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Behind the Balance Sheet
#29 The Plumber
Dec 14, 2023
James Aitken, an expert in the plumbing of the financial system, takes us on a world tour of hotspots in global finance. Topics include why he is relaxed about the US, Japan's program for greatness and its possible effects on global bond markets, and the challenges faced by China's property sector.
01:20:41
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Quick takeaways
- The US economy's strong nominal GDP growth has kept interest rates high, supported by fiscal transfers during the pandemic, resulting in healthy household and corporate balance sheets and sustained aggregate demand.
- China's focus on making its financial system robust and sustainable despite challenges in the property sector suggests a traditional financial crisis is unlikely, with Xi Jinping's leadership greatly influencing the direction of the Chinese economy.
Deep dives
US Nominal GDP and Interest Rates
The US economy is experiencing strong nominal GDP growth, which is keeping interest rates relatively high. This is due to the fiscal transfers and direct payments made to households and businesses during the COVID-19 pandemic. As a result, household and corporate balance sheets in the US are in good shape, which has helped sustain aggregate demand and prevented a significant increase in credit defaults. This higher nominal GDP also supports the ongoing growth and resilience of businesses, as long as interest rates remain aligned with this economic growth.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode