Michael Mandel Gets It

As readers of this blog know, I’m a bit of a groupie for economists. One of my favorites has long been Morgan Stanley’s Steve Roach. He used to be chief economist for the firm and write the weekly economic commentary, which mere mortals could read because it was published on the company Web site. In April 2007, Roach was promoted and named chairman of Morgan Stanley’s Asia operations. He stopped writing his column.

It’s our loss. Roach has been warning for years that the trade imbalances between China and the U.S. are not sustainable, and that the cozy situation where the Chinese lend us money (by buying U.S. Treasury securities) so we could buy the toys that they were manufacturing, even though we couldn’t afford them, was not going to last.

Michael Mandel, the chief economist at BusinessWeek, recently wrote a piece, “It’s Not a Crisis of Confidence,” that takes this idea that trade imbalances cannot be sustained a step further. Mandel argues: “Long accepted patterns of cross-border technological transfer, foreign trade, and global finance are simply not sustainable.”

If you only read one thing about why the financial markets are in turmoil, this should be it. Mandel gets it.