Zero Hedge: The Real "Helicopter Money": Since 2009, China Has Created $21 Trillion Of New Money, More Than Double The US
Back in the days of the Fed's QE, much of thinking analyst world (the non-thinking segment would merely accept everything that the Fed did without question, after all their livelihood depended on it), was focused on how massive, and shocking, the Fed's direct intervention in capital markets had become. And while that was certainly true, what we showed back in November 2013 in "Chart Of The Day: How China's Stunning $15 Trillion In New Liquidity Blew Bernanke's QE Out Of The Water" is that whereas the Fed had injected some $2.5 trillion in liquidity in the US banking system, China had blown the US central bank out of the water, with no less than $15 trillion in increases to Chinese bank assets, all at the behest of a juggernaut of new credit creation - be it new yuan loans, shadow debt, corporate bonds, or any other form of debt that makes up China's broad Total Social Financing aggregate.
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WNU Editor: I concur with the above analysis, and one that I always point out when I give a presentation on what is the real state of the Chinese economy. During President Obama's term the U.S. Federal pumped into the financial system about 3 trillion dollars. This cheap money boosted the stock market and other investments, but now that money is being flushed out of the system slowing growth and investment .... a point that President Trump makes all the time (and one that he is correct on). The Chinese Fed's QE is completely beyond what the U.S. has done, pumping around $15 trillion dollars to stimulate its financial markets and investments. How the Chinese are going to balance all of this out is beyond me. But I do know that the current trade war is going to cripple China's ability to balance its books if this continues, and the resulting crash will have global implications. And as for those who think China will one day be a reserve currency .... I say dream on. This type of policy all but guarantees that China will never be trusted to be a reserve currency.
"During President Obama's term the U.S. Federal pumped into the financial system about 3 trillion dollars."
ReplyDeleteAll that money and growth under Obama was anemic.
Monetary policy papered over Obama's stupid policies of greed and envy.
Another reason we need to have a strong policy with China; had we kept going being slave to them with our debt and technology, we would be screwed when this correction happens. Now, I think the US is in a much better position with them. Feel sorry for the countries running up debt with them, they are even catching on so this is fast catching up with China.
ReplyDeleteAgreed. China is majorly fucked. We all knew from hearsay what they are doing, some of us went their for business and saw it first hand.. it's not going to end well for their economy.. too much was spent with "printed money" (in the trillions!), on top up to 30% their GDP has been shown to be fake - using satellite data light analysis. Then the housing bubble is gonna hit early next year. They are losing the trade war. They are completely mad when it comes to their own capabilities, bullying everyone in the China sea -- but you can only do that as long as you can print money. And that stops now. While the other nations they bullied were smart. Not the Chinese. They proved to be the dumb ones over and over and over again. LOL We moved our factories last year, I know many others who did it even before, and some this year. Analysts have not at all caught up, because our analysts are all from BCG, Bain, McKinsey etc and they are all leftist leaning, MSNC sniffing people who have no clue really. Once they have caught up and actually go there for once and see how empty the financial districts are, how many sky scrapers are just empty, ghost cities, etc etc.. they will realise "wait a minute, who is actually still doing business in China?".. and then the world markets will reacts. Analysts are typical 22-26yrs old.. they have no clue.. they are a bit of herd people -- and, get this.. many analysts in the top consulting firms in the US, are Chinese visa citizens!!! Have you noticed that? :)) No one makes the connection?
ReplyDeleteWe need some serious journalists to have a look into the vast amount of Chinese analysts in our own companies that get to rate the Chinese market. It's beyond ridiculous conflict of interest with many having links to the party
ReplyDeleteThis figure of $2.5 trillion is puzzling. I had read numerous times $9 to $11 trillion went into the US economy during the obamma reign.
I may be referring to something else, money and finance is beyond me, but I thought our national debt increased by the above figures.
I have read that this recovery was the weakest we have experienced since the end of WWII. I do know younger people who, desperate to own a home, quite their jobs in CA and moved to AZ, Nevada, etc., bought during that period, and are just now getting their heads above water a tiny bit.
I also think of Bernanke as a serial interest rate manipulator and I do know that his manipulations hurt all savers, myself included.
I also deeply resent the chaos this attempt had on the citizens of this country and all done to rescue those behind the speculation and frenzy and whose lobbying in part created this madness, the banking industry.
The word toxic was used often to describe the financial "products" the banking industry created to finance homes for people who were taught nothing in school about financial bubbles and had to learn the hard way about speculative manias.
"Extraordinary Popular Delusions and the Madness of Crowds". Charles Mackay. 1841. Tulips, anyone? Better yet, how about a condo in Adelanto, CA.?
Nice Beard, even though he failed the soup test.
Smith
ReplyDeletestop the bsing and note the deficit we will soon have because of the trump tax gift to the very wealthy. If you are unaware of this, simply google and discover what trump has done to fiscal conservatives. and wake up
So when an image claiming to show Chinese factory workers making one of apparently thousands of Trump 2020 campaign banners hits the interne, people took notice.
ReplyDeleteThe photo appears to depict a Chinese worker with a banner that reads "Trump 2020. Keep America Great!" Text near the bottom of the photo says: "Here’s a Chinese factory worker making one of the 90,000 banners for Trump’s 2020 campaign. The banners say ‘Keep America Great.’ I guess #45 thinks keeping America great means hiring Chinese workers instead of American workers. So much for ‘America First.’"
Fred,
ReplyDeleteThere were tax cuts. Revenues increased. With a lower rate, you can get more economic activity and when the lower rate is multiplied by the overall economic activity, you actually end up with more revenue.
Now in Econ 101, which I know that you did not have based on all your writings, they say there are rates that are too low and rates that are too high. There is a sweet spot. You can use calculus to find it. We all know you never learned calculus. You should learn calculus. You are not going to remember this or that equation forever, but you will see things in a new light. You will have another, different tool in your tool box.
So what happened? Revenues are up, but the deficit grew. Congress increased expenditures even more. Too many bad Republicans and most all Democrats are bad.
If you already run a deficit and increase revenues by 5 percent while increasing expenditure by more than 5 percent, you are just going to be fucked.
You can approach the problem empirically. The WSJ did so. There analysis s is that the government never got more than 20% give or take 1% or 2% of the GDP.
Economics is the intersection of psychology and commerce. If people are not going to get ahead if they work harder, they are going to put it in neutral. There will be less economic activity and a smaller GDP. Kudlow likes to call this animal spirits. He is right.
You lower taxes down to 20%, more businesses will come back.
If you keep raising taxes to pay for new Democrats crossing the border, your children are going to curse you, because America will look like Mexico.