pull down to refresh
54 sats \ 3 replies \ @xz 20 Feb \ on: China Takes Preemptive Measures to Combat Deflation econ
When it's put that there's coordination to reinflate asset bubbles that doesn't sound great. Not sure whether FT is posturing that this is 'surprising move' is an act of necessity, as opposed to a controlled staged popping of asset bubbles.
I'm guessing that the truth is in the middle. If your economy is export driven, central, top down managed( and still pegged to the dollar?) Those adjustments might be fumbling around in the dark, but all within a given range of what happens to the trade partners fiscal policies.
I'm not sure how all this works in terms of deflation risk. I wonder if there's an aggressive element to the export of deflation in the same way US IR increases surprised global markets last year. A kind of fire and ice?
yes then you have raised some important points. but i am looking at the moment, especially with regard to the reaction of the Chinese, at the bank balance sheets, which suffer massively with such asset price deflation. in this environment, the fiat money system, the entire credit impulse, must be damaged. the Communist Party cannot afford a recession.
reply
Not sure I understand the ramifications of macro spillover, or as it used to be put, catching a cold and the world sneezing. But if I can believe the FR knows what it's talking about.
".. expansionary shocks to China’s credit lead to a decline in aggregate risk aversion, associated with a lower VIX, which elevates global asset prices and credit"
Guessing this means that on the flip this would telegraph the opposite but then again we see a frequent about turn of interest rate policy.
I agree it's all about avoiding domestic discontent.