Money is Fleeing China
From Zarathustra at Macrobusiness:
Sina reports that the big 4 bank’s (ICBC, China Construction Bank, Agricultural Bank of China, Bank of China) net new loans for May is bascially zero for the first two weeks. According to sources, two of the big 4 banks have had new loans of RMB10 billion and a few billion, while another banks have net new loans in negative territory This suggests that demand for credit is extremely weak, perhaps much weaker than anyone is yet contemplating.
The big 4 banks have also lost RMB200 billion of deposits, according to the report. One of these banks lost RMB90 billion of deposits alone…
Recently I have speculated that a debt deflation has begun in China. All of this new evidence supports that notion.
That giant sucking sound you hear is apparently lots of money leaving China and Club Med for safer digs. And with $8T American sitting on the side in liquidity, it ain’t in the US stock market. Global corporatism has given us global deflation. I wonder if Milton Friedman saw that coming:
Friedman was the main proponent of the monetarist school of economics. He maintained that there is a close and stable association between price inflation and the money supply, mainly that price inflation should be regulated with monetary deflation and price deflation with monetary inflation. He famously quipped that price deflation can be fought by “dropping money out of a helicopter.”