Monthly Archives: December 2016

Inflation Is Not About Price Increases, Frank Shostak (12/06/2016)

There is almost complete unanimity among economists and various commentators that inflation is about general increases in the prices of goods and services. From this it is established that anything that contributes to price increases sets in motion inflation.

A fall in unemployment or a rise in economic activity is seen as a potential inflationary trigger. Some other triggers, such as rises in commodity prices or workers’ wages, are also regarded as potential threats.

If inflation is just a general rise in prices as the popular thinking has it, then why is it regarded as bad news? What kind of damage does it do?

Mainstream economists maintain that inflation causes speculative buying, which generates waste. Inflation, it is maintained, also erodes the real incomes of pensioners and low-income earners and causes a misallocation of resources. Inflation, it is argued, also undermines real economic growth.

Why should a general rise in prices hurt some groups of people and not others? Or how does inflation lead to the misallocation of resources? Why should a general rise in prices weaken real economic growth?

Also, if inflation is triggered by various factors such as unemployment or economic activity then surely it is just a symptom and therefore doesn’t cause anything as such.

To ascertain what inflation is all about we have to establish its definition. Now to establish the definition of inflation we have to establish how this phenomenon emerged. We have to trace it back to its historical origin.

The Essence of Inflation

Historically, inflation originated when a country’s ruler such as king would force his citizens to give him all their gold coins under the pretext that a new gold coin was going to replace the old one. In the process the king would falsify the content of the gold coins by mixing it with some other metal and return diluted gold coins to the citizens. On this Rothbard wrote,

More characteristically, the mint melted and re-coined all the coins of the realm, giving the subjects back the same number of “pounds” or “marks,” but of a lighter weight. The leftover ounces of gold or silver were pocketed by the King and used to pay his expenses. (Murray N. RothbardWhat Has Government Done to Our Money? (Auburn, Ala.: Mises Institute, Libertarian Publishers, 2010), p. 58.)

On account of the dilution of the gold coins, the ruler could now mint a greater amount of coins and pocket for his own use the extra coins minted. (He could now divert real resources to himself.) What was now passing as a pure gold coin was in fact a diluted gold coin.

The increase in the number of coins brought about by the dilution of gold coins is what inflation is all about. As a result of the increase in the amount of coins that masquerade as pure gold coins, prices in terms of coins now go up (more coins are being exchanged for a given amount of goods).

Note that what we have here is an inflation of coins, i.e., an expansion of coins. As a result of inflation, the ruler can engage in an exchange of nothing for something (he can engage in an act of diverting resources from citizens to himself).

Also note that the increase in prices in terms of coins comes on account of the coin inflation. Observe however that it is the increase in coins brought about by the dilution of gold coins that enables the diversion of resources here to the ruler and not an increase in prices as such.

Under the gold standard, the technique of abusing the medium of the exchange became much more advanced through the issuance of paper money un-backed by gold.

Inflation therefore means an increase in the amount of receipts for gold on account of receipts that are not backed by gold yet masquerade as the true representatives of money proper, gold.

The holder of un-backed receipts can now engage in an exchange of nothing for something. As a result of the increase in the amount of receipts (inflation of receipts) we now also have a general increase in prices.

Observe that the increase in prices develops here on account of the increase in paper receipts that are not backed up by gold.

Also, what we have here is a situation where the issuers of the un-backed paper receipts divert real goods to themselves without making any contribution to the production of goods.

In the modern world, money proper is no longer gold but rather paper money; hence inflation in this case is an increase in the stock of paper money.

We don’t say that the increase in the money supply causes inflation. What we are saying is that inflation is the increase in the money supply.

Inflation Is About Wealth Destruction 

Note that increases in the money supply set in motion an exchange of nothing for something. They divert real funding away from wealth generators toward the holders of the newly created money. This is what sets in motion the misallocation of resources, not price rises as such.

Real incomes of wealth generators fall, not because of general rises in prices, but because of increases in the money supply. When money is expanded (i.e., created out of “thin air”) the holders of the newly created money can divert goods to themselves without making any contribution to the production of goods.

As a result wealth generators who have contributed to the production of goods discover that the purchasing power of their money has fallen since there are now less goods left in the pool — they cannot fully exercise their claims over final goods since these goods are not there.

Once wealth generators have less real resources at their disposal this is obviously going to hurt the formation of real wealth. As a result real economic growth is going to come under pressure.

General increases in prices, which follow increases in money supply, only point to an erosion of real wealth. Price increases by themselves however do not cause this erosion.

Can Increases in Commodity Prices Cause Inflation?

According to most economists, an important factor behind a general increase in prices is increases in commodity prices.

We have seen that inflation is brought about by a deliberate act of currency debasement — on a gold standard by issuing un-backed by gold paper money, while on a paper standard an increase in the supply of paper money.

An increase in commodity prices as such is not related to an act of embezzlement. For instance, in a true market economy an increase in the price of oil versus the prices of other goods is just a reflection of changes in peoples’ demand. Obviously it has nothing to do with an act of currency debasement brought about by the increase in money supply out of “thin air.”

Also, if the price of oil goes up and if people continue to use the same amount of oil as before, people will be forced to allocate more money to oil. If peoples’ money stock remains unchanged, less money is available for other goods and services.

This of course implies that the average price of other goods and services must come down. Again, remember a price is the sum of money paid for a unit of a good. (The term “average” is used here in conceptual form. We are well aware that such an average cannot be computed.)

Note that the overall money spent on goods doesn’t change; only the composition of spending has altered, with more on oil and less on other goods. The average price of goods or money per unit of good remains unchanged.

Hence, the rate of increase in the prices of goods and services in general is going to be constrained by the rate of growth of money supply, all other things being equal, and not by the rate of growth of the price of oil.

It is not possible for increases in the price of oil to set in motion a general increase in the prices of goods and services without the corresponding support from money supply out of “thin air.”

We can then conclude that the so-called general increase in prices that seems to follow an increase in a commodity price such as oil, is in fact on account of an increase in the money supply out of “thin air.” (Note that since an injection of money doesn’t enter all the markets instantly, a general increase in prices ensues on account of previous increases in money supply.)

Most economists, when discussing the issue of general increases in prices, which they label inflation, never mention the word money. The reason for that is the lack of a good statistical correlation between changes in money and changes in various price indexes such as the CPI.

Whether changes in money supply cause changes in prices cannot be established by means of statistical correlation.

A statistical correlation, or a lack of it, between two variables shouldn’t be the determining factor in establishing causality. One must figure it out by means of reasoning as to the structure of causality.

Can Inflation Expectations Trigger a General Price Rise?

We have seen that, as a rule, a general increase in the prices of goods emerges on account of an increase in the amount of money paid for goods, all other things being equal.

The key then for general increases in prices, which is labeled by popular thinking as inflation, is increases in the money supply.

But what about the situation when increases in commodity prices ignite inflation expectations, which in turn strengthens a general increase in prices? Surely then inflation expectations must be also an important driving factor behind the general increase in prices?

According to most economists, inflation expectations are the key driving factor behind increases in general prices.

Once people start to anticipate higher inflation in the future they raise their demands for goods at present thus bidding the prices of goods higher.

Also, according to popular thinking, workers expectations for higher inflation prompt them to demand higher wages. Increases in wages in turn lift the cost of producing goods and services and force businesses to pass these increases on to consumers by raising prices.

It is true that businesses set prices and it is also true that businessmen while setting prices take into account various costs of production. However, businesses are ultimately at the mercy of the consumer who is the final arbiter. 

The consumer determines whether the price set is “right,” so to speak. Now, if the money stock did not increase then consumers wouldn’t have more money to support the general increase in prices of goods and services, all other things being equal.

Hence, on account of expectations for higher prices in the future, all other things being equal, consumers will not be able to raise their demand for goods at present and bid the prices of goods higher without having more money. Consequently, the amount of money spent per unit of goods will stay unchanged.

So irrespective of what peoples’ expectations are, if the money supply hasn’t increased then peoples’ monetary expenditure on goods cannot increase either. This means that no general strengthening in price increases can take place without an increase in the pace of monetary pumping.

Note that inflationary expectations as such don’t cause a currency debasement, so in this sense an increase in so-called inflation expectations has nothing to do with inflation — i.e., an increase in money out of “thin air.”

Imagine that somehow the Fed did manage to convince people that central bank policies are aimed at stopping inflation and maintaining price stability, yet at the same time the central bank also raises the rate of growth of money supply.

Even if inflationary expectations were stable the destructive process will be set in motion regardless of these expectations on account of the increase in the rate of growth of money. Note that people’ expectations and perceptions cannot offset this destructive process.

It is not possible to alter the facts of reality by means of expectations. The damage that was done cannot be undone by means of expectations and perceptions.

When inflation is seen as a general increase in prices, then anything that contributes to price increases is called inflationary. It is no longer the central bank and fractional-reserve banking that are the sources of inflation, but rather various other causes.

In this framework, not only does the central bank have nothing to do with inflation, but, on the contrary, the bank is regarded as an inflation fighter.

On this, Mises wrote,

To avoid being blamed for the nefarious consequences of inflation, the government and its henchmen resort to a semantic trick. They try to change the meaning of the terms. They call “inflation” the inevitable consequence of inflation, namely, the rise in prices. They are anxious to relegate into oblivion the fact that this rise is produced by an increase in the amount of money and money substitutes. They never mention this increase. They put the responsibility for the rising cost of living on business. This is a classical case of the thief crying “catch the thief.” The government, which produced the inflation by multiplying the supply of money, incriminates the manufacturers and merchants and glories in the role of being a champion of low prices. (Ludwig von Mises, Economic Freedom and Interventionism, p. 94.)


How Inflation and Unemployment Are Related, Frank Shostak (12/13/2016)

A fall in the US unemployment rate to 4.6% in November from 4.9% in the month before, and 5% in November last year, has prompted some commentators to suggest that we are almost at the so-called natural rate, which is believed to be at around 4.5%.

It is held that once the unemployment rate falls below an “optimal” rate — called the Non-Accelerating Inflation Rate of Unemployment (NAIRU) — it sets off an inflationary spiral.

This acceleration in the rate of inflation takes place through increases in the demand for goods and services. It also lifts the demand for workers and puts pressure on wages, reinforcing the growth in the rate of inflation.

So from this perspective it will be difficult for President-elect Trump to implement his plan to lower tax rates and boost government outlays on projects including the improvement of roads and bridges without risking a strong increase in the rate of inflation. Or so it is held.

Note that in October, the yearly growth rate of the consumer price index already stood at 1.6% against 0.2% in October last year.

It also raises the likelihood that the Federal Reserve would have to adopt a more aggressive interest rate stance to counter any possibility for acceleration in the rate of inflation.

The NAIRU is an arbitrary measure, derived from a statistical correlation between changes in the consumer price index and the unemployment rate. What matters in the NAIRU framework is whether the theory “works,” i.e., whether a decline in the unemployment rate below the NAIRU results in the acceleration in the rate of inflation.

Using statistical correlation as the basis of a theory means that “anything goes.” For example, let us assume that a high correlation has been found between the income of Mr. Jones and the rate of growth in the consumer price index. The higher the rate of increase of Mr. Jones’s income, the higher the rate of increase in the consumer price index.

Therefore we could easily conclude that in order to exercise control over the rate of inflation the central bank must carefully watch and control the rate of increases in Mr. Jones’s income. This example is no more absurd than the NAIRU framework.

The purpose of a theory is to present the facts of reality in a simplified form. The theory must originate from the reality and not from some arbitrary idea that is based on a statistical correlation.

Contrary to popular thinking, strong economic activity doesn’t cause a general rise in the prices of goods and services and an economic overheating labeled as inflation. Regardless of the rate of unemployment, so long as every increase in expenditure is supported by production, no “overheating” can actually occur.

RELATED: “Inflation Is Not About Price Increases

The overheating emerges once expenditure rises without being backed up by production, a situation that occurs when the money stock is increasing. Once money increases, it generates an exchange of nothing for something, or consumption without preceding production.

As a rule, increases in the money stock are followed by general increases in the prices of goods and services. Prices are another name for the amount of money that people spend on goods they buy. When money is injected it never goes to all the markets instantly but by stages — there is a time lag. Hence the reason for the time lag between changes in money and changes in prices.

If the amount of money in an economy increases while the amount of goods remains unchanged more money will be spent on the given amount of goods (i.e., prices will increase). Conversely, if the stock of money remains unchanged it is not possible to spend more on all the goods and services, hence no general rise in prices is possible. By the same logic, in a growing economy with a growing amount of goods and an unchanged money stock, prices will fall.

Limiting Government Spending and Money Creation Will Lead to Wealth Creation

Now, if President-elect Trump were to seal off all the loopholes for the creation of money out of “thin air” and lower government outlays, this will leave more real wealth in the hands of the wealth generating private sector. This will strengthen the wealth generating process.

A strengthening in the wealth generating process will permit the increase in the production of goods and services, i.e., a strengthening in economic growth. Consequently, this will correspond to the decline in the growth rate in the prices of goods and services. (Remember the loopholes for money creation out of “thin air” are sealed off.) This will also correspond to the decline in the unemployment rate.

Observe in a free unhampered economy with minimal government involvement in economic activity and in the absence of money generation out of “thin air” an efficient use of resources will take place. In such an environment no one would need establish the so-called NAIRU. Such an environment will be conducive for real wealth expansion, a low unemployment rate and a declining rate of inflation.

Also note that in a properly functioning market economy any form of unemployment will be of a voluntary nature. Individuals will be paid in accordance with their contribution to the production of wealth. Any one insisting on a wage rate above his or her contribution to the wealth generation will be unemployed.

However the chances that Donald Trump is going to embrace a smaller government with the loopholes for money creation out of “thin air” sealed off is probably nil.

More Government Spending Will Undermine Wealth Creation

Hence we suggest that any aggressive expansion in government outlays are likely to undermine further the process of wealth generation and lead to economic difficulties ahead.

Obviously if the wealth generation process is still capable of absorbing all the abuses on account of government expansion and the central banks’ reckless monetary policies, then the policies of Donald Trump and the Fed will appear to be successful.

This illusion is going to be shattered once the pool of real wealth will fall onto a declining path. Once this happens the economy will fall into a severe economic crisis.

Any aggressive loose stance by the Federal Reserve and the government will only make things much worse. Remember government is not a wealth generating entity — it only consumes real wealth.

Civilización: cómo Europa lanzo la Revolución Industrial y supero al resto

De todos los libros escritos por Niall Ferguson Civilization probablemente sea su obra más completa y la que, en parte, mejor sintetiza su visión de la Historia. En esta obra, el profesor de Historia en Stanford aborda de forma sintética la cuestión referente al auge y dominio Europeo durante los últimos cinco siglos lo que los expertos denominan la “gran divergencia”: los motivos que ayudan a entender por qué Europa, y no China (por ejemplo), desarrolló la Revolución industrial a finales del s. XVIII y que dio a Occidente una ventaja competitiva que ha durado hasta nuestros días.

Ferguson identifica hasta seis ideas/instituciones – él usa el término “application killers” –, que tuvieron lugar únicamente en la fragmentada Europa. Estos elementos, a medida que han sido adoptadas por el resto de civilizaciones también explicarían la “gran convergencia” que ha tenido lugar desde el final de la Segunda Guerra Mundial. En efecto, para Ferguson, el requilibrio de fuerzas que estamos viviendo en la actualidad entre Occidente y Oriente -una de las grandes cuestiones de nuestro tiempo- se explica, en gran medida, ya que el grueso de países Asiáticos, muy especialmente China, han ido adoptando (adaptando) estas ideas.

Un de las grandes conclusiones del libro -en línea con otras obras del autor-, es que de estas seis instituciones que identifica Ferguson como “claves” para el desarrollo de la civilización la más importante es el rule of law; justamente una de las que China tienen pendiente de desarrollar (si es que la desarrolla algún día).

El libro lleva a cabo un gran ejercicio de simplificación que facilita su lectura y acerca la gran cuestión de la “gran divergencia/convergencia” al gran público  pero que al mismo tiempo ha sido objeto de críticas por sus detractores (véase por ejemplo la reseña del libro del periódico The Guardian) que también ha criticado el carácter excesivamente anglófilo del libro.

Desde un punto de vista estrictamente personal, pese a lo interesante de la lectura, Ferguson deja algunos elementos fuera de plano y su marcado acento anglófilo -el libro sigue (hasta cierto punto) la interpretación Whig de la Historia- y que, a la postre, limita el alcance de sus conclusiones. Basta pensar en el desarrollo de China -que se ha desarrollado al margen del “rule of law” inglés- y que pone a prueba, al menos en parte, la tesis central del autor.

En cualquier caso, la obra de Ferguson – especial énfasis en The Cash NexusThe Ascent of Money y ahora Civilization – es especialmente estimulante y me parece fundamental para tener una correcta visión global de nuestro entorno actual y los cambios que estamos experimentando en el Orden Global. Ferguson ayuda a simplificar temas que a priori podrían parecer inabordables y los trata con un ángulo distinto, fresco y hasta cierto punto innovador.

Cuadro resumen libro


China’s liquidity flood stirs memories of the Mongols and Mao

When Marco Polo went to China he discovered something better than alchemy. Rather than turning base metals into gold, he marvelled that the Chinese were creating money out of paper. But what the 13th­century Venetian traveller could not know was how perilous a paper currency would prove for the country that invented it.

At intervals in their history, Chinese rulers have succumbed to the temptation to pay off spiralling debts simply by rolling the money printing presses. Inflationary scourges ravaged dynasty after dynasty, with both the

Mongols and Mao Zedong’s Communists seizing power in a country eviscerated by depreciated paper.

Such episodes sound uncomfortable echoes for Beijing as it wrestles to control its latest bout of monetary exuberance. The current tussle to ward off a financial crisis pits the world’s most powerful authoritarian system against the propensity of money to resist control as it seeps and flows like water through unattended apertures.

China’s problem this time is not inflation, at least not yet. It is rather that Beijing has again sent its printing presses into overdrive, creating what is almost certainly the biggest pool of domestic liquidity in history to help stimulate its economy and finance a crushing debt burden. The danger is that if the renminbi loses value internally or gushes out of China, a wave of unpaid debts could precipitate a crisis.

The dimensions of China’s liquidity splurge are startling. Ousmène Jacques Mandeng, formerly with the International Monetary Fund, has calculated that between 2007 and 2015 China created 63 per cent, or $16.1tn, of the growth in the world’s supply of money.

China now has more money coursing through the arteries of its economy than the eurozone and Japan combined — and almost as much as the US and the eurozone combined. Since the financial crisis, commentators have focused on the efforts of US, European and Japanese central banks to print money through “quantitative easing”, but China’s output has eclipsed them all.

Marco Polo would have been impressed. He noted with awe China’s capacity to print off as much money as it needed: “It may certainly be affirmed that the grand khan has a more extensive command of treasure than any other sovereign in the universe”.

But for China’s modern rulers, the effusion of liquidity presents as many problems as it promises to resolve. The main issue is that debts are piling up almost as fast as China generates money to service them, creating what Jonathan Anderson of the Emerging Advisors Group calls a “debt funding bubble”.

In his analysis, China’s crunch point will come when there is a disruption in the supply of money needed to pay total debts that amount to about 250 per cent of China’s gross domestic product, the highest level among any large emerging market.

Mr Anderson sees peril mainly in the form of a “madcap proliferation” of flaky financial institutions that lend out money they have raised by issuing debt. The potential for something to go wrong is considerable among a “chaotic hodgepodge of banks and non­ banks” that are fuelling China’s credit boom.

Officials also see another source of vulnerability. They fear that Chinese corporations and citizens will decide en masse that they would be better off taking their money abroad to buy companies or invest in gold, stocks or real estate. Such capital flight could sap the liquidity that is required to keep China’s bubble from popping.

These concerns explain Beijing’s plans to restrict outbound foreign investment. People familiar with the plans told the Financial Times that China intends to scrutinise acquisitions of overseas companies costing more than $1bn if they are outside the investors’ core business scope. Meanwhile, state­owned enterprises will not be allowed to invest more than $1bn on a single real estate transaction abroad. Gold purchases are also being curbed.

With outbound investments from Chinese corporations running at $150bn in the first 10 months of this year, up from $121bn last year, such outflows are increasingly being seen as part of a complex of problems that have also driven down China’s stockpile of foreign exchange reserves from almost $4tn in early 2014 to $3.12tn in October.

Outflows of even as much as $1tn may not seem too debilitating when set against China’s proven capacity to generate plentiful supplies of money. But the fact that Beijing is taking action reveals the knife­edge upon which Chinese policymakers are balancing.

So engorged with easy money have they become that Chinese banks are on average four times larger today than they were just eight years ago. But riskier still is the fact that several of its mid­sized banks rely for funding on so­called wholesale operations — a euphemism for issuing debt to re­lend.

The folly inherent in such a form of alchemy has been understood for at least 800 years. Ye Shi, a Song dynasty adviser, warned that issuing “kongqian” — or “empty money” that is not backed by assets — would stoke inflation and reduce people’s incomes. His emperor did not listen, triggering economic chaos that enfeebled China before the Mongol invasion.

Marco Polo noted with awe Chinese rulers’ capacity to print off as much cash as they needed

Mark Spitznagel: “The Big, Fat, Ugly Stock Bubble” Is Now The Greatest Risk For Trump

ZH, By Mark Spitznagel, the founder and chief investment officer of Universa Investments, and a former senior economic adviser to Senator Rand Paul of Kentucky.

Stock Surge Presents Risks for the Trump Administration

The “big, fat, ugly bubble” in the stock market that President-elect Donald J. Trump so astutely identified during his campaign now becomes one of the greatest potential liabilities of his presidency.

If that bubble bursts soon, the pain will correctly be understood to be the result of monetary manipulations during the Obama years. But if it persists and the United States economy manages to further postpone its long-overdue recession (following an expansion that was barely that), Mr. Trump’s ostensibly “free-market” policies will unfairly bear the blame when the markets finally do return to reality — perhaps a year or two down the road. 

The postelection Trump rally in the stock market is evidence of euphoric optimism about the fiscal stimulus, reduced regulations and lower taxes that are hoped for. And yet we mustn’t forget where we are today, with distorted pricing in virtually all markets and extremely levered public and private balance sheets, all driven by monetary interventionism on a scale never seen before: By most measures, the stock market is as expensive as it has been for a century, save only the giddy late 1990s.

We must also remember what got us to this spot: namely, extreme, collectivist interventionism by the heavy hand of the state. Perhaps never before have we had such a clear case of a controlled experiment in the effects of economic (and especially monetary) interventionism. Problem is, the election of Mr. Trump is adding noise to this otherwise transparent experiment, and is extremely risky for supporters of his policies because he is poised to take office near such a peak in economic distortion.

The challenge, therefore, is for the incoming administration to let the authorities own the initial pain that is sure to come, such as the pain of pulling off the bandages, while letting the later recovery be his — as it should be. Though the Obama administration was able to blame a previous administration’s presumed free-market policies for eight years of lackluster recovery, it will be much harder for Mr. Trump to transfer blame for any economic crisis that occurs on his watch.

There’s something about a government that steps back to let free markets fix themselves that invariably renders it a ripe target for blame. “Couldn’t you have done something?”

After all, if the rally following his surprise election bears Mr. Trump’s name, the danger is that so, too, will the inevitable correction that neither he nor the Fed can stop. What could result — and what we should all fear, specifically — is the political pendulum swinging violently back toward big government and even greater market interventionism.

If Mr. Trump can focus on the long term and encourage asset prices and investments to correct themselves early (to the extent that he even holds such sway over them), perhaps this controlled experiment can remain obvious to everyone. Worthy or not, as the current general for advocates of the free market, he should hope to lose the short-term battle to win the bigger war, to gain positional advantage for the looming contest ahead.

Desentrañando el rompecabezas chino de mano de Hank Paulson

Como sucede con los grandes temas, el volumen de literatura sobre el tema abruma. Sucede como con Internet en donde saber seleccionar y categorizar la información es clave. El entendimiento de China es una de las grandes empresas intelectuales de nuestra generación. A finales de los 70s, y después de un “siglo de humillaciones”, varias guerras y tres décadas de comunismo, China se abría al mundo marcando uno de los grandes hitos del siglo XX y que cambiarían el orden global de manera definitiva: el mundo daba un golpe de timón del Atlántico al Pacífico; Estados Unidos y China -como antes EE UU y Europa-, pasaban a configurar la relación bilateral más relevante del mundo.

En este marco se encuadra el libro Negociando con China (Deusto) del antiguo secretario del Tesoro y antiguo CEO de Goldman Sachs, Hank Paulson. El libro aborda el tema de China a partir del hilo conductor de las vivencias personales de Paulson con aquel país que se inician a principios de los 90s y hasta nuestros días a partir de tres etapas bien diferenciadas: primero como máximo responsable de Goldman Sachs (sin duda una de las mejores compañías que han sabido enriquecerse con China), segundo como Secretario del Tesoro, y por último como presidente del Paulson Institute, organismo del tercer sector.

El lector es participe de este viaje a través del crecimiento del país -el libro resume y presenta los grandes acontecimientos de la Historia reciente del país (aunque ciertamente es muy poco teórico)-, al tiempo que se describen las peripecias de Paulson tratando con China tanto como alto ejecutivo como representante político. De este modo, el libro tiene la gran virtud de incorporar una gran cantidad de vivencias prácticas y casos reales de negociación con China lo que permite hacerse una buena idea de la complejidad del país y sus mecanismos de poder.

El libro describe por ejemplo, y lo hace bastante bien, la importancia de conocer bien el “quién es quién”, la historia detrás de la persona antes de negociar o tratar con ella y también la importancia de entender los símbolos y los detalles, elementos muy importantes dentro de la cultura china. De los diferentes casos de éxito y también fracaso en China, subyace siempre la importante idea que en la primera linea de negocios en el país, la de las grandes operaciones, a la realidad económica (el ángulo puramente de negocios) se combina siempre con la realidad del país (el ángulo geopolítico); ambos importantes y que normalmente confluyen en la misma persona: los altos cargos de las grandes empresas públicas y de los llamados sectores estratégicos (entre ellos la banca), son también altos cargos políticos dentro del Partido/Gobierno. En suma, la “gran empresa de China” es su transformación económica, asegurar su crecimiento y prosperidad, su integridad territorial y su capacidad para garantizar estabilidad política. Entender esta “agenda política” es imprescindible para las grandes aventuras comerciales en China y un elemento a tener en cuenta para cualquiera que se atreva a navegar por el gigantesco, dinámico y complejo mercado chino.

Entre otras muchas cosas el libro pone en valor la figura de Zhu Rongji, lo más parecido a Gladstone en versión china -figura, comentario al margen, con la que se intenta comparar Paulson en un pasaje que da, por hablar claro, vergüenza ajena-, y describe algunas de las estrategias para implementar las reformas pro-mercado como el hecho de adquirir compromisos con el exterior (p. ej. OMC) o la entrada de socios estratégicos e inversores extranjeros en las poderosas empresas estatales chinas (SOEs) mediante estudiadas operaciones de salida a bolsa (OPVs). Siendo el autor quién, todo sea dicho de paso, se echa en falta algo más de profundidad con respecto a las implicaciones de una OPV y los elementos que determinan su éxito.

El libro acaba siendo una mezcla de experiencia política práctica, un manual sobre como negociar y hacer negocios en China (muchas de estas observaciones son válidas en la mayoría de situaciones), todo lo anterior siguiendo el hilo conductor de la historia reciente del gigante asiático y salpimentando con el “Who is Who” de la política del país. Una lectura muy recomendable para cualquiera que quiera resolver el rompecabezas China.