In an earlier Monitor, we alluded to a possible monetary reason for suspecting that the past year’s spectacular (and inflationary) bounce in Chinese revenues and earnings might have reached its high-water mark.
Here we take a more detailed look at the situation in the Middle Kingdom:-
The older a bull market gets, those who are paid to comment on it become more and more desperate for new things to say about it – a professionally pressing need which tends to split the pundits into two distinct camps, each equally one-eyed about whether prospects are good or bad.
For those who will not take my word for it that banks do create deposits by lending money, let me quote you a little Roepke from a footnote (p113) to his 1936 work, ‘Crises & Cycles’:
“The process [of credit creation] is now clearly explained in any text-book on economics, banking or money (especially recommendable is Hartley Withers’ Meaning of Money). A fuller treatment may be found in the following books: R. G. Hawtrey, op. cit.; J. M. Keynes, A Treatise on Money, pp. 23-49 : C. A. Philips, Bank Credit, New York, 1920; W. F. Crick, “The Genesis of Bank Deposits,” Economica, June 1927, and F. A. von Hayek, Monetary Theory and the Trade Cycle, London,1933.”