Not so long ago, London Telegraph’s Ambrose Evans-Pritchard was one of the handful of must-read financial journalists. He probably still is, but since he disappeared behind the Telegraph’s pay wall his work is invisible to non-subscribers, only emerging when a free outlet runs one of his stories.
That happened this morning when the Sydney Morning Herald carried his analysis of the financial Ponzi scheme that is China.
After taking on more debt in a single decade than any other country ever — in the process helping to pull the US and Europe out of the Great Recession — China recently shifted into an even higher gear, creating a world record amount of credit in the most recent reporting month.
And – more important for headline writers and money managers – it reported exactly the right amount of GDP growth.
This brings to mind a long-ago interview in which economist Nouriel Roubini asserted that China just makes its numbers up, frequently reporting GDP immediately after the end of the period being measured, something that even the US can’t do.
But it’s one thing to for the rest of us to suspect and/or assert that China is just giving the markets what they want to hear, and another thing to understand the implications and explain them coherently. Evans-Pritchard does this in his latest article.
China’s majestic and elegantly-stable GDP figures are best seen as an instrument of political combat.
Donald Trump says “trade wars are good and easy to win” if your foes depend on your market and you can break them under pressure.
He proclaimed victory when the Shanghai equity index went into a swoon over the winter. This is Trumpian gamesmanship.
…click on the above link to read the rest of the article…