Image Source: PexelsChina is warming up stimulus to escape deflation. This means Chinese M1 is a priority number to watch.

Chart 1 – China is still in deflation and she can not stay there. Wall Street bankers have stated that the PBOC must ramp up M1 (via QE) to be over M2, otherwise a Chinese (maybe world) deflation crisis in 12 months will be deeper and harder to get out of. (Reference ZH).

Extract from ZH post…Goldman’s Borislav Vladimirov, who makes a very simple case: China now has no choice but to activate QE – just as we have been saying all along.

If it doesn’t, M1 will fail to grow faster than M2, and the government “will spread the monetary crowding out to more weak borrowers in the economy”, since the winners will save the impulse and kill the multiplier, resulting in an even bigger hole for China 12-18 months from now, and global deflationary destruction.

On the other hand, if China does do QE, oil will soar, and bitcoin and gold will be orders of magnitude higher once Beijing triggers then next global reflationary tsunami.
 Chart 2 – Chinese M1 swings correlate to the GDP Deflator index above. 
Chart 3 – When China does QE, it will affect oil prices and world inflation (green arrows). So forget about inflation being transitory, as a decade of sharp hot and cold inflation cycles is here to stay. Any period of hot inflation will be elevated risk for countries with very large sovereign debt levels (like the USA), another reason for elevated gold prices. Click for popup. Clear your browser cache if image is not showing.
Chart 4 – US PMI does well with exploding Chinese M1 (with a 5 month lag). Manufacturing around the world does better. An inflationary boom is near. That is rising world GDP with rising world inflation. Of course, just how fast inflation vs GDP rallies will be the hot issue. 2024 gold prices say inflation will be a very hot issue.  Click for popup. Clear your browser cache if image is not showing.
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