China Repeats Its Same Case For No-Inflation Bond Yields

It makes all the difference in the world. Back in the back half of 2018, the word more often being used when compared to that year’s first half had been “slowing.” By the later months, it was pretty obvious this was taking place no matter how many times the American unemployment rate was dusted off and trotted out in front of the media parade.

In Europe and then in the US, officials (and the media) shifted to promoting the idea that this was somehow no big deal, nothing other than the scorching economy of 2017 cooling off just a touch. Coming down from an extreme high couldn’t be a bother to anyone in it. More to the contemporary point, Jay Powell and Mario Draghi’s big inflation push (their necessary confirmation of successes in monetary policies) could be preserved the only danger was in it merely becoming a little less epic.

What if it had never got even close to epic? Understandable everyone’s confusion about 2019.

Since that boom never really boomed, this was more than simply misplaced expectations. An economy that never actually took off (the data more forcefully confirmed as much, if years later) that then drops down more is a very different one from a system racing ahead downshifting a gear maybe two at most.

Bonds traded on the former while booms and labor shortages got splashed all over the internet even as neither of those things existed in reality.

All is not forgiven but has absolutely been forgotten.

COVID subsumed that pre-COVID recession which had already dropped Japan as well as Europe into contraction long before any pandemic. Emerging Market economies were on the precipice, too, many already pushed over the edge. By far the biggest (negative) contributor had been a China talked about in the West as the solid rock of recovery when its own government kept warning, “look out below!”

Rinse. Repeat.

 

As we move forward further into 2021, the word emerging even in the mainstream media isn’t “strong” as it had been, now it’s “slowing”; as if time-warped backward to October and November 2018 only in this instance without “trade wars” to scapegoat. This time, it will be “supply chains.”

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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