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China Rising, Rent-Seeking Version

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"The reason real to worry about China, however, has very little to do with external balances, China’s dollar holdings, or even capital flows.  It’s about productivity and rent-seeking," Simon Johnson for The Baseline Scenario writes. "Rent-seeking means effectively a tax extracted by one sector from the rest of the economy... Finance is rent-seeking.  The sector has devoted great resources to tilting all playing fields in its direction.  Consumers are taken advantage of; consumer protection is vehemently opposed.  And great risks are taken, with the downside handed off to the government (and the consumers again, as taxpayers).  This downside protection allows an overexpansion of debt-financed finance – reaching the preposterous levels seen in mid-2008 and now re-emerging. Finance in its modern American form is not productive."