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“Fed Watch” is a macro podcast, true to bitcoin’s rebellious nature. Each episode we challenge the mainstream and Bitcoin narratives by examining current macro events around the world, with an emphasis on central banks and currencies.
In this episode, Christian Keroles and I dive into the surprise rate cuts by the People’s Bank of China (PBOC) and read some of Jamie Dimon’s recently leaked commentary on the global economy and geopolitics.
After a brief look at the bitcoin chart, let’s start talking about China’s July 2022 economic numbers. I read a Bloomberg article titled, “China hits with rate cut as data shows ‘alarming’ slowdown.”
Up and down the data release, the Chinese economy performed worse than last month and well below estimates. After decades of single-digit or even double-digit industrial production growth in China, it’s slashing bearish estimates of just 3.8% year-on-year.
Other important indicators for the Chinese economy are growth in retail sales as they try to break out of the middle-income trap and become a consumption-based economy. Growth was abysmal at just 2.7%, against a projection of 4.9%.
The property and real estate sector recorded a decline of 6.4%, which is likely to be an optimistic reading. In recent episodes, we’ve shown how the Chinese real estate market, like new home sales, has fallen 30% month-on-month in recent months. This is absolutely devastating for an industry built around pre-sales that is stuck in a slow-motion credit default.
The latest update from China this week is that the PBOC also cut its two short-term policy rates, each by 10 basis points. It’s not much, but it puts them in direct opposition to other central banks, which are following a tightening path.
As you can see in the chart below, the PBOC has been cutting rates consistently since long before COVID. This recent weakness can be attributed to its zero-covid policy, but the data shows that China is only experiencing a return to the trend, a trend that is heading towards a financial crisis.
In the graph below, we can see the growth rate of the last 25 years of Chinese gross domestic product. Growth changed fundamentally in China during the global financial crisis and has remained on a downward trend ever since. COVID was a massive shock, but now things are trending back towards a crisis.
I know Jamie Dimon is not the most popular guy in the Bitcoin community, but he is a heavyweight in the world of banking and finance. Which is why, when some of his comments to high-net-worth clients leaked this week, we should at least examine what he said. I will also note that Jamie Dimon is the CEO of JPMorgan Chase and the Wall Street banks influence the Federal Reserve. This is likely to be similar to what we would hear from a candid conversation with Jerome Powell.
As for the coming recession, Dimon calculated that the results are 10% soft landing, 20-30% mild recession, 20-30% harder recession, and 20-30% worse That means he thinks there’s about a 50% chance of a severe recession or worse. This is significant but mixed as it represents a high level of uncertainty at the top of banking and finance.
He was also uncertain about the path of the consumer price index and Fed policy. It’s important here because Powell is probably also uncertain.
Dimon was much more certain about other things, China for example. He said, “China has serious problems” and “Autocratic management may work on certain things, but it does not work in the long term.” After that, “I think it’s a mistake to say that America gets the short end of the stick.”
We might see Jamie Dimon as the stereotypical Davos man, friendly to the World Economic Forum and its agenda, but in these comments he criticizes environmental, social and governance (ESG) and recommends pumping more oil in the US. He implied that more, rather than less, US oil is better for the environment.
Finally, Dimon even made some comments about “woke capitalism,” the hallmark of the ESG movement. It was a little unclear what his direct thoughts were, but he certainly prefers to abandon the policies that are tearing us apart and hurting the economy. Instead, he wants to focus on coming together and supporting each other.
That does it for this week. Thanks to the watchers and listeners. If you like this content, please 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. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
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