Weekend Reads

For the profit and pleasure of subscribers, here's a few longer reads on economic, social and political matters for the weekend.

Adam Davidson examines Donald Trump's views on interest rates and the Federal Reserve in this piece for the New Yorker. Trump's views are incoherent and dangerous, while his advisers have called for a return to the gold standard and the abolition of the Federal Reserve.

"What would a President Trump’s monetary policy be? Judging by his words and the people with whom he surrounds himself, the options appear to range from fringe kookiness and ignorance all the way to nihilistic collapse," Davidson concludes.

By the way, Nate Silver's excellent 538.com currently sees a 40% chance that Trump will win in November. Duck, cover and hold.

Mike Konczal has written a nice summary at Vox of a new set of liberal economic policies that Hillary Clinton is moving towards.

Heard of Aladdin? It's Blackrock's data-mining risk analysis platform and it's one of the most important tools used now in global financial markets. This New York Times piece on Blackrock is a useful insight into who jumped in to the role that the mega-banks exited during the GFC. And, as John Carney suggested here, Aladdin looks a lot like Skynet, as this Blackrock video suggests.

One of the big risks for the global economy is some sort of debt crisis in China, potentially caused by corporates and or households taking on too much debt to fund a new real estate building and house price bubble. Andrew Browne has written a great piece for the WSJ on the startling growth in debt there in recent years.

"Over the past 12 months, China added more domestic credit than in 2009, when authorities engineered one of the greatest bouts of stimulus spending in history to rescue the economy as exports wilted during the global financial crisis," Browne writes. He concludes: "The multiyear boom surpasses even America’s excesses in the run-up to that crisis, and the biggest question hanging over the economy is how it will end. Because end it must."

“I sometimes joke that we’re in financial Star Trek,” says Rodney Jones, the Beijing-based principal of Wigram Capital Advisors. “We’ve left the solar system behind.”

And if you think the debt is on another planet, have a look at China's house prices. CNBC reports house prices in Shenzen have risen 76% since April last year and are now worth 70 times (correct that's 70 not 17) income.

The Bank for International Settlements, which was one of the rare groups to warn of the GFC, is particularly worried about the growth of corporate debt in China, as the Guardian reports here.

Bloomberg also has a good piece on China's growing property bubble. Here's a flavour:

“The more immediate risk of a sudden and steep downturn in the economy comes from the threatened bursting of the property market bubble,” Pauline Loong, managing director at research firm Asia-analytica in Hong Kong, wrote in a Sept. 14 report. “And bubble it is. The real question for investors is when and what will pop the bubble?”

Have a great weekend