ML-Implode News - Doug Noland: Pushing Desperate Measures Too Far

With markets in a tailspin and "money" fleeing China, reasonable analysis back in January might have anticipated Chinese 2016 Credit slowing to, say, $1.5 TN. It will instead likely double this amount. When one is pondering the unstable 2016's market backdrop, it's helpful to think in terms of China as the marginal source of global Credit. The immediate good news for equities and commodities is that Chinese central planning still holds astounding sway over the nation's lending and investing. The ongoing good news for global bonds is that this historic experiment in state-directed Credit and economic management is in peril. The extremely bad news for China - as well as global markets and economy - is that $3.0 TN of unsound Credit at this very late stage of the Credit cycle ensures an even more destabilizing bust.
It must be tempting for the believers to again revel in the brute power of the "perpetual money machine." Yet the costs associated with the latest round of monetary inflation are steep. Not many months ago it appeared that China was determined to rein in excess, while the U.S. was ready to lead the world toward policy normalization. Today it's become rather obvious that China is out of control and global policymakers are trapped at near zero or negative rates and perpetual QE monetary inflation. What was always sold as temporary extraordinary measures is increasingly recognized as desperate "whatever it takes" indefinitely.
... the Germans, Japanese bankers, pension fund managers or even the general public, it's been a frustratingly long wait for policy normalization. And just when hope was running high, the rug was pulled right out from under. Around the world many had patiently accepted the favoritism and inequity of reflationary measures. But what was supposed to be extraordinary and temporary morphed into the normal and permanent: egregious wealth redistribution.

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Doug Noland: Pushing Desperate Measures Too Far