Not all wealth is created the same. While the scale IS extraordinary, the source matters far more. Musk isn’t running a hedge fund, engaged in high-frequency trading, or speculating in options where one person’s gain is literally another’s loss. He built companies that employ hundreds of thousands of people, created transformative technologies, and delivered real value to society. That is much closer to productive stewardship than parasitism.

I was very much afraid that @NickJFreitas would say, "China could dump our debt," but to his credit, he focused instead on telecommunications and grid vulnerabilities. Impressive. However, I think he underestimates the inherent fragility and long-term unsustainability of China's export-driven model. Every nation has a finite debt capacity, and the more the Chinese double down on an inefficient and unproductive trade model, the faster those trade and subsequent capital flows will reverse. While it is difficult, perhaps nearly impossible, to predict exactly when that happens, I suspect it will occur much sooner (and faster) than most people expect.

I'd be careful with "because Americans want to own stocks." Equity valuations are heavily reliant on global asymmetries that are ultimatatly unsustainable. Market has had a good run, but even if you ended up on the winning side of the K-shaped economy, that is a fragile position that will one day correct.

"Global oil demand entering the crisis looks to have been weaker than anyone realised."

If you're a problem solver, money is a byproduct, just another tool in your kit. If you're not, no amount of money will ever make you one. Giving a trillion dollars to a non-problem solver is a waste of $1 trillion. @elonmusk identified problems and executed real solutions. If he had to start from scratch tomorrow, he'd end up with $1 trillion again. It wasn't lightning in a bottle, but an outcome driven entirely by the person.

But the claim that imbalances are only now "starting to look excessive" runs salt on a still open wound -- The surge in Asia's surplus didn't start in 2025 ... the IMF just missed it for several years (unfortunately) 2/

No, you wouldn't. Neither would I. It's a silly setup about something that doesn't exist. Nobody "denies science." People question hypotheses, challenge evidence, dispute interpretations, and debate conclusions. Skepticism isn't the opposite of science. It's the foundation of it.

Indeed. A Foreign Affairs article is an essay not an academic article. I do want to encourage a bit of action rather than watch China grow for another 2 years via net exports while the world waits for a change in its growth model!

Left, right, or center, if you're not talking about trade, you're not addressing the problem. You're just arguing ideology. Trade balances, capital flows, and the distribution of production determine where income, jobs, and wealth end up. Any explanation that ignores those factors is describing symptoms, not causes.

Your article touches on something important, but it understates the macroeconomic implications of the asset-ownership divide. Regards to @michaelxpettis who has done the most to explain how wealth concentration and trade imbalances are two sides of the same coin. Hopefully, I don't screw it up. Pettis's central argument, developed in "Trade Wars Are Class Wars" and elsewhere, is that the K-shaped economy isn't just a distributional story; it's a *macroeconomic* one. 1. The savings channel: Why wealth concentration suppresses demand👈 Often overlooked is the rich save a much larger share of their income than the poor and middle class. As income and wealth become increasingly concentrated, the national savings rate rises "mechanically" not because people are virtuously preparing for retirement, but because a larger share of national income is going to people who don't need to spend it. The result is a structural demand gap: production consistently outruns consumption. As Pettis puts it, "the rich save more of their money than do the poor, and households consume a greater share of their income than do businesses or the state". When too much income flows to high-savers, aggregate demand falls short of what the economy can produce. 2. The external absorption mechanism: How the US became the buyer of last resort👈 This is where the Pettis framework becomes essential. Excess savings from surplus countries (China, Germany, Japan, South Korea) don't just sit idle; they flow into US financial markets, propping up the dollar and inflating asset prices. "surplus countries subsidize their manufacturing industries but pass on the costs of these subsidies to deficit countries". The United States, with its deep and open capital markets, absorbs nearly half of the world's excess savings. But it comes with a cost, that capital inflow forces the US to run trade deficits by the iron logic of the balance of payments identity. "Since the US private sector is not wanting for additional financing... this surplus capital flows right back out through the trade channel, in the form of greater imports into the US". The result is a perfect, destructive loop: foreign savings inflate US asset prices → asset owners get richer → the US runs trade deficits → manufacturing hollows out → the households that didn't own assets face stagnant wages and rising costs. 3. The "febezzle" illusion: Why asset wealth isn't real wealth👈 Charlie Munger's concept of "febezzle" or why rising asset prices are so deceptive. "rising stock or real estate prices can generate income and wealth effects whether or not these rising prices reflect real increases in the earning capacity of these assets". In other words, financial markets create temporary impressions of false wealth (very similar to Ponzi schemes) without any need for an embezzler. This is crucial for understanding the "feeling broke" paradox. Those millionaires who feel poor aren't just suffering from "relative deprivation" or scoreboard envy. In a very real sense, their wealth *is* illusory; as it depends on a continued flow of foreign savings into US assets, sustained by policies abroad that suppress consumption. If (more like when) that flow reverses, the "wealth" evaporates, consumption collapses, and the economy enters a self-reinforcing downturn. As Pettis warned in 2021: "If we do see any sharp correction in US stock and property markets, the risk is that this sets off much slower consumption growth (the main driver of economic growth), will cause total growth to drop in a self-reinforcing loop. 4. The "upward mobility" narrative misses the fragility👈 Your point about dual-income households and credential inflation is exactly right, and Pettis would add that much of what looks like "climbing the ladder" is actually a treadmill. When household income growth depends on both adults working longer hours, or on ever-higher educational credentials whose costs have outpaced inflation, the fragility beneath the surface becomes apparent. The deeper issue is structural. The current global trading system incentivizes surplus countries to suppress household consumption and subsidize manufacturing, forcing deficit countries like the US to absorb the excess through debt and asset bubbles. This isn't a story about lazy Americans living beyond their means. It's a story about policy choices in both surplus and deficit countries that have systematically transferred income from labor to capital, from households to corporations, and from workers to financial asset holders. The K-shape as a global imbalance👈 Your article treats the K-shaped economy as a domestic phenomenon; asset owners vs. non-owners within the US. But it is a global phenomenon sustained by a dysfunctional international system. The asset-ownership divide in the US is the mirror image of suppressed consumption in China and Germany. You cannot fix one of those without addressing the other. So what you dismisses as "feeling broke" sentiment as a scoreboard problem, it misses the point. People feel broke not because they're comparing themselves to billionaires, but because the economy is genuinely fragile. It depends on ever-rising asset prices, ever-growing household (and public) debt, and ever-larger capital inflows from countries that have chosen to subsidize production over consumption. That's not a scoreboard problem. That's a structural flaw. As the Trades Union Congress report summarizing Pettis's work puts it: "The global financial crisis and subsequent conditions have been wrongly judged as the public living beyond the means of the economy; instead the economy has operated beyond the means of the public" . The K-shaped economy isn't a sign of success with a psychology problem. It's a sign of an economic model reaching its limits. --- *Source note: The citations above draw from Michael Pettis's work as referenced in the search results, including his columns in the Financial Times and Bloomberg, his co-authored work with Erica Hogan at the Carnegie Endowment, and the book *Trade Wars Are Class Wars* co-authored with Matthew C. Klein.*

The "Soviet cleanup" justification doesn't explain sustained, broad funding decades later. It's been nearly 40 years. If we haven't cleaned up and secured those sites by now, we never will. The idea that we can anticipate future variants by creating them in a laboratory is, at best, speculative. A virus's ability to mutate is influenced by the length and structure of its RNA genome, but ultimately you're still guessing. Even if you happen to predict a future variant correctly, any resulting vaccine is likely to have limited effectiveness because these viruses evolve so rapidly. The risks associated with laboratory leaks outweigh the potential benefits of trying to predict future variants. And if this research is mission-critical, it should be conducted in the United States, where oversight, accountability, and control of the facilities are far stronger.

That's one way to give them the finger on the way out the door. 💯

It's counterintuitive that Asian economies are hiking rates into an energy shock, but they are doing so to prevent the dollar system from hitting its limits. The issue is not high oil prices. It's that sharp increases in oil prices create dollar shortages in a system dependent on continuously rolling over and refinancing dollar liabilities. The risk is the volatility, not the price level.

Bravo Zulu on the $1T

“It was not the post-1985 rise of the yen that caused Japan’s lost decade. Tokyo had waited so long before the inevitable currency adjustment that policymakers were then forced to choose between a sharp slowdown and a disastrous policy response. They chose the latter.” — @michaelxpettis Japan's 'lost decades' were baked in because of suppressed consumption /export-led growth. By delaying rebalancing, policymakers made the eventual adjustment far more painful. China is repeating the same pattern today. With a record roughly $1.2 trillion trade surplus in 2025 and still massive surpluses in 2026 (May alone was about $105 billion), state banks continue buying foreign currency to limit RMB appreciation (USD/CNY around 6.76). This is not "resisting weakness"; it is actively capping strength to sustain the export and overcapacity model. I would only add that if what China is doing were efficient, why doesn't the rest of the world do the same? What would happen to the global economy if every advanced economy adopted this export-led, surplus-dependent growth model? If it were efficient and sustainable, we would not be seeing the parabolic rise in Chinese debt required to support it. (and before you say, "but all the advanced economies debts are rising...". Yes, they are because they are accomidating China's over production and inefficent growth model.)

He's right. Accounting identities such as (S-I) can tell you what is impossible, but they do not explain mechanisms or causation. China has never allowed a market-priced RMB. The entities absorbing external imbalances are central authorities and state-owned banks, not private market participants. That tells us far more than accounting identities ever will. Currency management by the CCP and the state remains manipulation regardless of the direction of the intervention. With a roughly $1.2 trillion trade surplus and state banks actively purchasing foreign exchange to limit RMB appreciation, the policy objective is clear: preserve export competitiveness regardless of efficiency. China is not Japan in the ways that matter here. There is unlikely to be a clean resolution through negotiations. Nor is the CCP's currency management a solution to China's deflation and weak domestic demand. It represents a doubling down on the same model of overcapacity and suppressed household consumption that created the problem in the first place.

Amazing how perceptions of China's yuan are sometimes stuck in 2024. Now that the yuan is inching up against the dollar, China (via the PBOC/ state banks) has been buying fx to limit its appreciation. That is literally what the settlement data shows 1/