Chart of the Day: China’s Debt Bubble Continues to Swell


Via Paul Krugman, Atif Mian and Amir Sufi give us the chart below today to chew over. It shows China’s declining trade surplus over the past decade, which authorities have effectively offset by a dramatic increase in private credit in order to boost domestic demand. The authors explain how this happened:

China got a break starting 2003….The rest of the world — and in particular the United States — was willing to borrow hundreds of billions of dollars every year to purchase Chinese goods (among other things)….The result was reduced pressure on domestic debt creation, and domestic debt went down from 125% of GDP in 2003 to almost 100% of GDP in 2008.

….The continued borrowing by western countries was not sustainable and by 2008 global demand for Chinese goods collapsed….How could China create new demand for its productive capacity? The answer once again came in the form of a rapid rise in domestic private debt. The Chinese state-owned banks with explicit prodding from the government opened their spigots. The country has seen an explosive growth in domestic private debt since 2008.

Is this sustainable? Probably not. It’s yet another reason to be concerned about the continued fragility of the global economy. We’re probably not strong enough to withstand a major shock from China.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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