Rise and Fall of Nations

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Автор — главный аналист Morgan Stanley по Emerging markets. Тема: глубокое исследование природы экономического развития и декомпозиция по основным 10 правилам:

1) Люди, человеческий капитал, рабочая сила
2) Циклы и постоянная изменчивость, всё живет и всё меняется, реформы решают и готовность к ним обязательна (начинается глава с красивого  примера про Россию, где автор зачем-то честно высказал своё мнение перед Путиным)
3) Плохие и хорошие миллиардеры, их влияние на экономику, на общество, что может случиться
4) Роль государства, вмешательство в экономику, в лонг-ране эффект всегда одинаковый, в шорт-ране кому-то может и повезти
5) Географическое расположение: кому-то может повезти, кто-то сам ищет и сам же создает своё географическое преимущество
6) Производство — первично (не возникнет пост-индустриальное общество сразу, нельзя перепрыгнуть)
7) Рост цен, инфляция
8) Цена валюты, дешевая или дорогая по отношению к другим, как её воспринимают локалы и нерезы, нельзя всё решить девалом, важен контекст, девал решает только если есть куча производственного потенциала (а иначе просто массовое обеднение)
9)  Уровень долга, и что еще важнее, скорость роста долга (по отношению к ВВП, конечно)
10) Эффект хайпа: выход на обложку Time больше чем в половине случаев в итоге означал закат, журналисты в самый последний момент пишут, и наоборот сильно растет обычно то, на что никто доселе не обращал внимания.

Более подробно описывать не буду (ниже можно найти кучу выделенных цитат). Но обращу внимание, что большие инвестиционные деньги проделывают очень большую аналитическую работу, прежде чем куда-то вкладываться. Колоссальный объем работы. И навряд ли, найдя алмаз, такие ребята начнут трубить куда надо вкладываться — мы об этом узнаем апосля, когда они уже войдут сайзом. Книга основана на очень богатом личном опыте, большой статистике, аналитических наработках и анализе чуть ли не всех развивающихся стран.

Что интересно, автор сам пишет, что редко когда страна получает самую низшую оценку. Но уникальности России в том, что по многим правилами мы таки заслужили наинижайшую оценку. Интересно, что книга от 2016 года, а после этого наша фонда сильно выросла, рупь дал хороший доход (carry+переоценка). Хороший повод задуматься, ведь если рост был оторван от экономического роста, то какова долгосрочная устойчивость такого роста и не случится ли всё опять также, как неоднократно случалось у нас? Китаю оценка тоже была дана ugly (рост продолжается лишь из-за новых и новых стимулов).

Поехали выделенные цитаты (делал через апп «заметки» в pocketbook). Сразу сорян, что много — кому лень читать, можете забить и обзоры выше асилить. Но книга учебная, поэтому если совсем в тезисах, то смысла не будет. А прочтя цитаты, у вас хоть что-то в голове сложится (вместо чтения всей-то книги).

1)       Do not expend energy on daily or quarterly blips in the numbers. Adapt to a changing landscape rather than let ego obstruct a strategic retreat. Understand that booms, busts and protests are part of the normal rhythm of life. Focus on big trends, and watch for the crossings. Build a system to spot important signs of change, even when everyone around you is just going with the current flow.

2)       Wall Street is fond of old sayings about how only the paranoid and the fittest survive. The challenge is how to channel a wise paranoia in the service of survival.

3)       The buzzword for this threat is “hysteresis,” which describes a period in which slow or negative growth begets slower growth rather than recovery

4)       A few basic principles underlie all the rules. The first is impermanence. Recognizing that this world is impermanent leads to the second principle, which is to never forecast economic trends too far into the future… practical time horizon of five to ten years....Predictions for the next twenty to one hundred years cannot possibly be fulfilled when new economic competitors can arise within five years. In any five-year period, a new technology can spring seemingly from nowhere...

5)       The question to ask, in any period, is not the typical one: What will the world look like if current trends hold? It is, rather, What will happen if the normal pattern holds and cycles continue to turn every five years or so? In practical people cannot begin to make plans without making an educated guess as to what is coming next

6)       former central bank governor Y. V. Reddy once cracked to me that while the future is always uncertain, in India even the past is uncertain.

7)       This is a classic case of Goodhart’s Law, which says that once a measure becomes a target, it ceases to be useful, partly because so many people have an incentive to doctor numbers to meet it

8)       These are the basic principles: Avoid straight-line forecasting and foggy discussions of the coming century. Be skeptical of sweeping single-factor theories. Stifle biases of all kinds, be they political, cultural or “anchoring.”

9)       Avoid falling for the assumption that the recent past is prologue for the distant future, and remember that churn and crisis are the norm

10)  Recognize that any economy, no matter how successful or how broken, is more likely to return to the long-term average growth rate for its income class than to remain abnormally hot (or cold) indefinitely

11)  Watch for balanced growth, and focus on a manageable set of dynamic indicators that make it possible to anticipate turns in the cycle

12)  Investment typically represents a much smaller share of the economy than consumption, often around 20 percent, but it is the most important indicator of change, because booms and busts in investment typically drive recessions and recoveries

13)  Growth can also be broken down as the sum of production in various industries, such as farming, services, and manufacturing. Of these, manufacturing has been declining worldwide—it’s now less than 18 percent of global GDP, down from more than 24 percent in 1980—but it is still the most significant force of change, because it has traditionally been the main source of jobs, innovation, and increases in productivity. So the rules have a lot to say about investment and factories and much less about consumers and farmers

14)  But for now manufacturing remains central to understanding economic change

15)  I eschew factors that matter to growth in the long run but that don’t work well as signs of change. For example, education is everyone’s favorite way to boost the talent of the labor force and raise productivity, but my rules pay little attention to it. The payoff from investment in education is so slow and variable that it is almost useless as a predictor of economic change over a five-to-ten-year period

16)  story in brief, an economy is most likely to begin rising steadily when the nation is emerging from crisis, has fallen off the radar of the global markets and media, and has chosen a democratic leader with a mandate to reform

17)  That leader will create the business conditions to attract productive investment, particularly in factories, roads, and technologies that will strengthen supply networks and thus help contain inflation

18)  The probability that a boom is about to end will rise as a nation gets too comfortable and as private companies and individuals run up debts to buy frivolous luxuries, particularly imported luxuries (привет, Китай, да и Россия тоже)

19)  This period of extravagance will make it impossible for the nation to pay its foreign bills, while widening the gap between billionaires and the rest, and between the countryside and the nation’s capital, provoking a political backlash that brings down the now aging regime, after which the cycle can begin again

20)  The aim: a practical person’s guide for spotting the rise and fall of nations, in real time

21)  For a nation’s economic prospects, the key demographic question is: Is the talent pool growing? The first part of the rule for finding the answer is to look at the projected growth of the working-age population over the next five years, because workers (more than retirees or schoolchildren) are the drivers of growth. The second part of the rule is to look at what nations are doing to counteract slower population growth.

22)  One way is to try to inspire women to have more babies, an approach with a spotty record at best. The other is to attract adults—including retirees, women, and economic migrants—to enter or reenter the active labor force. The big winners will come from among those countries that are blessed with strong growth in the working-age population or are doing the best job of bringing fresh talent into the labor force

23)  The 2 Percent Population Pace Test. Never in history has there been economic growth without population growth

24)  When smart people are seeking to move out of a country it is a bad sign, and when they are looking to move out along with their money, it is an even worse sign

25)  The joke in the AI field is that if you say AI is coming in twenty years, you can get investors to fund your work; if you say five years they will remember and expect you to deliver, and if you say one hundred years they won’t be interested

26)  If automation was displacing humans as fast as implied in recent books like Martin Ford’s The Rise of the Robots, then we should be seeing the negative impact on jobs already. We’re seeing the opposite

27)  world are similar to those that govern the physical world, in which nothing is ever lost, nothing is gained, and everything is transformed

28)  In the next transformation of the workplace, humans are likely to replace the jobs lost to robots and artificial intelligence with new jobs we can’t yet imagine

29)  To assess which nations are best or worst positioned to grow, look first at projections for growth or shrinkage in the working-age population, to gauge the potential baseline gain for future economic growth. Just as important, track which countries are doing the most or the least to leverage whatever population gains they will enjoy. Are they opening the workforce to the elderly, to women, to foreigners? Are they taking steps to increase the talent level of the workforce, particularly by attracting highly skilled migrants? In a world facing a future of growing labor shortages, it’s all hands—human or automated—on deck

30)  The occasional successes and frequent failures of political leaders are central to the rise and fall of nations, and the circle of life offers a few guidelines for spotting which countries are about to enter a period of rapid growth, and which are about to fall off the growth map

31)  Any newspaper reader has read dozens of columns ending with the recommendation that this or that country needs “structural reform,” which is timeless wisdom in the sense that it can wisely be said of any nation at any time (у нас это постоянно звучит кстати, хотя этот совет как мертвому припарка)

32)  There is never a moment when a country does not need to repair something “structural,” which sometimes refers to “micro” problems with the way business and government operate, and at other times to “macro” problems like high inflation, an overvalued currency or budget and trade deficits pinpointing when a country is ready to make hard changes is more important than identifying the specific content of the reform.

33)  And typically, the public’s willingness to back change depends on whether it is feeling the urgency of a crisis or the laziness of fat times.

34)  Though it is too soon to judge the newcomers, the next high-impact leaders are likely to rise from reformers elected to address problems highlighted by the events of.

35)  Beware when presidents start firing the reformers on their staff

36)  The European Commission president Jean-Claude Juncker captured the lament of technocrats everywhere when he remarked, “We all know what to do, we just don’t know how to get re-elected after we’ve done it.”

37)  So there is no reason to assume autocratic regimes have generally brighter growth prospects—despite the widespread admiration for Chinese-style command capitalism. Moreover, those averages conceal the big flaw in authoritarian regimes, which is that they are much more likely to produce extreme results, meaning wilder swings between periods of very high and very low growth

38)  In the postwar period, cases of both superfast and superslow growth have been generated mainly under authoritarian governments

39)  In contrast, democracies dominate the list of countries that since 1950 have registered the fewest years of extreme growth. This is the stabilizing effect of democracy at work

40)  The circle of life is a rule of politics, not science. It tells you that the likely timing and direction of change depends in part on where a country stands on the circle of crisis, reform, boom, and decay. Like any other life-form, the world economy follows cycles of decay and regeneration, its energies scattering and lying formless for a time, only to gather again into new shapes. The political lives of modern economies follow a similar cycle, exploding in crisis only to re-form and revive before dying out once again. This circle of life helps explain why so few developing economies manage to grow fast and long enough to enter the ranks of the developed economies. It also helps put into perspective why those that make the leap are called “miracle” economies: They have defied the natural complacency and decay that kills most long booms

41)  Many years can pass between the onset of a crisis and the arrival of a leader with the potential to push transformative economic reform, and even that arrival only raises the probability of strong growth. Many other factors will play a role in determining whether a new leader achieves reform, and whether that reform leads to strong growth. Strange gaps can appear, particularly when global conditions make it hard for any economy to take off

42)  Even in the worst periods of global stagnation and unrest, the circle of life will always continue to turn, however slowly, transforming the ashes of crises into the seeds of reform

43)  Bad times make for good policy, and good times make for bad policy.

44)  The evidence on balance shows that politics matters for economic growth, and the fortunes of a nation are likely to turn for the better when a new leader rises in the wake of a crisis, and conversely a nation is likely to be worse off when a stale leader is in office

45)  The long history of Latin America,” Piñera told me, “is that when times are good, countries turn to the left, and when times are bad, they turn to the right.”

46)  This pattern is familiar, even beyond Latin America. All too often in the emerging world, the backlash against an entrenched class of well-connected tycoons has brought to power a populist firebrand who pursues redistributive policies that can burn down the economy. In the extreme cases, populist demagogues seize private businesses and farms for the state, ban foreign investors from entering the country, raise taxes to choking levels in the name of helping the poor, ramp up the size of government, and spend heavily on wasteful subsidies. This particularly for cheap fuel. This basic menu of growth-killing policies has shaped the agenda of populists in many deeply unequal societies, including postcolonial cases such as Robert Mugabe of Zimbabwe, Kenneth Kaunda of Zambia, Julius Nyerere of Tanzania, Kim Il-sung of North Korea, Sheikh Mujibur Rahman of Bangladesh, and Zulfiqar Ali Bhutto of Pakistan.

47)  Mugabe’s regime is almost a corrupt parody of how a focus on redistribution without growth can destroy trust in the local economy, but a similar process has occurred in many countries, on every continent

48)  The basic question: Is inequality threatening the economy? This is one of those issues that need to be addressed more by political art than by economic science

49)  Inequality starts to threaten growth in part when the population turns suspicious of the way wealth is being created. If an entrepreneur is creating new products that benefit the consumer or building manufacturing plants and putting people to work, that form of wealth creation tends to be widely accepted

50)  However, if a tycoon is making a fortune by cozying up to politicians and landing contracts from the government, or worse by capitalizing on Daddy’s contacts, then resentment surfaces, and the nation’s focus turns to redistributing rather than creating wealth

51)  My approach to monitoring trends in inequality starts and ends with keeping an ear to the ground, because I know of no data that will clearly signal shifts in a nation’s attitudes toward wealth. But I do use a careful read of the Forbes billionaire list as one tool to identify the outliers: countries where the scale and sources of the largest fortunes are most likely to trigger tensions over inequality, and to retard growth in the economy. To identify countries in which tycoons are taking an unusually large and growing share of the pie, I calculate the scale of billionaire wealth relative to the size of the economy. To identify countries in which the tycoon class is becoming an entrenched elite, I estimate the share of inherited wealth in the billionaire ranks. Most important, I track the wealth of “bad billionaires” in industries long associated with corruption, such as oil or mining or real estate. It is the rise of an entrenched class of bad billionaires in traditionally corruption-prone and unproductive industries that is most likely to choke off growth and to feed the popular anger on which populist demagogues thrive. I also listen closely to how the public is talking about the nation’s leading tycoons, because it is often the popular perception of inequality, even more than the reality, that shapes the political reaction and economic policy

52)  To skeptics who find issues like wealth inequality or an approach like reading billionaire lists too soft to take seriously, I would argue that this is an increasingly vital sign. Developing societies do tend to be more unequal than rich ones, but it is increasingly unclear that their inequality problem will naturally disappear

53)  The rubric of good versus bad billionaires is the most important part of this rule, because even if the superrich control an unusually large share of the wealth, and leading families face little competition, they can make a positive contribution to growth if their wealth is concentrated in productive companies. They are also much more likely to be revered if they are getting rich by developing new smartphone apps rather than by milking their political connections

54)  Over time I’ve come to see that there is a rough sweet spot for the level of investment, measured as a share of GDP. Looking at my list of the fifty-six highly successful postwar economies in which growth exceeded 6 percent for a decade or more, I found that on average these countries were investing about 25 percent of GDP during the course of the boom. Often growth picks up as investment accelerates. So any emerging country aiming to grow rapidly is generally in a strong position to do so when investment is high and rising—roughly between 25 and 35 percent of GDP. They are in a weak position to grow when investment is low and falling—roughly 20 percent of GDP or less.

55)  The trick is to stop short of overdoing it, which is why the ideal level of investment is capped at roughly 35 percent of GDP. Beyond that level, excess looms historic pattern shows that investment flows in cycles, and once it hits a peak at more than 30 percent of GDP and begins to fall, economic growth slows by a third on average over the next five years.

56)  And if investment peaks at more than 40 percent of GDP, growth slows even more sharply, by about half in the five years following the peak. The reasons for this slowdown go back to the basic nature of the economic cycles, which is that as a period of strong growth advances, people get complacent and sloppy, and more money goes to increasingly unproductive investments. The economy slows because the contribution from productivity falls

57)  This signal has been flashing a bright warning to China in the 2010s. Despite the global slowdown in investment, China was still caught up in the extraordinary momentum of perhaps the biggest investment boom the world had ever seen. Between 2002 and 2014 investment rose from 37 percent of GDP to 47 percent, a level never before attained by a large economy

58)  The record of previous Asian miracles showed that trends in investment spending tend to be “monophasic,” meaning that once trends turn, the same conditions persist for many years

59)  the rule is still factories first, not services first

60)  It is not yet clear how the China story will end, but this process of decay in the quality of a binge—from good investments in factories or roads to questionable ones in real estate megaprojects—often results in a meltdown of some kind.

61)  Although a case can be made that services will come to rival manufacturing as a catalyst for sustained growth; that day has yet to arrive. For now the rule is still factories first

62)  former ambassador to India, who once had quipped that there are some mistakes only a Ph.D. can make

63)  In general, an economy is in a sweet spot when inflation is low and GDP growth is high, especially when growth has recently started to take off—because the absence of inflationary pressures may suggest it is the beginning of a long run

64)  If GDP growth is picking up but inflation is rising with it, the boom can’t last long because at some point—sooner rather than later—the central bank will have to respond by raising interest rates, in order to dampen demand and subdue inflation

65)  This increase in borrowing costs may also choke off growth. The worst case, however, is high inflation with low or falling growth, because in these conditions the central bank will still have to raise rates to control inflation, effectively putting the brakes on an economy already at risk of stalling. This can lead to stagflation, an extended period of low growth and high inflation

66)  high rate of inflation is a cancer that kills growth, attacking the living organism of the economy through several channels. Inflation discourages savings, because it erodes the value of money sitting in the bank or in bonds, in turn shrinking the pool of money available to invest.

67)  Eventually, high inflation will force the central bank to take action by increasing the price of money through higher interest rates, which will make it more expensive for businesses to expand and for consumers to buy homes and cars; as a result, the growth boom will stall.

68)  When inflation is very high—say, in the double digits—it also tends to be volatile, dropping suddenly or accelerating into hyperinflation, adding new hurdles to growth in the economy. In an environment where prices are prone to wild swings, businesses find it difficult to get financing for their projects and also can’t be confident of the likely return on their investments. If businesses are afraid to build new supply networks or improve old ones those networks continue to fall short of meeting demand, which keeps driving up prices. The economy then becomes permanently inflation prone

69)  A recent Deutsche Bank analysis of the Global Financial Database showed that before 1930, it was common for more than half of all countries in this sample to be experiencing deflation in any given year. After 1930 it was rare for even one country in ten to be experiencing deflation. And in the postwar period, only two economies have experienced an extended period of deflation—defined as one lasting at least three years

70)  The Great Wave, the Brandeis University historian David Hackett Fischer traced the records for the United States and various European countries as far back as the eleventh century and found long “waves” of time in which prices were either stable or falling, and numerous instances in which the deflationary periods were accompanied by a high rate of economic growth.8 In these long periods of good deflation, the fall in prices was driven not by a self-reinforcing shock to consumer demand, but by a positive shock to supply.

71)  These long periods of good deflation all date from before the 1930s, and they were driven by technological or institutional innovations that lowered the cost of producing and distributing consumer goods, driving down the price of those goods for long periods of time. Often, in fact, these bouts of good deflation have coincided with beneficial investment binges in new technologies like the steam engine, the car, or the Internet

72)  To cite just a few cases of good deflation: In seventeenth-century Holland, a new opening to trade and innovations in finance sparked a golden age of inflation-free growth that tripled the size of the economy over the course of that century. A similar period unfolded during the Industrial Revolution in late eighteenth- and nineteenth-century England, where technological breakthroughs such as the steam engine, railroads, and electricity were steadily lowering the costs of making everything from flour—which could now be ground in mechanized mills—to clothing. During this era, consumer prices in England fell by half, while industrial output rose sevenfold. Falling consumer prices in this era were interrupted only by heavy state spending on the Napoleonic, Crimean, and Franco-Prussian wars.

73)  Good deflation broke out in the United States during the early 1920s.

74)  The takeaway here is that, while low inflation is often a good sign and high inflation is almost always a bad sign, there is no simple deflation rule. One can’t say that deflation in prices for consumer products is in itself a good or bad sign

75)  The slight growth advantage in deflationary years was not statistically significant, and the BIS researchers confirmed that there is no clear evidence that consumer price deflation is bad—or good—for economic growth. The impact depends on what is driving deflation.

76)  The obvious question then is: Can you tell when consumer price deflation is the good, supply-driven kind, or the bad, demand-driven kind? The honest answer is that this is an extremely difficult task, which requires parsing conflicting forces of supply and demand.

77)  The point here is simply that since deflation became a bad word, there has been a bias toward assuming that any hint of deflation is bad for the economy, and that is not borne out by historical evidence

78)  In general, if for an extended period of time home prices grow at a faster annual rate than the economy, be on the alert

79)  In general, housing bubbles took longer to reach a peak than stock market bubbles, largely because stock prices are more volatile than home prices

80)  Housing bubbles were much less common than stock price bubbles, but when they did occur, they were much more likely to be followed by a recession. once prices for either houses or stocks rise sharply above their long-term trend, a subsequent drop in prices of 15 percent or more signals that the economy is due to face significant pain. But—and this is important—that pain will be much more severe if borrowing fueled the bubble. Debt magnifies these recessions.

81)  When a recession follows a bubble that is not fueled by debt, five years later the economy will be 1 to 1.5 percent smaller than it would have been, if the bubble had never occurred. However, if the bubble is debt driven, the losses are worse. In the case of a stock market bubble fueled by debt—meaning investors were borrowing heavily to buy stock—the economy five years later will be 4 percent below its previous trend. A debt-fueled housing market bubble will have an even uglier endgame, with the economy shrinking as much as 9 percent compared with where it otherwise would have been, five years on.

82)  The currency valuations don’t even feature in the conversations of most traders, who often favor buying the currencies of nations with high interest rates. As one veteran analyst recently put it to my team, “In valuing currencies, nothing works.”

83)  analyst’s choice of method is subjective, and the results erratic

84)  crises “take a much longer time coming than you think, but happen much faster than you would have thought.”

85)  Capital flight begins with locals, I suspect, because they have better access to intelligence about local conditions. They can pick up informal signs—struggling businesses, looming bankruptcies—long before these trends show up in the official numbers that most big foreign institutions rely on.

86)  Savvy locals are also often the first to return. In seven of the twelve major emerging-world currency crises, locals started bringing money back home earlier than foreigners and acted in time to catch the currency on its way up. Another way to think about this pattern is that big global players know a lot less than they like to imagine, and locals are a lot smarter than foreigners give them credit for.

87)  The capital account in the balance of payments also offers telltale signs of when local money is exiting the country in large amounts. As locals begin draining their bank accounts at home moving cash to the Bahamas and employing other exit channels, the money will show up in the balance of payments as heavy capital outflows.

88)  Rich locals and corporations can also slip money out of troubled countries through illicit channels that show up only in the “errors and omissions” column of the balance of payments

89)  Devaluations can do other unintended damage as well. In a country that lacks strong manufacturing industries, the cheaper currency can do little to promote exports, earn foreign currency, and help balance the current account deficit. This is the classic vulnerability of commodity-exporting countries, though recent research shows that, compared to ten or twenty years ago, it is getting more difficult even for manufacturing powers to capitalize on a cheap currency

90)  The reason is the recent global integration of supply chains, which means that many manufacturers buy a significant share of their parts and raw materials from abroad. As a result, exports now contain a larger share of imports, and if manufacturing powers try to gain an export advantage by devaluing their currency, they end up raising the price they have to pay for these imports

91)  Many currency traders joke that “defending the currency” really means “subsidizing the exit” of foreign investors

92)  One way to think about this rule is that the less developed an economy is, the more sensitive it is to “cheap is good.”

93)  The way the world has been turned on its head since the crisis of 2008 suggests that the scope for devaluing your way to prosperity is even more limited now. Global trade is no longer expanding, and emerging nations battle one another for finite shares of the fixed trade pie. This is a world in which cheap currencies alone are unlikely to produce many economic stars. Playing games to devalue a currency in this environment could easily backfire.

94)  The precursor of all these crises—and thus the most powerful indicator of a coming crisis—was that domestic private credit had been growing faster than the economy for a significant length of time. This is a very important clue

95)  The authorities also reached another surprising conclusion: Although the total size of a nation’s debt—meaning the total of government and private-sector debt—does matter for the economy’s prospects, the clearest signal of coming financial trouble comes from the pace of increase in that debt. Size matters, and pace matters more

96)  The critical question to ask about debt: Is private debt growing faster or slower than the economy for a sustained period. A country in which private credit has been growing much faster than the economy for five years should be placed on watch for a sharp slowdown in the economic growth rate and possibly for a financial crisis as well, because lending is running out of control. On the other hand, if private credit has been growing much slower than the economy for five years, the economy should be put on watch for a recovery, because creditors likely have cleaned up their books and are near ready to lend again

97)  The origin of the trouble is normally found in the private sector, though countries that enter the crisis with heavy government debt will suffer from a longer and deeper recession, simply because the government will find it hard to borrow to finance bailouts or stimulus spending

98)  This pattern—of debt crises starting in the private sector, and the state playing a supporting role—is now well established

99)  The result was that, worldwide, the debt burden in many countries has grown faster since the global financial crisis than it did during the supposedly reckless years of borrowing that preceded it

100)                         There are four basic signs of a stock market bubble: prices rising at a pace that can’t be justified by the underlying rate of economic growth; high levels of borrowing for stock purchases; overtrading by retail investors; and exorbitant valuations

101)                         The basic rule: the global media’s love is a bad sign for any economy, and its indifference is a good one

102)                         many American magazine journalists have long recognized the backward-looking nature of their business with a joke: By the time a story reaches the cover of Time or Newsweek, it’s dead. The results confirmed some truth in the old joke. If the Time cover was downbeat, economic growth picked up over the next five years in 55 percent of the cases

103)                         Forecasters seemed to ignore the tendency of economies to regress to the mean, and Ho and Mauro found that “we have had a pretty consistent record of forecasts that turned out to be optimistic.” Institutions like the IMF and the World Bank have been issuing forecasts that feed positive media hype for emerging economies, whether they were hot or not, and have “an especially difficult time predicting turning points.”

104)                         IMF’s long-standing reluctance to forecast recessions. this tendency is hardly limited to the IMF: Most economists tend to change their forecasts in small increments, and therefore miss the big shifts

105)                         I suspect that the IMF and the World Bank have a special reason for optimism bias: Many of the countries for which they make forecasts are also essentially their clients. Political elites in those countries would take offense at brutally honest assessments of their economic prospects. I see the same pressures weighing on many independent economists, particularly as emerging nations have grown in clout and reach in recent years

106)                         A frustrated economist from a large investment bank recently came to speak with me about China, and he was in a “damned-if-I-do, damned-if-I don’t” mood. He complained that if he questioned the 7 percent growth the Chinese government was reporting, he would get an earful from Beijing; but if he didn’t question those claims, he would hear it from investors

107)                         Economic growth lacks persistence, but media negativity about certain economies sometimes shows tremendous persistence, which is how success stories get overlooked

108)                         appearing on Time’s cover would have, in my view, suggested that the euphoria for India was reaching a peak, the kind that often precedes a fall

109)                         Mainstream opinion about which nations are rising or falling typically gets the future wrong, because it extrapolates recent trends and grows more enamored of a country the longer the growth run lasts. Often, that love story is cemented by a compelling but one-dimensional explanation. The best antidote to these misleading romances is to check the object of the media’s affection against all the rules. Most important, remember that the longer a growth spurt lasts, the less likely it is to continue. The most-loved nations will rarely have the best economic prospects in the next five to ten years

110)                         The most-hated nations, on the other hand, are often the object of widespread criticism for a reason, generally an outbreak of political protest or financial crisis that has exposed genuine vulnerabilities and will take some time to address. It is after these crisis-struck nations fade from the media glare and join the ranks of the forgotten countries that they are likely to emerge as the next success stories. The most promising form of hype for any country is none at all

111)                         No nation is an economic utopia. At any given time, none will score well on all the ten rules, and countries with the best prospects tend to get high scores on six or seven rules at most

112)                         The single most reliable indicator I have found is the negative one on the kiss of debt rule, which shows that a major economic slowdown has always materialized when a nation’s debt has grown more than 40 percentage points faster than GDP over a five-year period. With this signal now flashing red only for China, even this powerful idea currently applies to one country. A disciplined, balanced, and timely perspective works better than any single metric

113)                         The place to look for the next winners is always among the recent laggards, according to the hype rule

114)                         The AC era shall pass, and conditions will likely be radically different in 2020. The way nations rank based on the rules will change, and the details of the rules will evolve, but I believe the basic concept will endure. The most reliable way to track the rise and fall of nations is through a system of rules focused on a practical time frame

115)                         Every nation is destined to go through periods of expansion and decline, and none is destined to rise, or fall, forever. In an impermanent world, the only constant is the turning of the economic and political cycles that govern the future