Eurodollar University The Second Phase of Asia’s Collapse has Begun
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Jul 14, 2025 Steve Van Metre joins Jeff Snider to delve into Asia's alarming deflationary trends, with Japan now feeling the squeeze and China facing significant producer price drops. They discuss how this shift signals a potential economic strategy change in Beijing, with rising unemployment concerns. The conversation highlights central bank challenges and the ripple effects on global markets, particularly regarding the overcapacity and stagnant demand impacting industries like airlines. It’s a thought-provoking exploration of threats that could deepen the looming recession.
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Asian Producer Price Deflation
- Asian producer prices are in deflation, signaling weak demand rather than inflation.
- Japanese and Chinese companies absorb tariff costs to avoid losing sales volume.
China's Overcapacity Problem
- China's overcapacity issue is a symptom of a global demand shortfall causing price competition.
- Businesses face shrinking margins, risking closures and rising unemployment if demand continues falling.
China's Shift on Overcapacity
- China discourages production cuts to maintain employment despite weak demand.
- This suggests a potential shift tolerating unemployment instead of prolonged deflation.