Photo: Pedronet on flickr
TMM have been suffering deja vu. Groundhog year perhaps.
The check list –
European spreads – check
Bank bailouts needed – check
Equity markets on the slide – check
Complete and utter silence from the very people that should be seen to be taking control of the situation – CHECK CHECK CHECK!!!!
The Eurostriches are back. We have just revisited our first post on the Eurostriche back in summer 2010 to remind ourselves of their morphology and were struck by the familiarity of conditions to the point of depression. Unfortunately the one noticeable difference was the amounts mentioned that would shock the market. Today we need to add at least one more zero added. E30 billion? Pah ! That’s nothing!
Back in 2010 the market was looking East for the ultimate bailout, but today Voldermort and his Death-eaters appear to be too distracted patting out the flames on the hems of their own robes to worry about taking over the world. But TMM are worried that China is starting to suffer from the same disease as Europe. That of the Eurostriche.
The last policy response we saw from the bridge of the Chinese ship was to ram the engines into reverse to counter a boiling property market. Now whilst TMM have no love of Chinese property developers, cement magnates or officials who use informal financial channels in Macau to take cash offshore, there is a difference between a smack around the chops, solving the root of the problem (political accountability, abominable oversight of SOEs and a need for “real deal” control style privatization) and putting the whole economy into cardiac arrest with a credit/fiscal baseball bat to the head.
But since this last response, the infighting between the Captain and his officers on the bridge of the Chinese economy appears to have left no one in charge of the controls. Only the PBOC appears to be tinkering around the edges and TMM think they should stop behaving like a former pimply 15 year old turned 30 year old overpaid banker/fundmanager, jumping up and down on the couch at Spark in Beijing celebrating its newfound cultural relevance and realise that it is doing as much to bully the economy now as the property developer bovver boys do when doing “land consolidation”.
This morning there was rumoured hope of a new stimulation package but this was swiftly countered by *CHINA HAS NO INTENTION TO INTRO LARGE SCALE STIMULUS: XINHUA. TMM would like to believe that this is a comment on the lines of the Bernanke Put, to be taken as meaning that they have no intentions as there is no need, rather than there would be no intentions even if there is a need. Or rather, that the easing this time around is unlikely to be the “just throw a couple of trillion of loans at it”, and more about targetted easing, particularly on the fiscal side.
Yet TMM do have a terrible fear that the diseases of political paralysis that has been seen in the US during its debt ceiling debates and in Europe with the lack of string hand response, is now breaking out in China. If TMM don’t see any signs of faster implementation of Chinese infrastructure projects then we are going to be dreaming up a new Ostriche term for the Sinocrats.