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“Asia’s sweet spot looks stretched to us and we warn of a rising risk of a potentially painful snapback. High debt leaves it exposed to a global repricing of credit risk, possibly triggered by inflation surprises,” said Rob Subbaraman from Nomura. “We believe that 2018 will be the year that China starts to address its moral hazard problem. We see a greater risk of a spike in credit defaults and capital flight,” he said.

Capital Economics says its proxy gauge of Chinese output has dropped to 5.2 per cent from a blistering pace of 6.6 per cent in July, and is likely to slow to 4.5 per cent next year. China’s fixed asset investment has already begun to contract in real terms. The slowdown is heading for levels that set off the recession scare in 2015. The Fed quietly came to the rescue on that occasion by suspending rate rises: this time the U.S. cycle is far more stretched.

Let us assume the Republicans pass US$1.4 trillion of unfunded tax cuts for the next decade, with “front-loaded” stimulus adding 0.8 per cent to America’s GDP growth in 2018.

Let us assume too that U.S. corporations repatriate a fifth of their estimated US$2.6 trillion of offshore funds to take advantage of a one-off 14 per cent tax holiday, whether switching from euros, yen, etc into dollars, or switching the money from the offshore dollar funding markets to the U.S.

Either sends a powerful impulse through global finance. Despite the rise of China and the creation of the euro, the world has never been so dollarized, or so highly geared to U.S. lending rates. The Bank for International Settlements says offshore dollar funding has risen fivefold to US$10.7 trillion since the early 2000s, with a further US$14 trillion of global dollar debt hidden in derivatives. BIS research suggests that the ups and downs of the dollar – and the cycle of dollar liquidity – are what drive the world’s animal spirits and asset prices. This liquidity spigot is clearly being turned off. The Fed is not just raising rates, it is also reversing bond purchases.