China's Economy Is Running on Borrowed Money – and Time | Ruchir Sharma
- 6 years ago
It takes four dollars of debt to create a single dollar of GDP growth in China. For context, at the peak of the GFC in 2008 it was taking three dollars of debt to create a dollar of GDP growth in the U.S. China has received the kiss of debt, says Ruchir Sharma.
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Transcript - What our research shows is that if you look back in history the single most important predictor of economic and financial trouble is when a country takes on too much debt over a short span of time. If a country does that it’s bound to make bad loans. It’s bound to make bad investment decisions because there’s no way that you can lend too much money and find enough credit worthy borrowers to make the right decisions with that money over a short span of time. So the exact way that we define this in the book is that if a nation takes on too much debt over a five-year time horizon the next five years typically tend to be very bad for a country. Now as far as China’s concerned there is no developing country in history which has taken on so much debt over such a short span of time as China as done in the after crisis era. Read Full Transcript Here: https://goo.gl/yQbtjV.
Read more at BigThink.com: http://bigthink.com/videos/ruchir-sharma-on-the-fall-of-china
Follow Big Think here:
YouTube: http://goo.gl/CPTsV5
Facebook: https://www.facebook.com/BigThinkdotcom
Twitter: https://twitter.com/bigthink
Transcript - What our research shows is that if you look back in history the single most important predictor of economic and financial trouble is when a country takes on too much debt over a short span of time. If a country does that it’s bound to make bad loans. It’s bound to make bad investment decisions because there’s no way that you can lend too much money and find enough credit worthy borrowers to make the right decisions with that money over a short span of time. So the exact way that we define this in the book is that if a nation takes on too much debt over a five-year time horizon the next five years typically tend to be very bad for a country. Now as far as China’s concerned there is no developing country in history which has taken on so much debt over such a short span of time as China as done in the after crisis era. Read Full Transcript Here: https://goo.gl/yQbtjV.