Tuomas Malinen+ Your Authors @mtmalinen PhD econ. Chief Economist of GnS Economics. Adj. Professor of Economics @ Uni Helsinki. Economic growth, economic crises, monetary unions and central banks. Jan. 25, 2020 1 min read + Your Authors

It seems that the fact that the 'green shoots' observed in some places are most likely 'red herrings' seems not to have sank in.

So, another try. Please, consider these following figures. Thread.

First, the dominance of #China on the global business cycle. 👇1/

Second, why?

#China has been responsible for over 60 percent of all new money (credit) created globally and over 50 percent of all capital investments since 2009. 2/

Third, how?

#China has accomplished all this by enacting never-before-seen debt stimulus since 2009.

Due to which, she has passed all previous crisis-bearing examples of 'credit bonanzas'. 3/

Fourth, why 'green shoots'?

Since early last year, #China has, again, enacted record-breaking debt-stimulus, probably to appear strong in the trade negotiations.

Debt grew at least twice the speed of GDP in 2019.

Ask yourself, how sustainable is this? 4/

The answer: not very.

Looking at the GDP figures, it is obvious that #China is very close of reaching the 'debt saturation', like we warned early last year. 5/

Then, consider this. 👇

"At the end of 2018, the budget deficit of the Chinese government was close to five percent. However, if the off-balance sheet (“shadow”) financing of local governments is taken into consideration, the budget deficit rises to over 11 percent." 6/

Leading to:

"This effectively means that China is fiscally unable to underwrite massive infrastructure projects and so any new world-economy-saving stimulus from China, as in 2015/2016, will be practically impossible." 7/

I completely understand the need to stave of the risk of a #recession , but that's a dangerous fallacy.

The 'Chinese Miracle' is ending, and it will not mean good for the world #economy , or the #stockmarket .

A crisis is approaching.

You can follow @mtmalinen.


Tip: mention @threader_app on a Twitter thread with the keyword “compile” to get a link to it.

Enjoy Threader? Sign up.

Since you’re here...

... we’re asking visitors like you to make a contribution to support this independent project. In these uncertain times, access to information is vital. Threader gets 1,000,000+ visits a month and our iOS Twitter client was featured as an App of the Day by Apple. Your financial support will help two developers to keep working on this app. Everyone’s contribution, big or small, is so valuable. Support Threader by becoming premium or by donating on PayPal. Thank you.

Follow Threader