It's really cute that China will audit debt at all levels of its government. I take this promise about as seriously as I took the bank stress tests in the US and Europe. There's no way Chinese regulators will ever announce anything other than a clean bill of health to the public. They liberalized bank loan requirements precisely because they plan to layer more debt on top of existing debt.
China isn't the only kid on the block that wants to continue their leverage binge. Germany has assured Greece that it will not face further debt haircuts. I can only guess at how ginormous the Fed's dollar swap lines with the ECB have now grown to make this promise possible. Even Frau Merkel's iron rhetoric has softened. Elite fear of asset destruction and revolution must be palpable in the halls of Brussels, London, and Washington.
Corporate earnings have declined, and I think they've probably peaked. No way could profits at twice their historic percentage of GDP ever be sustained indefinitely. I'm pretty sure I've said that on this blog more than once. Mean reversion to 6% of GDP means an overshoot to the downside is likely before another upturn can take place. People who work for a company listed in the S&P 500 need to update their resumes.
The IMF doesn't have to worry about whether the Fed will improve its transparency. There is no way that is going to happen. The Fed is not going to end QE until after hyperinflation destroys the dollar. I could have told the IMF that but they never asked me, so instead they have to go wondering out loud in public.
Now it's Brazil's turn to make me LOL. Brazil wants the IMF to exclude the debt owned by its central bank from formal government debt calculations. That is about as irresponsible as a homeowner asking their credit agency to exclude their delinquent mortgage from their credit report because it can't be securitized. Try running that argument past your home loan officer and see how fast they have security escort you out of the bank. Brazil's pleading makes it clear that their currency isn't ready to serve as part of a central bank reserve portfolio no matter how robust their natural resource inventory looks. At least they still have the next Summer Olympics going for them.
I'm not going to count on any of the above parties to tell the truth until real economic results are obvious even to the dullards running mutual funds and wealth management firms. The irony of evolution is that folks with the most attractive pedigrees have become the least able to adapt to environmental changes. Stupid losers deserve what they get for not reading my blog.