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0 sats \ 2 replies \ @TomK OP 20 Feb \ parent \ on: China Takes Preemptive Measures to Combat Deflation econ
yes then you have raised some important points. but i am looking at the moment, especially with regard to the reaction of the Chinese, at the bank balance sheets, which suffer massively with such asset price deflation. in this environment, the fiat money system, the entire credit impulse, must be damaged. the Communist Party cannot afford a recession.
Not sure I understand the ramifications of macro spillover, or as it used to be put, catching a cold and the world sneezing. But if I can believe the FR knows what it's talking about.
".. expansionary shocks to China’s credit lead to a decline in aggregate risk aversion, associated with a lower VIX, which elevates global asset prices and credit"
Guessing this means that on the flip this would telegraph the opposite but then again we see a frequent about turn of interest rate policy.
I agree it's all about avoiding domestic discontent.