So the stock market fell 1,000 points last week, the worst first week performance of the stock market ever. This occurs amidst a decent jobs report on Friday, though as many observers noted that a lot of the jobs were on the lower end of the skill level, and several news outlets noted that wages continue to be stagnant. Everyone is pointing to China, whose economy is possibly slipping by a lot.
The old saying went that if the U.S. economy sneezes, the world economy catches a cold. But maybe that now applies to China more than the U.S. It was great fun indeed to take in the New York Times house editorial yesterday entitled “China’s Obsolete Economic Strategy.” I especially love this knowitall howler: “Chinese officials ought to be strengthening the economy, foremost by shifting its emphasis from investment to consumer spending and services.” Wait—isn’t China’s infrastructure-heavy “investment” the strategy that Tom Friedman and other cheerleaders of the “China Is Awesome” caucus have been urging us stupid Americans to follow? Heh. Moreover, while Friedman has so far not commented, Paul Krugman says that China’s “numbers, as I read them, don’t seem big enough [to cause a crisis]. That bad news is that I could be wrong.” Which means we’re doomed.
Even more fun, and sure to generate heartburn to Kurgman, Friedman, and the New York Times editorial board, is that Chinese leaders are apparently considering as a remedy . . . Reaganomics! The Economist reports in “Reagan’s Chinese Echo”:
RONALD REAGAN, a sworn enemy of communism, and Xi Jinping, a doughty defender of Communist rule in China, ought to have little in common. Lately, though, Mr Xi has seemed to channel the late American president. He has been speaking openly for the first time of a need for “supply-side reforms”—a term echoing one made popular during Reagan’s presidency in the 1980s. It is now China’s hottest economic catchphrase (even featuring in a state-approved rap song, released on December 26th: “Reform the supply side and upgrade the economy,” goes one catchy line).
There is even a new, government-sponsored China Academy of New Supply-Side Economics. Better keep Friedman and Krugman away from razor blades for a while.
But back here to the U.S. Yesterday’s Holman Jenkins column in the Wall Street Journal is a sustained attack on Donald Trump that goes too far even for me, and normally Jenkins can do no wrong. But there’s a short passage at the very end of the column that brought me up short:
If Mr. Trump were to become GOP nominee much less president, the consequences would be incalculable, and some of us find it hard to believe they would be good. Especially if, like 2008, the presidential election turns out to be fought against the background of a global financial crisis, as looks increasingly possible. [Emphasis added.]
I have no idea where the economy if heading, but when everyone is saying that there’s no recession on the horizon is precisely the time to expect a recession—or something worse. Another black swan of some kind. Every Republican presidential campaign ought to be ready for a sudden economic shock such as occurred in September 2008, which, recall, caught John McCain flatfooted. Up to that point he was even or slightly ahead of Obama in most polls.
As of this writing (shortly after 6 pm Pacific time), China’s stock market has opened for trading, and is down sharply again.