We had posted about Li Lu and his efforts to gather data from China with observations on the Covid issue (here) Li Lu is largely credited with bringing BYD to the attention of Charlie Munger, Sokol and then Warren Buffett following which Berkshire bought a stake in BYD.
In nov 2019, Li Lu published an essay in Mandarin on China. A couple of bloggers recently translated that article and you can find it here. It is quite a fascinating read. It prominently refers a book that I had read earlier this year and it made quite an impression on me. The article refers to the work to Richard C. Koo, who is a strong proponent of balance sheet recessions. Using this concept, he explains the lost decades in Japan and the lack of inflation & growth even though the government and the central bank has been injecting enormous stimulus & liquidity into the economy. Richard argues that since the recession in 2008, the similarities to Japan have magnified in the western economies and tries to correlate the lack of inflation in EU and US to Japan despite massive interventions. He further lays the groundwork explaining that fiscal stimulus during times of deleverage of the private sector can be offset by fiscal intervention through government spending to keep the economy afloat without going through a depression type environment.
Another article along similar lines came from LT3000 here.
Li Lu’s essays, LT3000 lucid thoughts and Richard Koo’s work gives investors a perspective or a framework on how the government fiscal intervention in times like the Covid crisis might pan out for inflation & growth.
Beowulf Capital 