically? Then it must stop producing it, and stopping producing it means closing down factories and firing workers, etcetera, etcetera. So ultimately,

I don't think they'll do that. I don't think. I think they're smart enough to recognize that they have to engage in domestic spending, and they will, but they'll only do it when they're forced to. I think. So before we go, one of our listeners said that we absolutely have to ask you the following question. So I'm going to try to tie it into some of the topics that we've been discussing. But when you view China's economy, are you confident that the rebalancing is going to happen?

And in what time frame do you think it might happen? And also are you sort of positive about the direction over of the overall China economy? And when you do some of the other stuff that you do in Beijing, which is you know a music label, you're involved in the music scene over there, and I think at one point you ran a club. I'm not sure if it's still open or not. But what does that tell you about the direction of the Chinese economy? Well, the question

is will rebalancing happen. Is is very obvious. Yes, it has to happen, and it will happen. One thing historically is we know that all great imbalances eventually reverse. The question is how does it reverse. It could reverse in the form of a crisis. So, for example, if you look at the US in the early nine thirties, in the US had many of the same problems that China did, and the way it rebalanced was in the first three years of the decade, GDP contracted by something like thirty

five the household income contracted by roughly half. That incredibly painful, but it rebalanced. Another way of rebalancing is the way the Japanese did after They also have the same imbalances that China does. Nowhere needs the same imbalances, so they rebalanced two, but they rebalanced in the form of two lost decades of stagnant GDP growth. Those are basically the models that the world gives us. Those are the two

ways you rebalance. And my guess is that China will rebalance the Japanese way in a very long drawn out rebalancing. Now for China, the sooner they start that process, the better, which basically means the more rapidly GDP growth drops, the better for China, and I have to say in the last few months, I've been pretty impressed that they haven't done what they always do when growth slows, and that is the panic and stuff on the accelerator. They haven't

done that, and growth is slowing pretty sharply. I just met with one of my former students, is very well plugged in, and he thinks it's possible we may even see months of five eight percent growth this year. That I think would be a really good sign because that means that China is really serious about getting its debt under control. The problem is that I think they think that is an are controlled somewhere around four and a half the five, whereas I think it's it's got to

go below three before it gets under control. But we'll see, We'll see what happens. And what about the music scene. What does that tell you about the future of China.

There's been good and bad things, but one of the one of the most exciting things about being in China, and it's something that I think a lot of people miss because they're looking for the wrong signals, and that is there's this incredibly buoyant cultural explosion taking place among the urban young China, and music is at the center of it, but it's not the only part of it. You see it in fashion, you see it in art, you see it in comics, you see the movies, lots

of different things. It's really quite impressive what's happening here. But I don't think that should be a surprise. Chinese incomes have have have soared in the last twenty to thirty years, and China has gone from a country that is primarily rural to one that is primarily urban, and and we've never seen anything take place at this speed before, so we don't really know what the result is going to be, but it's probably a safe bet that it's

going to be culturally extremely interesting, in something very vibrant. Alright, Michael Pettis, we're going to have to have you come back on just to talk about music for an episode. I think I'd love to. That was great. Thank you so much, Michael. That was I learned so much. I really appreciate it. Thanks very much. I hope that was useful.

So I love that conversation and I love that we're having at a sort of key political date in the Chinese calendar, because I think the policy is so important to all of this, right, absolutely, I really really liked that conversation, and the way Michael explains things is so clear because a lot of this type of analysis, a lot of which is sort of based on seemingly accounting identities, the sort of axiomatic relationship between savings investment and the

current account. It could seem like it can be. I always have a slightly hard time keeping these relationships in my head exactly like what moves up and so what therefore then has to go down? And I just think Michael did such a clear job explaining it and then explaining how these things have real world out ramifications. Yeah, And the other thing that seems to be coming through on our episodes recently is the notion that there is some sort of problem of imbalances with too much money

flowing into the US. We talked about it with David Beckworth most recently, and Michael brought it up yet again, and people seem to be moving towards a consensus that there is an issue here. They just disagree how exactly to fix it. And it's one of those things that to the average person, they would have a really hard time wrapping their head around why that's a problem. So it's like, Okay, China is investing all this money, all

this exporting all this capital to the US. I think intuitively to a lot of people like that's a good thing. Why not have people bring their money here? But then the way Michael explains it in terms of driving up asset prices, driving up the dollar, etcetera, or closing ing loosening of lending standards, and that hurts us savings. Uh, you start to actually crystallize what it really means to have capital flow to you as as opposed to demand

for our goods. So I just feel like that was so instructive and just seems to explain so much of what's happened in the economy over the last several decades. Yep, for sure. And we'll have to hap him back on to talk about his music label and his club as well. All right, well, let's leave it there for now. This has been another episode of the All Thoughts podcast on Tracy Alloway. You can follow me on Twitter at Tracy

Alloway and I'm Joe. Why isn't thal? You could follow me on Twitter at the Stalwart and you should definitely follow our guest on Twitter. He's way underfollowed for how much he knows, criminally underfollowed, criminally underfollowed. Michael Pettis, He's at Michael X Patris. Check him out and be sure to follow our producer on Twitter, Laura Carlson. She's at Laura M. Carlson, as well as the Bloomberg community of podcasts, which is under the handle at podcasts. Thanks for listening.