Chart Of The Week (CINO)

If I had to pick a chart of the week, it has to be the one below even though it only applies because I created this week. It’s not really something that happened over the last five days, but it does tell us a lot about everything else in the background.

Inflation being a money issue, in China that means bank reserves (unlike the US system). Chinese bank reserves are highly influenced by the PBOC’s forex assets (UST’s). The central bank level of forex is set by the external eurodollar flow or condition. Inflation in China, therefore monetary objectives, are directed more by this exogenous factor as internal deliberation and execution. It’s this way everywhere, really, a product of eurodollar evolution and connection, though we are meant to think that central banks are instead, well, central.

In that way, not only is China’s CPI clearly synchronized with other inflation indices around the world (including Europe’s HICP, meaning different methodology along with it being a different continent) we see the common theme running through all of them. And it’s not the Federal Reserve. It sure makes the inflation scenario that much more difficult to support, even with, of course, globally synchronized growth that would be registered in China first and foremost; if it was really happening.