The Chinese central bank has just pulled the trigger to stimulate its economy making loans cheaper such are mortgage. This is a big change from all of the people talking about China's economy collapsing. Well that also took place and this stimulus package is what's saving its butt at the moment kind of like the stims everyone got in the USA back in 2021.
Remember just a year ago or less when all of these major projects in the housing sector ended up closing up shop and even blowing up some buildings they couldn't finish. The bubble of all bubbles riff with fraud.
Well this move by China now means that trillions has been injected into the economy, bank rates slashed and overall support into the real estate sector.
Ring any bells?
Kind of sounds like a mix of 2009 and 2020 mixed into one for the USA both of which did good for a little pump but ended up crashing the economy into a recession.
What Does It Mean For the Rest Of The World?
China is the worlds second largest economy to the USA. With China making this move it often has an effect in a massive upscale in asset prices. Those assets such as stocks, crypto, silver, oil etc could all start to see massive inflation once again in values.
Right now the China economy is in a almost deflation scenario in which asset prices fall. However that falling is the result of companies not being able to pay off debts and people overall just losing confidence in their investments. Meaning they hoard all of there money and sit on it which further ushers in a larger issue in which the economy can collapse.
I think the most wild of the cuts they did is they reduced everyone's mortgage rates by half a percent.
That means if you had a loan for 6% your bank would call you up and tell you well now you're at 5.5%. But they are also doing a number of rather wild things. They are offering money to investors to more liquidity, banks have more liquidity and transactions between banks are now lowered and companies are now getting money to buy back stocks.
TARP
We can look back to the 2008 days in the USA in what was called TARP where the USA went through this and did nearly the same things. It included 750 billion dollars to stabilize the economy and how did that end up?
It did save it but we went through one of the worst recessions and a bunch of banks, companies and rich folk all making off with millions further increasing the wealth gap which we continue to see to this day.
Effects Around The World
While this might not seem like a big deal being that it's over in China it actully should mean that US stocks and other assets around the world are impacted in the positive direction. This is mainly due to China having the second largest economy.
Commodity stocks like those of oil have been up this week for the most part and this will most likely show it's face more come Monday being that the markets are closed until Monday.
The next best place to look would be the crypto markets and seeing how they trade over this weekend. However there could be a liquidity hang up being that most everything is closed on the weekends.
Another sector to watch will be dividend paying stocks as they have increased liquidity that liquidity is often dumped out in the form of dividends to share holders. So not only do REITs for example have a benefit right now of FED rate cuts but they could also now see a boost based on Chinas stim package.
The Crypto sector is also looking rather healthy and it's not only from this there are currently a number of factors playing into its price. The real beauty of bitcoin is it's a fix amount and in being a fixed amount it seems to suck up all of the inflation happening in the world into once stable asset that everyone can predict.
This spill over effect should boost the overall economies around the world. This means I expect a ATH for Bitcoin rolling into 2025 making $100,000 looking reasonable.
Posted Using InLeo Alpha
