Broadsheet

With the new Creator Studio suite, Apple has largely (and for some apps, entirely) removed semantically meaningful illustrations from its own app icons. The only thing left to distinguish them is the color the crude squiggle inside the squircle. ↩︎

Photo by Windmemories via Wikimedia Commons

Back in the 2010s, a lot of people marveled at China’s seemingly recession-proof economy. Throughout the global financial crisis of 2008 and the Chinese stock market crash and capital flight of 2015, the country never recorded a single quarter of negative economic growth. Here’s what I wrote back in 2019:

China’s government seems to have developed a highly effective new form of economic stabilization. Its extensive control of the financial system allows it to turn on a flood of bank loans when the economy looks weak, and restrain credit when the danger has passed. China’s avoidance of recession in at least the past three decades suggests that this form of credit-based stabilization is more effective than traditional, more indirect stimulation of the economy through government deficits and central bank monetary easing…When a recession threatens, the government tells banks to lend --— to local governments, construction companies and real estate developers. Then, if the credits go bad, the government swoops in and takes the nonperforming loans off of financial companies’ books. Uninterrupted rapid growth then shrinks the government debt as a percentage of gross domestic product, and the system sails blithely forward[.]

And here’s what I wrote in 2018:

China…directed banks to lend lots more money [in 2009]. The World Bank estimated that increased bank credit represented 40 percent of China’s stimulus. Much of the lending was done by China’s four large state-owned banks. The money went to infrastructure, real estate and all kinds of corporate projects, many of which were carried out by the country’s state-owned enterprises.

Basically, most countries use two types of policy to get the economy moving again when some sort of negative shock hits it:

monetary policy (e.g. cutting interest rates), and
fiscal policy (e.g. stimulus spending).

Macroeconomists disagree about why interest rate cuts give the economy a boost, but most agree that the policy usually has an effect. Although there are many other theories and interpretations, one way you can think of rate cuts is as a financial policy — by making it easier for businesses to borrow and invest, low interest rates stimulate business activity. Fiscal policy, in contrast, pretty much bypasses the world of finance and aims directly at the real economy — you build a bridge or a road, which employs some people who might otherwise be unemployed, and then those people turn around and spend their money elsewhere in the economy, igniting a virtuous cycle of spending and working.

China uses both of those, but it also uses a third policy: financial policy. Instead of simply cutting interest rates and hoping that this filters through to bank lending, China’s government uses its direct control over the banking system to push banks to lend more. In the 2010s, after the Great Recession and the 2015 Chinese stock crash, this mostly meant lending to real estate companies. This lending fueled the biggest property boom the world has ever seen.

The boom ended in late 2021. The crash of the Chinese property developer Evergrande began a sequence of bankruptcies and defaults across the entire real estate sector. China’s property prices began to fall, and have not stopped falling to this day:

Chinese housing construction plummeted as well:

But despite the housing crash, China’s official growth rate never fell below zero — or even below 3%:

In fact, China did this by resorting to a version of the same playbook it used in 2009 and 2015. The Chinese party-state called up its captive banking system and told it to lend huge amounts of money to manufacturing companies. And that’s exactly what it did — industrial loans surged, even as real estate loans petered out:

It’s tempting to cry “China’s done it again!” In fact, that’s exactly what some people are now doing:

Skeptics will caution, of course, that this sort of stabilization policy can come with a cost: lower productivity growth and economic inefficiency over the long term. That’s probably what happened in the 2010s, as China’s repeated use of real estate lending to stabilize the economy directed resources to inefficient real-estate companies and led to lower productivity growth. Now there’s the possibility that China’s wave of financial stimulus in 2022-2024 may lead to an overhang of unproductive “zombie” companies that keep soaking up labor and other resources for years to come:

But admirers of China’s economic system will be undeterred. They will point out that productivity is hard to measure; that long-term costs are both uncertain and hard to verify; and that long-term problems can always be fixed later. The more important fact, they’ll argue, is that China did exactly what Xi Jinping said it would do — to pivot away from an excessive reliance on real estate without causing the economy to shrink. “Chinamaxxers” will use this as reason to crow about the superiority of the Chinese way, while left-leaning intellectuals will use China’s performance as a foil to demonstrate the benefits of greater government control over the economy.

There’s just one problem with this triumphalism: China did, in fact, have an economic crash as a result of its real estate bust.

The first way to see this is to look at China’s job market. In 2023, China famously modified its youth unemployment data to use a narrow definition of unemployment, because the numbers were getting too high. But even the revision couldn’t mask the upward trend:

Overall unemployment was recorded as rising only a small amount. But as Bloomberg reported at the time, China’s total unemployment numbers aren’t a very good measure of the labor market, and alternative indicators told a much more pessimistic story:

Alternative indicators and anecdotal reports suggest unemployment is worse than the official monthly figures show…[T]he [official headline] figures aren’t sensitive to changes in the number of migrants from China’s rural areas who work in cities; they also don’t capture the number of people who have dropped out of the labor market for more than three months or those unable to start work…
The employment sub-index for China’s non-manufacturing purchasing manager’s index, which tracks hiring intentions in the service and construction sector, has stayed consistently below pre-pandemic levels for most of the past 12 months…Official data shows there’s been no growth in the migrant worker population since the pandemic…The average number of workers at industrial enterprises with revenues above 20 million yuan ($3.1 million) fell to 7,398 in November 2021 from 7,419 in November 2020, according to official statistics…Because of the weak labor market, record numbers of young people are preparing to take exams to qualify for post graduate courses or enter the civil service [and] would not be counted as job seekers[.]

What about GDP growth? In her tweet above, Kathleen Tyson declares that China “was the first to deflate a massive, leveraged housing bubble without a single quarter of economic contraction or loss of growth momentum in the real economy”. But is that true?

Well, no, it’s not. According to China’s official statistics, the Chinese economy shrank by 0.8% in the second quarter of 2022:

China’s growth is usually reported in year/year numbers, but quarter/quarter is how the U.S. and most countries do their reporting. So by the kind of measurement Americans are used to hearing about, China’s economy officially contracted at an annualized rate of over -3% in the second quarter of 2022. This was also revised down from the -9.3% that was reported in the initial version of the statistics. As for “loss of growth momentum”, China’s economy is officially growing around 2 percentage points slower than it was just before the pandemic.

So even if we accept the official numbers, the claim is wrong. But should we accept the official numbers? Probably not. There is evidence that the Chinese government “smooths” its growth numbers — in good years, it fudges downward, and in bad years it fudges upward. This is from Nakamura et al. (2016), who use detailed data on Chinese consumption to estimate how incomes changed:

Our estimates suggest that official statistics present a smoothed version of reality. We find that inflation was overestimated and growth underestimated by several percentage points per year in the late 1990s. In contrast, since 2002, official inflation statistics have risen only modestly, but our Engel curve based estimates have risen much more. Our estimates imply that growth was substantially lower than official statistics suggest since 2002, and actually dipped into negative territory in 2007 and 2008.

A bunch of analyses claim that China has also done this in response to the property crash. The Rhodium Group used alternative data sources to estimate that China’s economy actually shrank in 2022 and grew much more slowly in 2023 than the official numbers suggest:

Officially, China reported 3.0 percent real GDP growth in 2022, despite the fact that significant proportions of the economy were under strict lockdowns to prevent the spread of COVID-19 during large portions of the year, retail sales fell outright, and investment in the property sector was collapsing. In 2023, the decline in property investment continued, net exports and government spending were drags on growth, and household consumption growth remained relatively low. Beijing provided little direct assistance to households to facilitate spending, and Chinese households added to savings and paid down mortgage debt instead of spending more. Yet China officially reported 5.2 percent real GDP growth in 2023, barely slowing from the pre-pandemic pace of 6 percent in 2019, even though the property sector was experiencing a boom in 2019 and was collapsing in 2023…We estimate that real GDP growth was closer to a contraction of -0.3 percent to -0.8 percent in 2022, and there was only modest growth of 1.5 percent to 2 percent in 2023. [emphasis mine]

The Bank of Finland was a little less negative, but still estimated that growth stalled in 2022:

Capital Economics, which tracks a whole bunch of independent estimates, finds that China probably did experience a recession in 2022, though it’s pretty positive about growth since then.

One particularly pessimistic indicator is inflation, which has slipped into negative territory in China since the real estate bust:

Deflation is a classic sign of low aggregate demand and a slowing economy.

It should be noted that there are a few analysts who disagree, and think that China’s growth numbers are basically accurate. But most independent assessments conclude that China’s growth not only suffered a sharp hit in 2022, but has been weaker in the years since the end of the pandemic.

It makes sense that China’s government would continue their traditional approach of smoothing out growth numbers in the short term in order to project an attitude of stability and calm. But smoothing only works if the economy eventually bounces back. If China is on a new longer-term trajectory of lower growth — which of course remains to be seen — then there will be too few good years to “pay back” the growth that was “borrowed” in the bad years of 2022 and beyond.

I don’t want to detract from China’s accomplishment here, or say that its macroeconomic stability is entirely fake. China has invented — or, perhaps, perfected — an alternative tool for macroeconomic stabilization. Countries all over the world, including the United States, should study China’s financial stabilization policy and think about how to accomplish something similar without direct government control over bank management.

But at the same time, I don’t think we ought to be idolizing Chinese macroeconomic policy either. Even if there don’t turn out to be long-term productivity costs — which is a big “if” — China still hasn’t managed to rewrite the rules of aggregate demand and aggregate supply.

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Going into the weekend during which Americans celebrated the 250th anniversary of the day on which the Second Continental Congress accepted the Declaration of Independence, President Donald J. Trump was facing a whole lot of bad news.

There was the war on Iran. On Thursday, after U.S. Central Command said regional leaders in the Middle East were committed to the “free flow of commerce” in the Strait of Hormuz, Iran’s military command said that any ships trying to cross the strait on unapproved routes would be met with a “forceful response.” The U.S. has been urging ships to use a route close to Oman, but Iran’s warning caused ships to turn around.

Iran was part of the story of the economy. The choking off of the roughly 20% of the world’s oil that flowed through the Strait of Hormuz until Trump launched an attack on Iran has caused inflation to spike in the U.S. On Wednesday, July 1, Trump’s new hand-picked chair of the Federal Reserve, Kevin Warsh, told the European Central Bank Forum on Central Banking that “prices are too high.” With inflation over 4%, Warsh also reiterated that the Fed would continue to hold its goal of no more than 2% inflation, suggesting that the interest rate cuts Trump wants so badly are not going to happen any time soon. Currently there is talk of raising interest rates later this year.

In addition to concerns about stringency in the oil markets, Joe Hernandez of NPR reported on Friday that the shutdown of the Strait of Hormuz also affected transport of about one third of the world’s fertilizer transported by sea. Shortages hurt farmers around the world, including in the U.S., where farmers were hit with skyrocketing fertilizer prices during planting season. An April survey from the American Farm Bureau Federation reported that 70% of respondents said they couldn’t afford all the fertilizer they needed for the season.

Hernandez reports that higher fertilizer prices are just one of the reasons that consumers will see higher food prices this fall.

And then there were the stories about corruption. On Tuesday, new financial disclosures showed that Trump has made an eye-popping $1.4 billion in his family’s cryptocurrency ventures since he took office. On Thursday, Trump appeared to feel the need to defend those profits, telling CNBC: “There’s nothing illegal. There’s nothing wrong with it I could know.” Julia Manchester of The Hill noted that Trump went on to say that the nature of the presidency means that his children “have inside information” about almost any business decision they make. He said: “Almost anything they do, if they want to buy a truck, if they buy an energy efficient truck, they have inside information.”

There are specific legal prohibitions against using insider information for benefit in stock trades and financial transactions.

And Trump appears to have fleeced his own followers. On Saturday, Eric Lipton and David Yaffe-Bellany of the New York Times reported that as of the end of June, nearly a million people who bought Trump’s memecoin lost a total of $3.81 billion while Trump walked away with $636 million. Trump took transaction fees up front, so he made money no matter what happened with the coin. For his followers, though, his advice that “It’s time to celebrate everything we stand for: WINNING!” and to “Join my very special Trump community. GET YOUR $TRUMP NOW!” cost them dearly as the coin slid from trading at $75.35 to trading at $1.76, a drop of 97%.

On Thursday, Democrats on the House Committee on Natural Resources released a report accusing Trump of cheating the American people at large by diverting donations that donors intended to make to the nonpartisan America250 program to his own Freedom 250 organization. After failing to take over America250 entirely, the report charges, Trump’s people created Freedom 250 within the National Park Foundation. By using a known and popular public charity as cover, Freedom 250 could attract donations while operating outside the transparency and accountability rules Congress required for America250.

The report suggests that Trump officials gave donors intending to donate to the bipartisan America250 routing and account numbers for Trump’s Freedom 250. They also took most of the money Congress appropriated for the America 250 project; in June a spokesperson for the Department of the Interior told Michael Scherer of The Atlantic: “Spending taxpayer money on frivolous, poorly attended events and D.C. consultants who are trying to get rich off America’s 250th is the exact opposite of what was intended. This administration will not light taxpayer money on fire. Full stop.”

But Trump officials routed that money to favored contractors, including the firm that helped to organize Trump’s rally at the Ellipse on January 6, 2021, before attendees stormed the U.S. Capitol.

Representative Jared Huffman (D-CA), the highest-ranking Democrat on the House Committee on Natural Resources, told reporters: “I’m a lawyer, and I know better than to pronounce that a crime has been committed. But I do know the elements of fraud, and there is evidence of all those elements here.”

Meanwhile, Trump’s Freedom 250 focused on promoting his 250-foot-tall triumphal arch at his Great American State Fair on the National Mall. Recurring problems with Trump’s renovations to the Lincoln Memorial Reflecting Pool marred that celebration as the pool turned green with algae and then pieces of the pool’s new coating began to break loose. Administration officials accused vandals of causing the damage. They put fencing around the pool and had National Guard troops patrol it.

The Great American State Fair opened on June 25 after a number of musical acts backed out, saying they had been misled into thinking the event was backed by the bipartisan America 250. Once open, the fair was plagued with electrical issues, sparse exhibits, and heat. A model of the proposed triumphal arch looked cheap and quickly began to come apart. Visitors were few and far between, and CNN’s Kaitlan Collins reported that aerial images of the empty mall so enraged Trump that White House officials deleted them from official and personal social media accounts.

And on June 25, in response to a lawsuit by journalist Katie Phang, U.S. District Judge Emmet Sullivan ordered acting attorney general Todd Blanche to produce key documents from the Epstein files by July 2 or show cause why the Department of Justice is refusing. On July 2 it refused to produce the material, saying its redactions and omissions were within the scope of the requirements of the Epstein Files Transparency Act.

On July 3, Fifty Plus One, which tracks Trump’s job approval rating, reported that 59.1% of Americans disapprove of his performance while only 37.5% approve.

And so, on Friday night, the eve of the 250th anniversary of the Declaration of Independence, Trump flew to South Dakota to deliver a speech at Mt. Rushmore in which he claimed he and his supporters are at war against an enemy here at home: communists.

Before his trip to the state, Trump posted a video showing his own likeness on a golden sculpture of Mt. Rushmore, alongside the images of George Washington, Thomas Jefferson, Theodore Roosevelt, and Abraham Lincoln, with the voiceover saying: “I will be the greatest president for many, many years to come.” The video opens with the text “Art of the vision” spelled out over an American flag, an encapsulation—although perhaps an unintentional one—of how Trump has maintained political power by selling a false image to his followers.

Trump began his speech with a series of feel-good platitudes: “These are very, very special times. And this is a very special place. You live in a very special place. Congratulations, everybody…. We are a nation of dreamers and believers, warriors and explorers, doers and fighters…. There has never been anything like us anywhere on earth.” And then he tied together MAGA’s white nationalism with the claim that Trump’s political opponents want to destroy the economy.

Trump clearly thinks there is political gain in convincing his followers that his political opponents are communists, although this is a lie made up out of whole cloth after the victory of Democratic Socialists in Democratic primaries and the popularity of New York City mayor Zohran Mamdani. Communists call for the end of private ownership of the means of production, giving the state control of private enterprises. In today’s America, it is actually Trump, himself, who is taking government stakes in private enterprises.

Democratic Socialists are not communists or socialists, who want to see the end of private property. Democratic Socialists call for a robust system of private enterprise, alongside government control of the aspects of society required for people to participate in the economy on a level playing field. While Democratic Socialists embrace a wide range of policies, they generally don’t think schools, or medical care, or roads, should be profit-making industries.

In that, they echo Americans from the 1860s, when the Republicans established public colleges, or the 1900s, when Theodore Roosevelt called for public health insurance. Indeed, what today’s Democratic Socialists call for is much more limited than what the Republicans under President Dwight D. Eisenhower wanted in 1956, when the top income tax bracket in the United States was 91%.

Nonetheless, on Friday Trump tried to convince Americans that “there is now a resurgence of the communist menace in our land, including from newcomers to our country who embrace ideas totally opposed to our way of life and our great success.” “These are not mere political disagreements like differences over taxes or regulations,” he said. “Communism is a mortal threat to American liberty. It is the greatest threat to our country, including World War I, World War II, Pearl Harbor, or even 9/11.”

He went on to say: “They don’t want good. They don’t love God and they don’t want God. They don’t love religion and they don’t want religion and they won’t have it.… They have no respect for law, justice, principle, tradition, or your God-given rights. It’s an ideology of mass theft, mass control, mass lies, and mass murder…. You can be a communist or you can be a patriot. You cannot be both.”

His false vision of the U.S. is aimed at the midterm elections. “America will never be a communist country,” he said. “We can only lose the midterms if we allow ourselves to lose the midterms, if we are foolish, stupid, and unwise.” He went on to demand that the Senate end the filibuster and Congress pass the voter-suppression SAVE America Act. If they do, he said, “we will not lose an election for a hundred years.”

On July 4, hundreds of masked white supremacists in khakis and blue shirts, carrying Confederate flags and flags with the logo of the neofascist white supremacist group Patriot Front, marched in Washington, D.C., chanting “Reclaim America.” The White House did not respond to a query from Gloria Oladipo of The Guardian about whether Trump condemns the march.

Trump continued his attacks on “communists” in a late-night speech on the National Mall after thunderstorms temporarily shut down his planned rally. “[A]ll these talks from the communists, they haven’t got a chance,” he told the drenched audience members, “not even a chance. We don’t want communists in our country.”

Trump’s drop into an anticommunism that exaggerates even the excesses of the McCarthy era seems to indicate panic rather than confidence. Today, July 5, he began posting on social media at 1:21 AM and over the course of the day posted more than 100 times, attacking Democrats and boasting extravagantly of what he says are his own successes while demanding Congress pass the SAVE Act or lose the presidency forever.

Trump’s people appear to be trying to push Trump’s vision, but it doesn’t seem to be sticking.

Interior Secretary Doug Burgum made the rounds of the Sunday talk shows today, insisting that the problems with the Lincoln Memorial Reflecting Pool were the work of vandals who have gashed its surface in multiple cuts that equal the 350 feet Trump claims and that there is video evidence, although the administration, which is famous for spinning everything to its own advantage, is choosing not to show it.

When CNN’s Dana Bash asked whether they actually had photographs of people cutting a gash in the liner, Burgum danced away from the question after commenting, “I’m not sure why you and others in the media think that you want to keep trying to question whether or not…”

And so the 251st year of American democracy begins with reality reasserting itself.

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Notes:

https://www.aljazeera.com/economy/2026/7/3/iran-warns-ships-against-using-unapproved-routes-in-strait-of-hormuz

https://www.theguardian.com/world/2026/jul/05/iran-control-strait-of-hormuz-ali-khamenei-funeral

https://www.wsj.com/economy/central-banking/interest-rates-kevin-warsh-de137876

https://www.cnbc.com/2026/07/01/kevin-warsh-ecb-forum-live-updates.html

https://www.npr.org/2026/07/03/nx-s1-5877344/fertilizer-shortage-food-prices

https://thehill.com/homenews/administration/5952294-trump-crypto-profits/

https://www.nytimes.com/2026/07/04/us/politics/trump-coin-crypto-investors-loss.html

https://www.washingtonpost.com/politics/2026/07/02/donors-were-misled-by-trump-backed-freedom-250-house-democrats-allege/

https://www.washingtonpost.com/documents/2cfa8a43-d56d-4133-92b0-6a14ed113db4.pdf?itid=lk_inline_manual_2