Ending the Great Stagnation that is taxing Western policy makers may depend as much on the Chinese Communist Party as it does on the world’s leading central banks. Six years after the global financial crisis erupted, there is any number of explanations why Europe cannot shake off a Japan-style balance-sheet recession and why the United States is experiencing sub-par growth and high unemployment. Governments and households racked up too much debt to sustain living standards. Demographic tailwinds have turned into headwinds as baby boomers retire and the surge of women entering the workforce has run its course. Many banks are still ailing and are building up capital instead of lending freely. But two other factors cannot be overlooked. Firstly, there is an excess of global savings, which has lowered the natural real rate of interest that equalizes savings and investment. The result is a liquidity trap. […]