China Connection

It’s a big week for “Inflation Updates,” at least the nonsense compositions that make up “official CPI numbers,” as opposed to money supply, velocity of money readings and good old credit growth numbers, all far better measures of inflation. Either way, this week sees the release of CPI and/or PPI for the US, the UK, the Euro-Zone and for Japan on which we will be commenting in next Monday’s “Investment markets Overview.”

The World’s “leading central bankers” have committed their respective electorates, oops they are unelected, to a further $US 30,000,000,000,000 ( yes, it looks more daunting than $US30 Trillion and it is) of debt, by way of QE and other stimulus measures to re-flate their respective economies, and have failed miserably, just as we said they would.

We can also include China, that extremely important number two economy in the world, who this week announced that factory-gate prices fell in September for a record 31st month, whilst its CPI reading for September came in at a below consensus 1.7% forecast, at 1.6% annualised, versus the 2% registered in August. One glance at Chinese CPI and GDP shows a falling trend for both, despite the massive stimulus attempt by China in 2009.

15 Oct 14 Blog 1

Meanwhile, China’s M2 money-supply eased to 12.8% annualised in August and it’s worth a comparison of this against the main Chinese stock index. The stand-out, aside of the money-supply trending lower for four years now, is just how muted the stock market response was in 2009 to that massive stimulus attempt.

15 Oct 14 Blog 2.

Like their counterparts in the West, the Chinese authorities appear to “fudge” their official statistics, allegedly, so you are on your own in respect of working out exactly what’s going on.

We try not to fudge but “connect the dots,” where many seem to fail and the CPI connection with China is very real, it’s called “exporting de-flation.”

 

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One response to this post.

  1. […] of investors’ expectations and guidance, they do need to be analysed. One of the four was, “China Connection,” an early warning in respect of “officially fudged economic data,” whereas “An Honest […]

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