In your book, you suggest the U.S. should spend like China spends on infrastructure to boost its economy. But some say China's economy is growing too fast and could be in for a hard landing. Would you still say China is the right model to follow?
Every year there are skeptics who say China is going to hit a brick wall. But for 20 years in a row, GDP has grown over 7% a year. The contrast recently is particularly striking.
If you look at the third quarter figures that just came out for the U.S., in real terms, GDP in the U.S. is just barely above where it was prior to the crisis during the third quarter of 2007. It's only one half of one percent greater. During that same period, China's GDP is up 40%. It's just staggering. There's got to be something that we in America can learn from how China has been addressing its economic issues because this difference is too striking to ignore.
If the U.S. doesn't work to reduce its debt, couldn't we end up like debt-troubled Europe?
No. The problem is that Europe has a central bank for the entire 17-nation eurozone. Suppose a Greek bond matures in Greece. Investors get paid in euros. They don't have to put that money back in Greece. They can put it in Germany or the other countries in the eurozone. In the U.S., that's not possible. It has to go back into the U.S. financial system. In the U.K., pounds have to go back into the U.K. financial system. And in China they have to go back into the Chinese system. Europe is a totally different situation, and its' a fundamental issue that a lot of smart people in Europe haven't grasped yet.
So U.S. debt can grow and grow and it shouldn't be a problem. That's a bold statement, isn't it?
It's a bold statement but it's true – logically.
