Most stories on China over the past few months have included some variation on the chart below, which appeared in a recent Free Exchange column ("Taking credit for nothing").

It shows the boom in Chinese credit, broadly and narrowly defined. A renewed surge in lending in the first ten days of June greatly alarmed China's central bank, according to a scoopy story in Tuesday's Wall Street Journal. Rattled, the central bank proceeded to rattle everyone else by letting the cost of interbank borrowing spike. But the chart opposite only tells half the story. The other half is shown in the chart below, published by Nomura in an impressive June 28th report called "Asia's rising risk premium". This chart, like the first, shows China's credit boom (including its shadow-banking boom), based on the deviation of credit (and property prices) from their trends. But on top of this depiction of the financial cycle it also shows a more traditional measure of the country's business cycle, based on the deviation of GDP growth from its trend. The two cycles, you will notice, are way out of tune with each other: credit is booming, but the economy is not.

The dissonance in Nomura's chart is a pretty good representation of the ambivalence in my own brain as I contemplate China's policy dilemma. And it is a dilemma. If both the financial and the business cycle were in full upward swing, the policy response would be obvious: restrain demand. But when the economy is already weakening, such restraint would make the slowdown worse, preventing the economy making full use of its potential. Few outside commentators seem to worry much about that. (LarsChristensen is one notable exception.) Most seem to imagine that the only people who will be hurt by tightening are corrupt communist apparatchiks bent on vulgar and vainglorious follies. It is, after all, the Chinese central bank's job to remove the maotai just when the Party is really warming up. But that is not how a macroeconomic slowdown works. The pain spreads and multiplies far beyond the original malinvestors to many marginal workers. China is not yet a rich country. And the migrants who man its construction industry have little to fall back on. Their "unemployment insurance" typically amounts to a hectare or two of cropland.

The dissonance in Nomura's chart also helps explain the discord in China's money market last month. Some banks lent heavily in the first ten days of June, according to a summary of a central-bank meeting obtained by the Journal, because they "thought the government would launch stimulus policies as the economy slows, and positioned themselves in advance". The banks were, in effect, looking at the dipping red line on Nomura's chart and expecting a government response. It does, after all, have a growth target. But the central bank was instead looking at the soaring black and pink lines. By the time the lenders realised their mistake, they had already overcommitted themselves. An overnight interest rate of more than 25% was the result.