Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Financial “Collateral Damage” Highlights China’s and Fed’s Impossible Task

IMG Auteur
Published : July 08th, 2017
324 words - Reading time : 0 - 1 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Opinions and Analysis

Variant Perception notes China Broad Credit Growth Slows to Zero. The side effect is a huge amount of collateral damage.

The recent tightening of credit we have seen in China is primarily aimed at clamping down
on shadow financing. Wealth management products have rapidly grown in size, from only
8% of total banking deposits in 2012 to over 20% today.

The top chart shows China’s banks’ claims on non-banks, which is where a lot of shadow financing shows up. As we can see, growth in this category has fallen precipitously from 70% YoY to 20% today.

However, there is collateral damage from this tightening. For one, bank-lending rates are starting to rise as their cost of funding rises (bottom-left chart). Policymakers in China want to confine the rise in rates in to the interbank market, but this a next-to-impossible task. Too great a rise in lending rates would feed negatively into the real economy.

Moreover, as the bottom-right chart shows, tightening has led to broad credit growth falling to near to 0% on a 3-month basis. A negative second derivative in credit must be watched for any inhibitive effects it may have on economic growth – especially in a country so heavily credit-dependent such as China. A negative first derivative in credit, as we are on the cusp of today, leaves economic growth even more fragile.

Impossible Task

I don’t agree with VP analysis on everything, but I do agree on most things. I find this report spot-on.

China has an impossible task of slowing its shadow banking sector running rampant and maintaining growth.

China’s Dilemma 

I do not know what China will ultimately choose, but something has to give one way or another.

China’s unpleasant choice is a bubble bust now or a bigger bubble and a bigger bust later.

By the way, the Fed faces a similar unpleasant choice, as do central banks in general. Asset bubbles are everywhere.

Mike “Mish” Shedlock

Source : mishtalk.com
Data and Statistics for these countries : China | Georgia | All
Gold and Silver Prices for these countries : China | Georgia | All
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
IMG Auteur
Mish 13 abonnés
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. He writes a global economics blog which has commentary 5-7 times a week. He also writes for the Daily Reckoning, Whiskey & Gunpowder, and has over 80 magazine and book cover credits. Visit http://www.sitkapacific.com
WebsiteSubscribe to his services
Comment this article
>Follow all commentairies
You must be logged in to comment an article8000 characters max.
Log in or Sign up
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Meow
21 JulDoom1
>>For all his blunders and stumbles...<< To be fair, all presidents blunder and stumble like this. This is just the first in a long while ...
The Gold Industry is in a Deep State of Dysfunction, Delusion and D...
21 Julkevthorne
Just hold on to it - you will win. A cautionary tale: I wish, back in the early 90's, when I took out a pension - it was "cast iron, copper...
The Gold Industry is in a Deep State of Dysfunction, Delusion and D...
20 JulDRGEORGE
Yep, hard to argue with any of that. But this poor, disillusioned, confused, swindled, isolated, powerless, 'smart'(HUH) precious metal owner has n...
This Feels Like the Action in 2008 Right Before the Collapse - Dave...
18 JulThe Recusant
Will we witness a battle-royale between the CBs and traders shortly?
Guess What Happens In States Where Food Stamp Recipients Have To Work
18 JulThe Recusant1
As a left-leaning independent, community service seems like a great idea as a prerequisite for food stamps for single childless recipients. But, as...
Watch: Trump Was Hammering CNN In 1990 For Fake News: “When People ...
18 JulThe Recusant
Yes, there is sensationalism in today's news media. On a sliding scale, however, the news media is far more honest than ANYTHING the Trump administ...
Guess What Happens In States Where Food Stamp Recipients Have To Work
18 Julkevthorne2
Then, how about making the banksters do some real, productive work in return for the taxpayer funded bailouts they received - like rebuilding worn-...
Holy Hell
17 Julaccording
good one. where have you been hiding?
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS