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Gordon T Long

Gordon T Long

Global Macro Research | Macro-Technical Analysis 

TIPPING POINTS

FLOWS & LIQUIDITY

 

A GLOBAL REFLATION ROCKET HAS BEEN LAUNCHED

It is easy to lose perspective with the financial recovery and stimulus numbers currently being bantered around – Millions, Billions and now Trillions! Lets try and put them into some sort of context.
 
GLOBAL
The IMF recently outlined how the COVID-19 pandemic and associated lockdowns have prompted unprecedented Global fiscal actions that have now amounted to:
    • $11.7 Trillion, or close to 12%of global GDP, as of September 11, 2020.
      • Half of the fiscal actions consisted of additional spending or forgone revenue, including temporary tax cuts,
      • The other half liquidity support, including loans, guarantees, and capital injections by the public sector.
    • In 2020, Global government deficits are set to surge by an average of 9% of GDP, 
    • Global public debt is projected to approach 100 % of GDP, a record high,
To combat the economic fallout from the Great Financial Crisis of 2008 central banks printed $12 trillion between 2008 and 2016.

 
They’ve printed more than HALF of this ($7 trillion) in the six months from April to September alone. 
 
USA
In the US between stimulus payments and central bank lending facilities directly to small businesses/ Main Street, much of the money appears to be going straight into the economy:
    • In the U.S., we’ve already seen one stimulus program of $3 trillion. 
    • On top of this, the Fed has put over $1.6 TRILLION in actual real money into the U.S. economy in the form of credit facilities. 
    • Add that up and you are talking about $5+ trillion in new money entering the US economy this year.
    • And now Congress is talking about another stimulus program somewhere close to $1.8 trillion being funneled into the economy sometime in the next three months. 
    • That would put the total money printing for 2020 in the ballpark of $7 trillion.
Again, let’s put this into perspective. 
 
The U.S. economy is roughly $22 trillion in size. So, in the span of a single year, policymakers will have funneled an amount of money equal to nearly 33% of U.S. GDP directly into the economy.
CHINA 
In March of this year, to offset the catastrophic hit the Chinese economy had suffered from the Covid-19 pandemic, China injected a record 5.2 trillion yuan ($732 billion) in new total social financing – China’s broadest credit aggregate. Five months later Beijing once again surprised to the upside when in August China injected a whopping 3.58 trillion yuan into its economy ($520 billion).
 
The ~$1.4 in 5 months is a historic rate and only comparable to two previous shocks where the Chinese Impulse helped save the global economy. 
 
This is how you begin to reflate a MASSIVE GLOBAL Bubble!

“While the financial punditry is preoccupied with the Fed and its $7 trillion balance sheet, whether Powell is purchasing bond ETFs or has enigmatically stopped doing so (as it did in August), and whether the US central bank has any hope of sparking inflation (with or without the help of Congress), what most are forgetting is that when it comes to any global reflationary spark, China – and its $40 trillion financial system which is double that of the US – has been a far more critical driver than the US ever since the financial crisis.”     Tyler Durden – ZeroHedge
 

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