I thought it would be interesting to see where we are with inflation in China, as I think it gives a clue to the robustness of the economic growth in the system. I think it is pretty clear to see that inflation is falling pretty sharply. This may explain why the Chinese central bank was so eager to cut rates last week. Yes I may be speaking my own book here but it sure feels like deflation could well become the inevitable beast that central bankers have fought so hard to slay.
I took a look at how “Deflation” is trending on Google and it is only now starting to gain some traction again. This is a perfect setup for a perfect storm.
Finally I think it is prudent to see if that perennial deflationary economy Japan is building up any inflation. Well what do you know it sure is and I think that is a good thing as it is the only chance it ever has of repaying the massive government debt it has on its balance sheet.