EM and China Driving Global Credit Growth

The macro-economic landscape has profoundly changed since the financial crisis. Developed markets deleveraged, and emerging markets became the engine of global credit and money growth. The top-left chart from the BIS shows this very clearly. EMEs (emerging market...

Reflation in Danger Due to Low Liquidity

Over the past few weeks we have expressed scepticism on the Trump reflation trade and we have argued that bank stocks should underperform. We have shown previously that when you look at the 3 and 6 month change in Commercial & Industrial lending as well as the...

Chinese Excess Liquidity Rolling Over

Chinese excess liquidity does a good job of leading asset prices as well as China-related commodities. We define excess liquidity as M1 money growth minus Inflation minus economic growth. This captures how much excess money there is beyond what the real economy can...

Financial Conditions Keep Tightening

Financial conditions are slowly but surely tightening.  We have had one actual rate hike by the Fed, but conditions had begun to tighten before this. This is primarily a developed market phenomenon. Real M1 for the G7 has been trending down for the past 6 months....

The Remorseless Logic of Capital Outflows from China

China is in the midst of a debt-deflationary bust.  It is an ongoing process that has gathered pace recently.  Capital outflows are a symptom of this, and a weaker yuan is an integral part of the attempted cure.  We expect more of this to come. We wrote back in the...

Spanish Economy Remains on Cyclical Upswing

For all of Spain’s entrenched structural issues (as we detailed in our April thematic, Spain – Still a Hole in Europe’s Balance Sheet), leading economic data continues to point towards a cyclical recovery in Spain. Real M1 is growing at 15% YoY, consumer confidence is...

Money surges in Europe, growth to follow

If you ignore the ongoing Greek sideshow, rarely has European money growth been as accommodative as it is today. Europe has enormous structural problems of too much debt, an inflexible currency and an ageing population, but cyclical factors are very positive. Leading...