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Will China Hit That Inflation Deer In The Global Macroeconomic Headlights Anyway, Despite The Fact They Are Slamming On The Brakes?
My stance on China’s comeuppance for attempting to pack 50 years of
growth in to 3 years is still quite unchanged. I am fully aware that
many “smart” bankers and analysts have different perspectives, but as I
posted a couple of weeks ago, “Currency Crisis! Inflation! Sovereign Defaults! Bahhhh… Who Are ‘Ya Gonna Believe, The Government Or Your Lyin’ Eyes?“. From Bloomberg, this morning: U.S. Index Futures Fall After China Raises Banks’ Reserve Ratio
China’s central bank raised reserve
requirements for lenders for the second time this year to counter
inflation and curb property-price gains.
…Reserve ratios will increase half a
percentage point starting Feb. 24, the People’s Bank of China said on
its website today in a one-sentence statement. Today’s move came 10 days
after China raised interest rates.
And anecdotally on the ground as reported by BoomBustBlogger John:
We import from Asia, V-nam mostly. After Chinese new year factories returned back to:
-
- 8% devalution in the dong
- New Taxes for using moterbikes and cars
- Interest on loans from 14 to a new 20%
- and more prices controls.
On top of that the real kicker.
Business in Vnam had to buy US$ from the black market, the diff was 30%
compared to the banks. Business would buy on the black market and get a
fake bank reciept at the banks rate and keep the 30% spread & use
the fake reciept for accounting, this helped keep their prices down. Now
the gov is matching the black, the spread is gone.
We have people on the ground in Vnam.
So who is going to pay these new prices that are coming over here right
now, higher prices are on their way. Can you say margin compression,
possible a big one. Look for shorts in low margin retail, big ticket item retail that are heavy into made in Asia not made in USA.
These events were telegraphed
clear as day. I understand that it is difficult to be a fundamental
investor with the broad market rising 98% from 2008 lows while the cause
of said lows have simple been exacerbated. Looking at it this way, many
bullish pundits are of the mindset that China will lead the world out
of recession as China is slamming on the breaks to avoid the already
inevitable inflation boom at the same time that much of Europe is
showing signs of a double dip and America is struggling with rapidly
depreciating housing stock, excess debt and what looks like a structural
shift in unemployment. Keep hope alive if you wish, but it looks to me
that the printing to pop equities has just created another Boom/Bust
scenario to cure the Boom/Bust scenario that we have yet to of exited.
Don’t say I didn’t tell you so…
- Can China Control the “Side-Effects” of its Stimulus-Led Growth? Let’s Look at the Facts Wednesday, February 3rd, 2010
- What Are the Odds That China Will Follow 1920’s US and 1980’s Japan? Wednesday, March 10th, 2010
- BoomBustBlog China Focus: Inflation? Thursday, May 20th, 2010
- BoomBustBlog China Focus: Interest Rates Thursday, May 20th, 2010
- All
Throughout Last Year and During the Inflation/Deflation Camp Debates, I
Warned of the Risks of Stagflation. Did I Have a Point? Let’s Look at
the Numbers Behind the Numbers… Monday, July 26th, 2010 - China
Is In a Self-Imposed Bubble That Has Nowhere To Go But Bust! You Don’t
Get Something (Growth Through Stimulus) For Nothing (No Economic
Consequences) Tuesday, November 23rd, 2010 - My China Ruminations Have Come to Pass As the Country Enters a Bear Market Tuesday, May 11th, 2010
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TCT : your absolute certainty on foreign economies just amazes me in this hyped uncertain world. You must have a crystal ball and sleep in Ben's private study reading into the great man's mind like into the time machine. What perception.
Too late for china. The greatest malinvestment.story in history. Crack up boom or deflation, but no matter which way they decide their unfair dollar peg will be history in the next year or two as long as bennie keeps up the pressure. China is our bitch now. They know it which is why they make bellicose statements and empty threats.
What I find interesting is how the pervasiveness of the state in China may affect value.
The bottom line seems obvious: Now that global finance has invested trillions with the Communists, they naturally deserve to lose every last penny of it.
But the gory details of valuation, pricing, and profit-taking strategy (AKA 'hot potato on the barrel of a tank') are fascinating.
And then there are the macro ripples etc. Any idea of the scale of exposure that Dow companies and the financial sector have to a Chinese recession or 'freeway blowout' crash?
I always said on this site that the only way we'll know when it goes sour in China is from the satellite pics of smoke rising from the cities. Keep it real, Reggie, thanks for these 'freebs for the plebes'...
The BIG news in China will be the condition of the winter wheat crop here.
Wont be long.......Got food ?
Bubble, Bubble, Toil and Trouble.
RE there is outrageous and unaffordable even to "wealthy foreigners" now. Vacancy rates are massive....even empty cities dot the rural landscape.
As usual, too much stimulus too fast with massive misallocations into RE and the stock market without the fundamentals to support such a rise....only speculation and hot money.
Reggie Baby---We've been oddly, uncharacteristically, and non-explanatorily QUIET on Apple lately.... What gives??? Lost your blowhard gene somewhere in the flowcharts????
Ted, baby. Apple has so far done practically everything that I said it would - as has Android, Google, RIM and MSFT.
looks like that sell off in futures was mighty short lived....but then again...we do have a market that's only allowed to trade in one direction so....
Nice work as always Reggie. Keep it coming.
Keep hope alive.
The Man from Hope.
Hope and Change.
I have come to hate the word Hope.
Hope in one hand, and shit in the other...
Different spellings same meaning.
If the Chinese down side, opaque to our foreign eyes, becomes the bad kid on the block...it'll send a shock wave through the moribund developed world that'll make Ben Ali's current coma status look like pretty teeny-weeny small talk. That is big time mind splitter...