China Tightens Economic Screws. Is it a war front?

The talking heads on the business shows are agog at the collapse of Copper prices this week as Chinese export data fell hard.  It should be no secret that China’s leaders are trying to deftly deflate a credit bubble there before it brings their whole economy down – and with it potentially the Communist Party.  I have read estimates that credit in China is in the aggregate over 500% of GDP.  Of course no one really knows as official statistics that are true are hard to come by in the managed economy.  But suffice it to say they have a credit bubble proportionately even larger than the one in the US in 2007.  And they want to prevent a 2008 type outcome which may threaten social harmony in the Middle Kingdom.

This got me thinking today about whether the timing of this is not convenient as a way to harm their nemesis Japan.  Recall that Japan has made a huge gamble that they can print money in such a way that they can restart their economy and get the tax revenues that entails, before the effect of rising rates that would come from the inflation they seek causes their world record high debt burden to eat all of their revenue and then some.  This is called Abenomics after the Prime Minister, Shinzo Abe.  Mr. Abe is also however stoking the flames of Japanese nationalism with visits to the Yakusune Shrine of their WWII war dead and calls for a beefed up military and changes to the Japanese Constitution that would enable it.  This does not play well in China.  By deflating their credit bubble at this time, China is probably dooming Japan’s effort to reflate its economy successfully.  Surely the powers in China know this?  Perhaps it is an intentional side effect of their plan to deflate their credit bubble?  Hmm.  Perhaps…

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