Commentary
Cue the Worldwide inflation.
Just a few weeks ago I did a video about how China is on the edge of recession. Weeks later, the edge of recession has now progressed to a full-blown Chinese fire drill.
So What Happened?
Last week, Chinaâs ruling Politburo held an emergency economic meeting and decided to crank up the money printers to 11, pumping money to consumers, to banks, to property developers, basically to anybody who might spend it.
Specifically, Beijingâs going to dump about 3.8 trillion yuanâroughly half a trillion dollarsâto keep the economy running.
A trillion yuan goes to consumer subsidies, including a hundred twenty U.S. per month child subsidyâa hundred twentyâs big in Chinaâto bribe Chinese mothers into having more kids, which theyâve stopped doing.
Next up are the banksâas alwaysâwho get a cool hundred and forty billion U.S. along with another 100 billion dumped into stock markets.
Allegedly this is all to spur spendingâas in the banks lend the money out and the stockholders feel richâbut it would do wonders for the gaping holes in Chinaâs teetering financial industry.
Beyond the Money Dump
Beyond the money dump, Chinaâs slashing interest rates across the boardâwhich governments do to try and gin up some tissue-fire growth.
Theyâre slashing downpayment requirements on houses, opening a special credit facility so banks and hedge funds can gamble on stocks, and cutting the reserve requirements for banksâmeaning banks can raid their vaults and go on a lending spree.
Put it together, and Beijingâs doing everything it can to get money out in the wild, down to bankrolling gamblers and pouring yet more trillions down the black hole of Chinaâs comically over-built housing market.
You may have seen the ghost towns Chinaâs built; here comes round two.
What Scares China
Why so desperate, you might ask?
Easy: China is panicked not only about a looming recession but that it might be falling into the Japan-style doom-loop of structural stagnation thanks to President Xiâs anti-business jihad.
The key number here is the interest rate on 30-year government bonds, which is a classic indicator of a zombie economy in the spawning.
Ominously, Chinaâs 30-year just fell below Japanâs. Flirting with zombie territory.
Whatâs Next
Near-term, theyâre popping the bubble in Beijing with stocks soaring.
And while 4 trillion yuan is a lot of money, this isnât yet the Big Bangâthat would be a long-rumored 10 trillion money dump by Beijing.
Theyâre not there yet, probably because the U.S. and Europe havenât hit the meat of their recessions. Debt-fueled Americans are still buying Chinese exports.
Chinaâs Turn for Chaos
Iâve mentioned in previous articles how if China goes down, the Chinese people wonât have a sense of humor about it. This ainât Japan where people shake their heads and obey.
Beijing knows this, they know the kinetic history of the Chinese masses when theyâre angry, and if they panic hard enough they may reach for a war to both distract the population and to clamp down on dissent.
Just this week they launched a massive military exercise in a disputed area of the South China Sea, there could be more to come.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
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