the big bang theory.... the mother of all QE

  1. 10,119 Posts.
    China's inflation rate is so low now and that together with a massive national debt might mean communist leaders start taking more desperate measures to stimulate the economy. Should prices shrink that massive debt bubble will rise like a monolith at low tide threatening to blow the Chinese economy sky high.

    Thus at the end of monetary polity is ZIRP and a QE program at least as big as the EZ QE then much bigger bigger. Politburo overfed necks are on the line so soon it'll be job creation by experimentation across the nation. The QE biggest bang theory.

    Business Spectator:

    China’s consumer price index (CPI) — a main gauge of inflation — plunged to 0.8 per cent year-on-year in January, its lowest level since November 2009.
    The rise in the CPI was sharply down from the 1.5 per cent recorded in December, according to figures provided by the National Bureau of Statistics.
    The producer price index (PPI) — a measure of costs for goods at the factory gate — fell to -4.3 per cent year-on-year, compared to -3.3 per cent previously.
    The drop in the PPI figure marked the 35th straight month of declines.
    ANZ Bank's chief Greater China economist Liu Li-Gang said the weak figures suggest that deflation has "become a real risk for China"

    Mr Liu said further monetary policy easing would help "facilitate the undergoing de-leveraging process as well."
    “Indeed, China’s central bank cut the reserve requirement ratio (RRR) last week and conducted a large amount of reverse repos before the Chinese New Year, indicating that the central bank has engaged into aggressive easing to head off the deflation risk," he said.
    Mr Liu said that market interest rates have remained elevated while the RMB exchange rate weakened — an indication of capital outflows from the onshore market.
    “The balance of payment data suggest that China saw $US91.2bn deficit under capital and financial account in Q4 2014, which could be owing to fears of economic slowdown."
    Mr Liu expects China’s central bank to lower the deposit rate by 25 basis points in the first quarter, followed by another 50 basis points RRR cut in the second quarter.
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