Nearly seven months ago, last December, we made a key observation: after surging higher in the aftermath of the covid crisis as Beijing scrambled to reboot the economy with a record burst of new credit creation, the most important signal for the global economy - China's credit impulse - had peaked, a reversal which we said would unleashed profound shockwaves on everything from the global economy to capital markets, if with a lag that was sizable enough that most market participants would forget all about the catalyst that caused this adverse sequence of events manifesting so vividly in the past few weeks.
But first a little history: why does China's credit impulse matter?
Regular readers may recall that back in June 2017, we wrote that if one had to follow just one macro indicator that impacts virtually every aspect of the global economy, that would be the Chinese credit impulse. Not surprisingly, the article was titled "Why The (Collapsing) Credit Impulse Is All That Matters." Then, a few years later just in case there was any confusion, we again wrote "Why The Collapsing Chinese Credit Impulse Is All That Matters."