The Chinese Money Behind Global Inflation Baseball

Before 2014 and Euro$ #3, of course, China money had always expanded via the expanse of foreign assets easily flowing into authorities’ collective hands. Since, especially dating back to January 2018 (Euro$ #4), no such luck. The “dollars” haven’t disappeared like they had in 2014 and 2015, but for “some” reason they aren’t showing up even last year during ostensibly reflation if not Jay Powell’s alleged global flood.

For months on end, the PBOC reported practically the same balance of foreign assets – to the point China’s central bankers seemed to be thumbing their noses at the rest of the world being so obvious as to this clear artificiality. In February 2021, the asset level for forex finally rose if only the tiniest bit.

Since, as if to forward the joke even more, the same line in March and April is back to changing so very little from that February departure. At this point, what’s the point? It isn’t gigantic reflation nor is it, more importantly, a sharp turn.

So what?

It’s another reason, another monetary set of reasons, to go along with thoroughly disappointing now slowing – in the Western imagination – economic results. There aren’t any or many supposedly reflationary dollars showing up right where they would if reflation was real and really substantial.

Strike one.

China’s economy continues to modestly rebound contrary to most if not all outside views. The country’s Communist leadership has repeatedly emphasized how they are fine with this (at least decisively unwilling to do much about it), and the PBOC’s balance sheet further backs up in deed what have already said repeatedly in communique and spoken words. Not only do they say they’re at potential, they’re shifting to a monetary policy as if they truly believe it.

Strike two.

With PBOC monetary actions lining up squarely with declared Communist economic intentions, essentially this is the best the world should expect from China, what does that mean for the global economy outlook not in some distant mid-20s state but more immediately for even just the rest of this year? We’re all supposed to taking off toward inflation when here’s the Chinese behaving as if what little taking off already happened last year.

Certainly, this possibility, along with the two others just mentioned, would add up to a baseline global factor being priced into low bond yields and dollar-based risks no matter how much the US CPI manages for a few months in between. The fundamental ideas behind “transitory” in every real sense have more than Jay Powell’s clueless gaze behind everything.

Strike three?

Perhaps, at least right now, it seems for Japanese (and Caribbean-based) banks they are thinking and acting so. 

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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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