*The Great Rebalancing*

The author is Michael Pettis and the subtitle is Trade, Conflict, and the Perilous Road Ahead for the World Economy.

Here is one excerpt:

There are huge tracts of empty homes outside of Dublin in part because of the overvaluation of East Germany’s currency after reunification.

I take his core message to be something like the following: DeLong and Krugman circa 2005-6 were right that the fundamental problem with the global economy is one of rebalancing out of whack trade flows.  The comeuppance is still on the way.

I hold two somewhat different views than those professed in this book, or at least I would describe them as different emphases.  The first is that explanations for resource unemployment, in my view, should be conducted across shorter and more local time scales.  The second is that even apparently unsustainable trade balances can be kept in manageable order if growth is healthy enough, admittedly a big “if.”  That said, I agree with the author that the global economy, despite recent declines in risk premia, still is not out of the woods.

We will of course see.  This book in any case makes for stimulating reading.  Here is the book’s home page.

Addendum: Also arrived on my desk from PUP is Peter Temin and David Vines, The Leaderless Economy: Why the World Economic System Fell Apart and How to Fix It.