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In Episode 137 of Hidden Forces, Demetri Kofinas speaks with professor of finance at Beijing\\u2019s Peking University, Michael Pettis. Profesor Pettis\\u2019 research has focused mainly on Chinese financial markets, global trade & capital flows, and central banking. He spent seventeen years on Wall Street running fixed-income trading and capital market desks and has advised governments on privatizations of national banking systems and commercial bank debt restructuring & loan issuance.\\xa0

In their latest book, \\u201cTrade Wars are Class Wars,\\u201d Michael Pettis and his co-author Matthew Klein argue that rising inequality within countries heightens trade conflicts between them. \\xa0 The entire conversation lasts for approximately two hours and we devote the first hour to understanding how balance of payments and capital flows\\u2014themselves heavily dependent on the dynamics of wealth and income distribution within a country\\u2019s borders\\u2014can generate imbalances in trade, asset prices, interest rates, debt levels, and currency valuations, often leading to misallocations of capital for the surplus and deficit countries alike.\\xa0\\xa0

The second hour is devoted to applying this balance of payments framework to specific economies\\u2014namely, the United States, the Eurozone, and China. Demetri and Michael discuss how the financial instability generated from the sorts of imbalances discussed in this episode are now seeping into our systems of government, turning a financial crisis into a political one.

For Super Nerds and Autodidacts, you will want to consult your rundowns and have your transcripts handy for this episode. There are links in the rundown to many of the concepts and theories discussed, as well as charts and images that are relevant to the discussion.\\xa0

You can access the overtime of Demetri\\u2019s conversation with Michael Pettis, as well as obtain copies of the transcript and rundown to this week\\u2019s episode through the Hidden Forces Patreon Page. All subscribers gain access to our overtime feed, which can be easily added to your favorite podcast application.

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Subscribe & Support the Podcast at http://patreon.com/hiddenforces

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Episode Recorded on May 16th, 2020