The Other Half of Macroeconomics and the Fate of Globalization

Koo, Nomura’s chief economist and the author of the balance-sheet-recession argument, holds that orthodox macroeconomics assumes a world with more borrowers than lenders and has no account of the opposite case. After a debt-financed bubble bursts, companies and households with damaged balance sheets minimise debt rather than maximise profit, so lowering rates does nothing — there is no borrower at any price, and only fiscal spending keeps the economy from contracting. Japan after 1990 is the case study; 2008 is the repeat. The book’s other half stages economies in sequence — urbanising, then post-Lewis-turning-point industrialised, then “pursued”, once a lower-wage competitor emerges and the returns on domestic investment fall below returns on investing abroad. That last stage, he argues, is where the wage stagnation and the political backlash against globalisation in the developed world actually come from.

Why it’s on the list: The most recent entry in Li Lu’s value-investing and capitalism section, and the one that supplies the macro conditions the rest of the section’s bottom-up discipline operates inside — why rates stayed at zero, why balance sheets matter more than earnings for a decade at a time.

Where I saw it: On Li Lu’s Recommended Book List, the Himalaya Capital bibliography — 137 entries across six numbered sections. This entry sits in the value-investing section, the one the saved X posts photographed; the full list was recovered from the source PDF. Li Lu lists it as Wiley, 2018.

Connections

• Li Lu’s Recommended Book List — the list this came from.
• Macroeconomics — the discipline the book says is half-built.
• Debt — debt minimisation is the behaviour the model turns on.
• Globalization — the “pursued economy” is Koo’s explanation of the backlash.