Even With Reforms, Debt Will Constrain Global Growth

CHINA FINANCIAL - Report 14 Jan 2015 by Michael Pettis
Special Points To Highlight In This Issue:In spite of overwhelming historical evidence, and a sophisticated understanding of the mechanics of financial distress in finance theory, one of the most consistent mistakes macroeconomists make is their failure to recognize the growth constraints that emerge from the liability side of national balance sheets. Liabilities are more than simply the sum of the ways in which assets and operations are financed. Liability structure determines how payments are indexed and how an economic entity absorbs and responds to external shocks.By indexing payments, ...

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