Staving off crisis and reviving growth dominate today’s economic conversations the world over. Even in China, which received opinion dictates is an almost inexorable economic powerhouse, appears keen to maintain their stratospheric growth at all costs, via constant injections of fiscal stimuli; in the four years after the global financial crisis that began in the summer of 2008, China’s monthly money supply (M2) has doubled. According to Andy Xie, the controversial commentator and former Chief Economist  of Morgan Stanley, “this is the greatest experiment in monetary stimulus in modern economic history”. “This is dangerous,” Andy continues, “when a medicine isn’t working, it could be the wrong one or the dosage isn’t sufficient. China is trying the latter. But, if the medicine is really wrong, more and more of the same will eventually kill the patient. All the prima facie evidence is that increasing the money supply regularly is the path to stagflation. ”

Andy has a sterling record of economic analysis, especially when it comes to predicting crises and bubbles. His doctoral thesis argued that Japan was a bubble in late 1980s, he penned a long report at the World Bank in the early 1990s arguing that Southeast Asia was a bubble, publicly warned that the dotcom boom a bubble in 1999, and authored numerous research notes from 2003 onwards arguing that the Western property market would crash in cataclysmic fashion  before the end of the decade. “When the current crisis began, I predicted how central banks and governments would react: they would ease monetary policy and increase fiscal deficits, the medicines wouldn’t work, they would increase the dosage and the end game would be global staglation. I argued in favor of monetary and fiscal stimulus to the extent to stabilize the situation, not to revive growth. The latter needed structural reforms to be achieved.Structural reforms are difficult because they would upset a lot of people and are slow in producing results. Smart and powerful people usually want to produce quick results to show their worth. This is why policy actions often take the path of least resistance, even if they lead the world to the edge of the cliff.”