If China pursues fiscal stimulus while maintaining the currency peg, it will mechanistically sterilize or offset any fiscal easing to prevent currency depreciation, rendering stimulus self-defeating, as demonstrated by Japan's 1990-2005 experience where government deficits rose from 8-12% while private credit declined, leaving total credit flat.

causalpending

Speaker

Brian McCarthy

Evidence Quote

if they really Goose things with fiscal it will create downward pressure on the currency that they will have to offset with some tight tighter monetary policy... they will sort of mechanistically have to sterilize or offset any fiscal easing

Source

China’s Economic House Of Cards Is Collapsing | Brian McCarthyThe Monetary Matters Network
Created: 8/10/2026, 11:05:04 PM

My Notes

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