By Steve Hanke in Baltimore
The Shanghai Composite Index tumbled by more than 9% in October, and has shed 25% for the year. To determine the probability of a cool down, one must look at the money supply, broadly measured. The relationship between the growth rate of the money supply and nominal GDP is unambiguous and overwhelming. It is unsurprising that Chinese stock markets have been rattled. Moreover, as China has for some time been the biggest contributor to world growth, the cooling spreads beyond the country’s borders.
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