Monday, August 29, 2011

Michael Pettis makes some bold economic predictions about China, Germany, the U.S.

and other countries, including:
  • Over the next two years Chinese household consumption will continue declining as a share of GDP. Chinese debt levels will continue to rise quickly over the rest of this year and next. Chinese growth will begin to slow sharply by 2013-14 and will hit an average of 3% well before the end of the decade. Within three years Beijing will be seriously examining large-scale privatization as part of its adjustment policy.
  • Spain and several countries, perhaps even Italy (but probably not France) will be forced to leave the euro and restructure their debt with significant debt forgiveness.
  • Germany will stubbornly (and foolishly) refuse to bear its share of the burden of the European adjustment, and the subsequent retaliation by the deficit countries will cause German growth to drop to zero or negative for many years.
  • Trade protection sentiment in the US will rise inexorably and unemployment stays high for a few more years.

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