G-20

-- This is a guest post by Jay Pelosky, Principal, J2Z Advisory, LLC.  It was originally posted on the Huffington Post. --

China’s surplus fell from 10.1% of GDP in 2007 to 5.2% in 2010.  Whether its current account will continue to decline or will return to higher levels seen in the mid-2000s is a subject of considerable disagreement.

In today's Huffington Post, Bruce Jentleson, a policy wonk, and Jay Pelosky, a seasoned global investor, argue that the public and private sectors in the United States must cooperate if the country is to "revitalize domestically and compete globally."

Lincoln Ellis, Managing Director of the Strategic Financial Group and Chief Investment Officer of the Linn Group, spoke with Bloomberg’s Matt Miller and Carol Massar yesterday about the World Economic Roundtable.

-- This is a guest post by Jay Pelosky, Principal, J2Z Advisory, LLC --  Japan’s massive earthquake, follow on tsunami and subsequent nuclear power plant upheaval have reinforced uncertainty regarding the strength of global economic activity and the appropriate financial assets prices to reflect that activity. The Arab Spring and EU debt crisis meant such uncertainty was already in the air in the weeks preceding the March 11^th earthquake.

As was suggested in an earlier post, China has an unusual low level of consumption and unusual high level of investment and savings.  The high level of savings is not, as is often assumed, attributable only to an increase in household savings, but to a rise in savings in the corporate and government sectors.  From 2000 to 2008, 80% of the increase in China’s gross national savings took place in the government and corporate sectors, not among households.  (The savings rate data for this post is based on the

It is widely known that China needs to rebalance its economy to rely more on consumption, but the extent of China’s imbalance between consumption and investment is not fully appreciated.  Comparisons to other emerging markets and countries like Japan, Taiwan, and Korea that pioneered the East Asian growth model show that China’s low levels of consumption are unparalleled.

China has grown rapidly for over a few decades but the engine of China's recent growth may be reaching its limit. Are the rapid GDP gains from its fixed investment and export model coming to an end?  And what, if anything, will replace it, and with what consequences for the world economy?

-- This is a guest post by Jay Pelosky, Principal, J2Z Advisory, LLC --

I recently attended a very interesting roundtable on China’s future growth path, led by The New America think tank and the World Policy Institute.

While listening to the debate over China’s need/ability to change its economic model, it struck me that the catalyst for such change could be developing right before our eyes – namely, inflation.

The opening theme of the 2011 State of the Union address, and the theme that the President has carried forward since then, was his insistence that the nation has at long last emerged from economic crisis.  He said: “Two years after the worst recession most of us have ever known, the stock market has come roaring back.  Corporate profits are up.  The economy is growing again.  And after two years of job losses, we’ve added private-sector jobs for 12 straight months -- more than 1 million in all.”