Two months ago, the Chinese Communist Party purged Bo Xilai, a rising political star. The Bo affair has exposed widespread corruption and deepened fissures within the country's famously unified leadership. What do such scandals reveal about China's governance? How will they affect its upcoming leadership transition?
In an environment of secular stagnation in the developed economies, central bankers’ ingenuity in loosening monetary policy is exactly what is not needed. What is needed are admissions of impotence, in order to spur efforts by governments to promote demand through fiscal policies and other means.
Unlike the 2008 global financial crisis, which was mostly a large negative aggregate demand shock, the next recession is likely to be caused by permanent negative supply shocks from the Sino-American trade and technology war. And trying to undo the damage through never-ending monetary and fiscal stimulus will not be an option.
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