. The working narrative is that these will, once again, renew global growth and allow governments, corporations and consumers to go even more deeply into debt. But will the increase in liquidity work this time around?
Several arguments can be made indicating that the answer is "no". It's likely that this 'liquidity pulse' may provide a temporary boost to the markets, but not the real economy. This is an extremely hazardous combination.
The end of the cycle
As we explained in our June forecasts, the nascent economic downturn did not start as a result of trade issues, but rather from the diminution of massive Chinese debt-stimulus, which ran from around late 2015 till July 2017. This stimulus was conducted through the shadow-banking sector and especially through the local government financing vehicles, or "LGFVs". During 2016, the size of the shadow banking sector tripled.