ZERO HEDGE - Aug 14, 2020 -
by Tyler Durden -
Two months ago we said that "the most important question in finance today" is whether what comes next after the historic liquidity tsunami which will see global central bank balance sheets hit $28 trillion next year...
... is inflation or deflation, a question which is even more critical and urgent today, yet which provokes even more market confusion, which can easily be seen in the record divergence between real rates (inflation adjusted current rates) which are at all time record lows, and breakevens (inflation expectations), which have been soaring for the past 3 months, a topic which we addressed earlier this week in "What's Behind The Bizzare Break Between Breakevens And Crashing Real Rates."
Yet one place where the all-important answer to this question that will define the global monetary system for the foreseeable future may be found is not in the US at all, but rather in China, as present in today's chart of the day, showing the uncanny correlation between China's credit impulse and (12 month lagged) US reflation, as measured by CPI-adjusted real rates.