China’s PPI reading for Feb 2021 came in at the highest level since February 2018. Demand must be booming! Not so fast, CPI tells a different story.
QE is meant to generate inflation in the economy by printing money. Unfortunately, the only simple part of that two word phrase is the word “printing”.
Most traders can relate with the scenario where markets react in a way completely opposite to how it should have reacted. The problem lies in the word “should”.
Understanding that emotion is more important a driver of market prices than economic conditions gives traders an extremely valuable perspective.
Are recent acute liquidity problems in the Treasury market due to recent narratives focused on inflation? Or is there something more going on, like in repo?