The People’s Bank of China (PBOC) has been a major source of global liquidity which is causing deflation rather than inflation. Consider the following:
(1) Chinese bank loans rose 13.6% y/y last year. They have increased by a whopping $8.9 trillion, or 200%, since the end of 2008 to a record $13.3 trillion. They first exceeded US bank loans during September 2010, and now exceed them by 69%!
(2) Bank loans accounted for 60% of social financing at the end of last year. Twelve years ago, bank loans accounted for 90% of financing. In other words, the shadow banking system has grown faster than the banking system.
(3) The result of all this credit has been lots of economic growth, but also lots of excess capacity in manufacturing and PPI deflation. The PPI fell 4.3% y/y during January, the most since October 2009. That’s the 35th consecutive monthly decline on a y/y basis. The manufacturing PPI fell 3.1% y/y in January. The raw materials PPI fell 8.6%, led by ferrous metals (-20.5%) and coal (-13.0).
Today's Morning Briefing: Greece & Popeye. (1) Popeye, Wimpy, Angela, and Alexis. (2) Beware of Greeks bearing debts. (3) Grexit or Bailout II? (4) Who will pay for anti-austerity measures? (5) When Germans say “nein,” they mean “nein.” (6) Beware: In Greek, “no” is “ókhi,” which sounds like “okay” to English speakers. (7) Greenspan predicting Grexit. (8) Obama straddling the issue. (9) More signs of life in Eurozone economy. (10) China deflating despite, or because of, mountain of debt. (More for subscribers.)
(1) Chinese bank loans rose 13.6% y/y last year. They have increased by a whopping $8.9 trillion, or 200%, since the end of 2008 to a record $13.3 trillion. They first exceeded US bank loans during September 2010, and now exceed them by 69%!
(2) Bank loans accounted for 60% of social financing at the end of last year. Twelve years ago, bank loans accounted for 90% of financing. In other words, the shadow banking system has grown faster than the banking system.
(3) The result of all this credit has been lots of economic growth, but also lots of excess capacity in manufacturing and PPI deflation. The PPI fell 4.3% y/y during January, the most since October 2009. That’s the 35th consecutive monthly decline on a y/y basis. The manufacturing PPI fell 3.1% y/y in January. The raw materials PPI fell 8.6%, led by ferrous metals (-20.5%) and coal (-13.0).
Today's Morning Briefing: Greece & Popeye. (1) Popeye, Wimpy, Angela, and Alexis. (2) Beware of Greeks bearing debts. (3) Grexit or Bailout II? (4) Who will pay for anti-austerity measures? (5) When Germans say “nein,” they mean “nein.” (6) Beware: In Greek, “no” is “ókhi,” which sounds like “okay” to English speakers. (7) Greenspan predicting Grexit. (8) Obama straddling the issue. (9) More signs of life in Eurozone economy. (10) China deflating despite, or because of, mountain of debt. (More for subscribers.)
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