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“Fed Watch” is a macro podcast that stays true to Bitcoin’s rebellious nature. Each episode questions the mainstream and bitcoin narratives by examining current events on a macro basis around the world, with an emphasis on central banks and currencies.
In this episode, Christian Keroles and I dive into the surprise rate cut by the People’s Bank of China (PBOC) and read some of Jamie Dimon’s recently leaked comments on the global economy and geopolitics.
China’s Surprise Rate Cut
Let’s take a quick look at the Bitcoin chart and then discuss China’s economic indicators for July 2022. I read the Bloomberg article. “China will be shocked by a rate cut as data points to a ‘worrying’ slowdown.”
Before and after the data was released, China’s economy was worse than last month and far below expectations. China’s industrial production is just 3.8% below bearish expectations after decades of high single-digit or high double-digit gains.
Another key indicator of the Chinese economy is retail sales growth. China is emerging from the middle-income trap and becoming a consumption-driven economy. The growth rate was a terrifying 2.7%, compared to the forecast of 4.9%.
Real estate and the real estate sector registered a 6.4% decline, perhaps a rosy figure. A recent episode showed that China’s real estate market, like sales of new homes, has fallen by as much as 30% month-on-month in recent months. This is absolutely devastating for a sector built around presales and mired in slow motion credit defaults.
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The latest news for China this week is that the PBOC cut two short-term policy rates by 10 basis points each. Not much, but it puts you in direct conflict with other central banks pursuing a tightening path.
As you can see in the chart below, the PBOC has been cutting rates consistently long before COVID. While this recent weakness may be due to the COVID-zero policy, the data suggests that China is just trending toward a return to trend – a financial crisis.
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In the chart below you can see the growth rate of China’s gross domestic product over the last 25 years. China’s growth rate changed fundamentally during the global financial crisis and has been trending downward ever since. COVID was a big shock, but we are now returning to the trend towards crisis.
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I know Jamie Dimon is not the most popular person in the Bitcoin community, but he is a heavyweight in the world of banking and finance. So when some of his comments to high-net-worth clients leaked this week, at least his statements should be investigated, and Jamie Dimon said he was the CEO of JPMorgan Chase and a Wall Street bank. Also note that is impacting the Federal Reserve Bank. This could be similar to what you’ve heard from candid conversations with Jerome Powell.
As for the upcoming recession, Dimon assessed the resulting 10% soft landing, 20-30% moderate recession, 20-30% more severe recession, and 20-30% worse. That means he believes there’s about a 50% chance of a deep recession or worse. This is important, but tangled, and shows a high level of uncertainty at the top of banking and finance.
I was also uncertain about the direction of consumer price index and Fed policy. Powell is also likely to be uncertain, so it’s important here.
Dimon was more certain about other things, like China. “China has serious problems,” he said, adding that “dictatorial control works in certain areas, but not in the long run.” It was followed by, “I think it’s a mistake to say America has the end of the stick.”
We may look at Jamie Dimon as the quintessential Davos man friendly to the World Economic Forum and its agenda, but in these comments he denounces environmental, social and governance (ESG), Encouraging more oil to be pumped in the United States. Less oil from the US is better for the environment.
Finally, Dimon commented on the “awakened capitalism” that characterizes the ESG movement. It was a little unclear what his immediate thoughts were, but he certainly wants us to abandon the policies that are tearing us apart and hurting our economy. We want to focus on supporting.
That’s it for this week. Thank you watchers and listeners. If you enjoy this content, please like, subscribe, review and share!
Don’t forget to check out the “Fed Watch Clips” channel on YouTube.
This is a guest post by Ansel Lindner. Opinions expressed are entirely his own and do not necessarily reflect those of his BTC Inc. or Bitcoin Magazine.