Book Review: “When Markets Collide: Investment Strategies for the Age of Global Economic Change” by Mohamed A. El-Erian 

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Caveat Emptor (Latin: Let the buyer beware).

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The sudden credit crunch of 2007-8 left countless small-time investors holding the bag. The big-time failure of Wall Street was rewarded with a big-time relief, thanks to the powers that be in Washington D.C. Moral hazard! What moral hazard?

 “When Markets Collide” is about the 2007-8 financial meltdown. It is half an autopsy and half a prescription for resurrection——yes, the market folks may not believe in Jesus but they buy the story of Lazarus. 

Autopsy-wise, the author reports a collision between the market of yesterday and the market of tomorrow. The former is an old world in which developing countries were aided through trade by developed countries such as the United States. The latter is a new world in which developed countries are aided through trade by developing countries such as China.

To bring investors back to life, the author prescribes a framework of detecting signals in noises that will wise you up to a latent sea change in today’s market. In other words, you can be enlightened enough to see a black swan or a mermaid before everyone else. Mind you, his framework is quite a demanding one. But it won’t hurt to put it in your toolbox, I guess.

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I have no problem perusing this book out of intellectual curiosity. I have a problem, though, when the author introduces to his reader (me) a brave new world with a white-knight China taking charge during 2007-8.

Who says that the reader and the author have to be on the same page?

No one can deny that during 2007-8 China flooded Wall Street with hot money and financed Washington D.C.’s spending with cool billions after cool billions. Meanwhile, in the name of globalization, China convinced and conquered the elites of Wall Street, Washington, and Ivy League-linked think tanks. China was ushering in a multicultural global village, or so America was told.

In a TED—technology, entertainment, design—conference Harvard Professor Graham T. Allison, famous for his Thucydides's Trap, praised China for its super-efficiency in building highways. For illustration, he projected a postcard-like blow-up of a sample on the screen beside him. He then joked about America’s inefficiency in improving its infrastructure. He didn’t bother to mention China’s super-efficiency in land-grabbing to feed its pet projects, however. He concluded his presentation by telling his young audience that it all depended on them as to how his Thucydides's Trap would play out in terms of the U.S.-China relationship. Kumbaya!

Also, there’s no Thucydides's Trap to speak of in “When Markets Collide”. In its author’s eyes, China is benignly making itself somewhat like Singapore, only much bigger——authoritarian, orderly, efficient, pragmatic, capable of balancing capitalism with welfarism and modernism with traditionalism. 

If it sounds too good to be true, it is too good to be true. Caveat Emptor.

Too bad that during a phone interview with Voice of America on China’s foreign trade issues, a guest who’s a financial analyst from Shanghai nailed it when she said that her compatriots were still 100+ years behind the curve. Of course, she was referring to the fact that China is a land of rules, not a land of laws. The last time I checked, she was never heard from again, despite the fact that the line of VOA is always open to her.

The author should take notice of the incident above.

As a matter of fact, “President Xi” has a hard time managing the decline of China. China keeps declining like the Red Chamber. That’s why success stories are made up non-stop. That’s why he badly needs to build and build, hoping against hope that he can build China out of economic doldrums. Grand View Gardens (大观园) and White Elephant projects are therefore popular with him (Kim Jong-un, ditto). In “Dream of the Red Chamber (红楼梦)” Granny Liu (刘姥姥) may be impressed by the Grand View Garden, but she also lets us know quite a lot about peasants’ hardships (e.g. subsisting on tree barks alone in times of famine). People never forget.

The author of “When Markets Collide” knows so much about talking China up, and yet he knows so little about China.

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China is about the past. America is about the future. 

China holds the future back in order to stabilize the present in the shadow of the past.

For America, the future is first and foremost.

America needs the world to move forward with it. To move the world forward is to move away from a Maoist helmsman whose Titanic is on a collision course with an iceberg made in…where else but China?

Like it or not, decoupling is happening, accelerating.

——Lingyang Jiang