The Hangover

Friday, December 11, 2009

Today's post will be mercifully short, as last night was Macro Man's office Christmas party. Overconsumption of adult beverages has left him nursing a startlingly powerful hangover, and he really hasn't got the energy to do more than point at pictures.

Thankfully, China released a veritable library of data last night that makes for interesting viewing. The latest M2 data confirm that Beijing has been throwing a pretty serious party of its own, with plenty of liquid(ity) provided....
The bill hasn't come yet, so everyone still seems to be having a good time. Even the normally grumpy "foreign devil" guests can't complain too much; hey, just look at that import growth!
Ah, but some early arrivals who drank deeply do indeed to be in the early stages of the same "pounding head, dry mouth, dodgy guts" ordeal that your author is currently enduring. Copper imports have started collapsing back towards trend:
as have iron ore imports:
Strangely, the one commodity sector that seems to be the most resilient is the one with the soggiest price of late, crude:
Of course, China has a relatively lower profile in the oil market than they do in, say, copper. But still, the relative divergence in price fortunes is striking. In any event, it seems as if even China cannot party indefinitely without getting a hangover. Sure, a hair of the dog approach can postpone the pain....but the more that that remedy is pursued, the more painful the hangover will be when it finally comes time to sober up.

Posted by Macro Man at 9:10 AM  


Headline inflation has also started to rise in China - not surprising given the base effects from last year and the recent rise in food prices. Inflation lags M2 growth by around 9 months - it is just a matter of time. Of course, asset price inflation is already underway. The hangover may be very large - 10.4t in loans over the past 12 months (or one third of GDP) is one hell of a party.

Skippy said...
11:17 AM

Anonymous said...
12:30 PM  

very funny

Anonymous said...
12:48 PM  

MM, what about coal? Are they still importing more than normal? or it also coming back to normal?

Anonymous said...
1:08 PM  

Similar profile, though the srop off has not been as extreme yet. That might have something to do with the weather...these data are not seasonally adjusted, so might make sense that energy imports have not fallen as much.

Macro Man said...
1:12 PM  

The one thing I have learnt in markets is that when drunk and anticipating less sleep than usual, one MUST drink a Berocca before bed to prevent ill effects the next day.

Hope you're surviving MM

Minty said...
1:19 PM  

Just one question:

As far as I can understand from this graph:

we may experience a certain inflaton in hangovers when banks start lending and the multiplier returns to something less ridicolous than 0.8...

Any thoughts?

Tord Steiro said...
2:07 PM  

Whatever your hangover, it could be worse, MM; you could have watched the Steelers last night. . .

But What do I Know? said...
2:43 PM  

Well, I said the other day that the pity party's over. I'm at the point now where I hope they lose out so they can finally draft a half decent tackle....

Macro Man said...
3:00 PM  

am loving this treasury smackdown...well deserved and more to come...

Anonymous said...
3:27 PM  

i hear ya about the hangover

how bout them steelers...!!!

Anonymous said...
3:29 PM  

How about them dollars, en fuego atm...

Our Man in NYC said...
4:23 PM  

LB- time for the US flattner has arrived

Anonymous said...
4:52 PM  

US November gasoline price is almost 50% hgiher than that in November 2008. I cannot wait to see the headline inflation number next week before FOMC. Sure Ben will see that number before everybody else here, right?

zjin said...
6:35 PM  

Tord that's assuming the reserves stay flush in the face of a rising multiplier. Your chart demonstrates that there is no causality going on. It's the pushing on a string deal.

Steve said...
6:38 PM  

zjin -

this is a big problem with finance now. If you go out and look at real prices in the real world -- they are definitely going up

But finance geeks insist on a weird academic debate about theoretical models that may or may not even be valid -- money multipliers, reserve deposits, number of leprechauns within a distance of the NY Fed.

Theoretically, the finance geeks are right... but as we all learned (or should have learned) from the LTCM disaster, the real world doesn't always "obey" theory

Theoretically, LTCM could not blow up. Theoretically, we cannot have inflation because low unemployment (like in the 1970s?) or because some money multiplier nonsense.

But in the real world, it can and is happening.

My favorite quote I like to tell analysts is: every ship at the bottom of the ocean has a set of charts on it. Just because there are no underwater rocks shown on the chart does not mean you can't hit one or run aground.

That's the difference between book smart and experience

To everyone on the blog: Have a great holiday and I hope to have lots of endless debates again next year. MM -- hope your hangover clears quickly

Gary said...
8:48 PM  


It took a decade for the Japanese Damn to burst.

jc said...
8:19 AM  

Abu Dhabi, Dubai's white knight.

"Hans, Bubi, I'm your white knight!"

Eillis, Die Hard.

Skippy said...
8:19 AM  

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