Lou’s experience suggests that even though China is putting the brakes on...the brakes won't work ?
Macro scale inputs... used to be understood as "long lead" influences... so raising rates might change the stock market tomorrow... but the lag in real impact in the real economy of rate changes being integrated into the economy is usually more than six to eight months out... during "normal" economic times. With things "slower" than normal... expect "slower" will apply to change being transmitted more slowly, in general, too ?
Short term events might be controlled by something other than the "brakes don't work" ? The car following the semi-truck... responds to the truck's brake lights by accelerating and passing ? While that might matter to the driver of the car bringing a purchase home from the store... it doesn't get the product in the back of the truck to the stores any sooner ? Slower... is still slower... in the aggregate.
the brakes on credit expansion in the economy... doesn’t have to signal slower growth in the economy or demand for commodities. That’s because the traditional link between credit and growth is not as strong as it once was. In other words... things are different this time... because ??? I'm not buying the argument... mostly as it seems intent on crafting as explanations the invention of disconnects... between things that aren't all that connected... as a reason that "change doesn't matter"... because suddenly realizing cars are not trucks.
In the degree that its saying only that... ending Covid lockdowns fosters growth without it having anything to do with change in the interest rate environment ? Well. yeah... but, is that really the proper frame of reference to apply in making proper economic comparisons ?
Foreign demand is playing a key role in the economy this year... That in turn creates a global industrial cycle correlating with everything...
and that growth begets growth irrespective of credit conditions as long as...
"And a miracle happens here"... ?
Impact depends on the relative scale of change, and where it occurs, and when. If China's economy is 70% export driven and 30% domestic demand driven... there is a lot of room to grow domestic demand... but you can't replace the 70% in weight, or impact, even with a very high growth rate in "domestic"... in the short term.
But, China's export driven markets... are less impacted by China's experience of changing economic drivers or impacts in changed domestic demand... than by the impacts of those changes in foreign economies...
So, the bigger question, as always, not ever addressed in articles like this... is what the impact of China's credit cycle inputs will be... on customers' sustained willingness, or not, and ability, or not... to continue buying...
That's all the more true when "financial decoupling" is not seen in isolation from other de-couplings occurring... making it not all and only economics that will drive future change ?
The rest of the world is not similarly "de-coupled" either from China's, or from the U.S.'s, decisions on credit and trade... as this article suggests China's own economy will prove to be... in isolation... while ignoring the herd of elephants in the room... But, ignoring all that...
If China's restricting credit... is countered only by the U.S. and Europe sustaining the opposite in easy money (and in buoyant global stock markets) ... its impacts are likely to be vastly different than were the U.S. and Europe to move to duplicate the restrictive measures ?
That likely a part of why there was such an apparent over-reaction to the Fed announcement of... nothing... as it did not occur in a rate vacuum... ?
Otherwise, the message is... it doesn't matter if China restricts credit, even by a lot... only if the Fed does, even by a little ? Or, in the alternative, the message is... the Fed is not the only one who's lying about the impacts of its policies... ?
The only other perspective that makes "sense" then... is in recognizing that overly Panglossian view (of the best of all possible worlds)... that globalization is all and only a good thing... but, since it isn't panning out all that well right now... the global decoupling occurring is thus also all and only a good thing ?
I agree with the article on one thing...
Inflation (or the long delayed end of price suppression) being made apparent in the upward repricing of commodities now... is not going to go away just because China (or, the Fed, in theory) has decided to throttle credit back a bit...
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