Ronald McKinnon, professor of international economics, Stanford University, contests the so-called conventional wisdom on the matter of exhange rates and trade deficits in a new working paper added to the CS Research Room.



    The investment implication of McKinnon’s thesis is to buy companies that will benefit from a continuing dramatic increase in the wages of those people whose wages are being repriced towards Developed world levels. The demand for goods and servies which have a high income elasticity of demand – private healtcare, better real estate, airconditioning in countries like India and China will be extraordinary for a long time.


    May 25 – New York Times (David Barboza): “After construction workers finish plastering a replica of the Arc de Triomphe and buffing the imitation streets of Hollywood, Paris and Amsterdam, a giant new shopping theme park here will proclaim itself the world’s largest shopping mall. The South China Mall – a jumble of Disneyland and Las Vegas, a shoppers’ version of paradise and hell all wrapped in one – will be nearly three times the size of the massive Mall of America in Minnesota. It is part of yet another astonishing new consequence of the quarter-century economic boom here: the great malls of China. Not long ago, shopping in China consisted mostly of lining up to entreat surly clerks to accept cash in exchange for ugly merchandise that did not fit. But now, Chinese have started to embrace America’s modern ‘shop till you drop’ ethos and are in the midst of a buy-at-the-mall frenzy. Already, four shopping malls in China are larger than the Mall of America… Chinese are swarming into malls, which usually have many levels that rise up rather than out in the sprawling two-level style typical in much of the United States. Chinese consumers arrive by bus and train, and growing numbers are driving there. On busy days, one mall in the southern city of Guangzhou attracts about 600,000 shoppers. For years, the Chinese missed out on the fruits of their labor, stitching shoes, purses or dresses that were exported around the world… ‘Forget the idea that consumers in China don’t have enough money to spend,’ said David Hand, a real estate and retailing expert at Jones Lang LaSalle in Beijing. ‘There are people with a lot of money here. And that’s driving the development of these shopping malls.’”

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