Book Review: China and America - A Time of Reckoning, by Charles Dumas
There's a book-swap shelf at work and unsurprisingly, although there's a range of general material, there are quite a few more specialist books in the realm of economics and finance. This slim volume dates from 2007-8 (with an "appendix", in fact about half the book, extracted from a previous book written in 2005) and I have to say it hasn't fared well. The opening chapters are a bit technical; although it's illustrated with graphs rather than equations, I imagine the same law of reduced readership ought to apply as to popular (hard) science. Rather than follow Mr Buffett's advice, it doesn't help that the thesis that is rammed home is that problems in the world economy aren't down to American over-spending, but rather to "Eurasian" (principally China, Japan and Germany) over-saving. Technically, of course, a reason America (and Britain, and other countries) are able to borrow cheaply is that there is money available from these savers. Also, of course, the paradox of thrift applies: things don't work too well if we all save and no-one spends. But you have to look at where we've got to and wonder whether things have turned out well so far. Although the PIGS get a mention, the author's focus is on Italy rather than Greece, which was considered too small to be problematic. The artificial exchange rate between the Renminbi and the Dollar features quite prominently, and the author assesses the Chinese authorities unlikely to act in a way that will prevent, ultimately, some sort of trade war. Globalisation and populism also get mentioned; on the consequences of the first for the second, the author may be in the right ball park, although with things having taken longer to come to a head than anticipated.