Wood Sister’s Long Push Raising interest rates by the central bank is a more important goal than controlling inflation – bursting the Chinese bubble

Wood Sister's Long Push Raising interest rates by the central bank is a priority over controlling inflation - bursting the Chinese bubble

Original author: @CathieDWood

Original source: twitter

Translation: rick awsb

Note: This article is from @rickawsb’s Twitter. MarsBit compiled it as follows:

Cathie Wood’s long tweet almost bluntly reveals that the Fed’s rate hike is more important than suppressing inflation, and it punctures the Chinese bubble.

Conspiracy theories have been put under the spotlight by mainstream institutional investors for the first time.

The full translation is as follows, with the emphasis on the last paragraph:

“China is exporting deflation in a more profound way than many economists and strategists anticipated. Under unchanged conditions, the renminbi has depreciated by 15% against the US dollar in the past year, which should have caused its Producer Price Index (PPI) inflation rate to rise by 15%. However, in reality, this ratio has decreased by 4%.

In other words, the deflation vortex originating from China is approaching 20% (15% + 4%), and the default problems of China’s real estate and trust companies highlight this.

Since joining the World Trade Organization in 2001, China’s real Gross Domestic Product (GDP) has grown at a double-digit rate for nearly 20 years. Rapid growth can mask many economic problems, often including excessive debt and related leverage effects. These problems are now emerging in China.

China may want to limit, or even stop, the depreciation of the renminbi. To do this, it may sell US dollars and buy renminbi, effectively tightening its monetary policy and exacerbating the fragility of the economy, even under “loose” policies.

In our view, the Federal Reserve has triggered and exacerbated global deflation risks. Its record-breaking 22 rate hikes may first impact China and then spread to other regions of the world.

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