Macro thinking…sort of

Investment Strategist Russell Napier has a guest column in Wednesday’s Financial Times that seems, on its face, to make a bold statement: “The new normal is the roll back of the free markets.” The advanced economies are fighting a desperate rearguard action against powerful deflationary forces, which are the real chief export of China and other emerging economies. In the course of the fight, they have been forced to abandon free market principles.

On careful reading, the argument is more nuanced, and I had to read it a couple of times, and do some thinking, to appreciate what he is saying here. This is quite different from the “end of free markets” view that George Soros famously expressed in a speech at Columbia, and closer to Ian Bremmer, who has made it a centerpiece of his firm’s global outlook. This helped me to re-think the macro dynamic of state capitalism, financial markets, and sovereign debt. It also helped to make some sense of what looks to me like incoherent rage against economic and fiscal policy, from both left and right. We’re fairly principled here about sticking to economic analysis and avoiding politics; this is about as far as I am willing to go in that direction. Napier’s essay is worth a read.

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