Bulletins and News Discussion from September 23rd to September 29th, 2024 - The War In The North

Or China is preparing to take Taiwan and is taking all the free Westoid money they can get before doing so

(I don't know enough about economics to say if this actually makes sense)

The point is that this signals exactly what the western market wants to see, a clear sign that the party is willing to follow neoliberal economics at crucial steps now and in the future.

IMO greed(profit) speaks the loudest, Wall st. doesn't realy care or believe in all these fearmongering narratives, instead they fear the perception that the CPC can "fuck up" the economy at any time by doing that evil socialism thing.

Wall Street loves it because it shows the party is in control and takes the economic data seriously while also showing there should be no fear of the CPC taking any "socialist" measures in the short term. Again it shows what everyone wants to see, that the party cares more about economic data than anything else.

The thought things can be fixed with just pumping money is a slippery slope, yet its no surprise why capitalists are loving it.

But I think it’s safe to say that with the Fed lowering the rates, we are now entering the Phase 2 of the US financial warfare against China. Phase 3 being the ultimate speculative attack by selling its assets all at once.

You should temper your expectations here, China has a lot of room to make stupid decisions still, while the US is entirely built on a house of cards called "economic data" which would be fine if not for the unbelievably asinine attempts made to justify why bad data is good actualy.

The question of soft/hard landing is basically down to how the market wants to interpret the narrative at any point in time.

If you pay attention at all to these narratives the neolibs already flip flopped a dozen times since 2020.

Inflation was bad, then it wasn't, then it was "sticky", then it was "solved" anyway because fuck food and rent anyway so the fed must cut rates, but actualy not yet because if they do it means they're afraid the bad data is bad actualy and they're desperate, but actualy now the bad data is not bad at all because turns out the fed mandate is throws dice who fucking knows at this point so we must cut rates now otherwise it wont be soft landing anymore except any bad jobs report can turn soft landing into bad landing overnight.

I'm not sure I ever believed the US can wage such an economic war, upon reflection to me it seems since 2020 all this current political/economic circus can't be maintained if the US does intend to get serious against China.

As a seperate point to the bellow, since this is something you constantly say it must happen, how do you ever expect the Yuan to take a substancial share of the dollar's position worldwide without any QE happening and without some financial carrots thrown to foreign finance capital. Its impossible. Any dedollarization wordwide has to come with an increased yuan share even if it never becomes more than a moderate minority % wise. Every single measure taken would have to be taken sometime for that to happen.

But either way not everything has to be about the dollar.

What the central govt just did is that they spent a year letting the financial system languish in an all downside environment, making the financial sector so desperate for any kind of dependable asset to invest in that investors started begging for sovereign bonds at any yield, which then effectively lowered the cost of issuing more sovereign debt, and reset market wide ROI expectations from the lofty days of real estate exuberance, ultimately making it cheaper to start the transition from a land finance based financial system to sovereign bonds finance. The central govt had the option of intervening much earlier to preserve a higher anchoring point for long term financial value extraction, and instead they chose to wait for the credit cycle to bottom until it was clearly starting to impact economic momentum before intervening with fresh credit injections. They saw 3 straight months of deceleration and decided to do some easing. Decisions on intervention have followed quarterly trends for years now. They will a continue drip irrigation approach until they feel there is sufficient headway on debt deleveraging.

And some other notes

The fiscal element is smaller than the chinese pandemic stimulus and much, much smaller than the '08 chinese stimulus. If we factor incremental credit, the size difference is even larger.

Capital formation is what drives credit formation in China. GCF as a % of GDP rose in the 2000s, plateaued over the last decade and is presently transitioning to its decline phase. The aim of loosening credit is to stabilize capital intensity i.e. prevent it from declining too quickly. Beijing is very focused on the downward slope of the transition. Also Higher-income groups drive the majority of demand (consumption and gross capital formation) in China in the last decade. So even tho CPC focus is on decreasing inequality and uplifcting lower income groups (GINI has droped like a rock in the last decade after all) into a healthy consuming middle class they still have to make sure the economic activity of higher income groups doesnt drop too much and too fast before the lower income groups ,well stop being that, and are able and willing to support domestic consumption on their backs. But RE downturn and stock market being garbage has made lot of the top 10% in China lose and decrease their treats a bit too fast for CPCs liking so throwing some stock numberinos and helping measures is meant to stabilize that decline into something managable , not to reverse the trend or the economic restructuring. So for example the mortgage interest cuts impacted ~50 million households that have mortgages, totaling approximately ~150 million people, or ~9-10% of the total population. These households are predominantly in the top two quintiles but acounted for an outsided piece of the total consumption and GCF like i said and like i said their economic activity was dropping a bit too fast for China's liking

So when economic indicators weakened in the summer, much of it driven by worsening sentiment — especially in higher-income groups. Beijing's worry was on trickle-down effects from higher-income groups to the broader economy. For example, Fixed Asset Investment growth in the larger, higher-income provinces was faltering. It was down ~3% in Guangdong YTD. That is important for lower-income migrant workers in the largely blue-collar construction and manufacturing industries. On the consumer side, declining/stagnant asset prices clearly contribute to such worsening sentiment and decreased spending in those higher-income groups. It was enough of a real economy impact that Beijing finally felt the exercise a "call option" and try to put a "floor" on asset prices, both in its property & stock markets.