By Sasha Cekerevac for Investment Contrarians | Nov 11, 2013
I think it’s interesting how people, including the mainstream media, discuss an issue without truly understanding what it really means. It seems that skimming the surface is good enough these days, as no one seems to want to dig a little deeper.
One example is the recent reports from Chinese Premier Li Keqiang, who stated that the Chinese economy must grow at least 7.2% per year in order to limit the unemployment rate at four percent. (Source: “China Premier warns against loose money policies,” Reuters, November 5, 2013.)
As we all know, the Chinese economy is extremely important. As the second-largest nation in the global economy, its ability to manage the Chinese economy and prevent it from weakening further is quite important.
China’s Premier warned against creating even easier monetary conditions within the Chinese economy, as additional money printing could lead to even higher levels of inflation. Currently, the total credit supply is now in excess of $16.4 trillion (or 100 trillion yuan), approximately twice the size of its entire Chinese economy.
With the global economy still quite weak, China has had trouble exporting. It is now trying to transition the Chinese economy from export-led to domestically oriented, reducing its reliance on the global economy.
At least, that’s the story on the surface…
Here’s what troubles me: the Chinese economy is slowing, we all know that, yet all of its money printing so far has led to a total amount of credit supply twice the size of its entire economy.
So, what has all of this money printing really done?
It’s caused people in the Chinese economy to react by … Read More