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Brad Setser highlights that China’s current demand levels are insufficient to support its rising supply unless the country pursues large-scale exports.
He points out that many trade purists disregard concerns over trade imbalances and do not address what he describes as China’s distorted domestic growth model.
Setser has previously questioned China’s currency intervention and the disconnect between domestic demand growth and import growth. In another note, he stated that lost tax revenue on rents in the U.S. could cover a significant increase in the U.S. defense budget. His recent comments extend his ongoing scrutiny of macroeconomic policy choices in major economies.