PODCAST: “Hexapodia” Is þe Key Insight XXVII: Evergrande

Noah Smith & Brad DeLong's 30:00 < [Length of Weekly Podcast] < 60:00

  
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Key Insights:

  1. I do not understand how the Chinese economy works.

  2. The Chinese economy is an odd combination of market and party in which the party has enormous reach and control, but somehow that has not triggered the “soft budget constraint” problems of the Soviet model.

  3. Financial constraints are not real—a government that wants to can evade them in its management of the economy.

  4. Real resource constraints are, however real: finance does not bind because it is true that what we can do, we can afford; but it is also true that what we cannot do, we cannot afford.

  5. You can hide for a while from real resource constraints by bubble-overvaluing the low-value infrastructure and real-estate investments that you are making, but you cannot run.

  6. There is lots to read that is good; consult these show notes.

  7. HEXAPODIA!!

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References:

  • Ming Zhao: Evergrande’s Backstory

+, of course:

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