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Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski.  Artwork by David Parkins, operating with palette knives, color charts, painting palettes, tube wringers and paint rollers.


China’s ForEx Reserves are Calm… Too Calm

China, owner of the biggest foreign exchange collection in human history, is reporting ‘no change’ in reserves. For months! In the middle of a monetary maelstrom?! That’s no accident, nor does it suggest calm serenity. Precisely the opposite. It’s unnatural. The implications are unsettling.



[Emil’s Summary] Life is full of problems. And when particularly irritated by them, we turn to professionals for help. Sure, men – especially the married kind – will insist they can take care of it. Plumbing? No problem. The Johnson-rod is loose in the car? I got it. Open wound with compound bone fracture? Rub some dirt on it. Still, eventually even men will get to a point when they’ll ask for directions, because what can be done – they built the city all wrong. And so, when the technical expert is called we damn well expect they’ve got a toolbox of specialized, effective gadgets.

For example, those tooth-yanking sadists are expected to make small talk about The Marathon Man while utilizing a tray of mouth mirrors, sickle probes, scalers and saliva ejectors. Go to the stables and you’ll see brushes, sweat scrapers, hoof picks, deworming pastes, fly bonnets and liniments that will give your mare that glossy finish. One expects the same of our monetary technocrats. Their toolkit – you’d EXPECT – to hold a printing press, bond certificates, gold, as well as maps and barometers identifying the specification, production, distribution and utilization of modern money.

In this 21st episode of Making Sense, Jeff Snider tells us what IS in the monetary toolkit after spending a professional lifetime reading meeting minutes, transcripts and speeches. What’s in there? Yeah, Magic-8 Ball. A rubber duck. Prayer book, of course. Half-eaten egg-salad sandwich. And importantly, the phone numbers of financial journalists. Join us as we discuss the monetary toolkit through the lens of: China’s unchanging foreign exchange reserves, credit conditions in the United States and PMI scores from around the world. Also, we end the show by holding a candle-light vigil for the 13th anniversary August 9, 2007. The day that the global monetary order malfunctioned. A day that the then-CEO of the British bank Northern Rock said, “the world changed.” A day that The Guardian newspaper analogized to August 4, 1914 – the start of The Great War. A day that has yet to end.

01:29 China introduction – why did Jeff write about the Chinese yuan now?
02:57 A ‘straight line’ is unnatural in the complex system of central bank reserves. Is it a sign of manipulation?
08:24 Foreign exchange reserves have been ‘frozen’ for two months. Why is China doing it?
10:11 China’s experience with the four eurodollar disturbances (2000-07).
12:03 China’s experience with the four eurodollar disturbances (2007-09).
13:18 China’s experience with the four eurodollar disturbances (2011-12).
15:31 China’s experience with the four eurodollar disturbances (2014-16).
17:22 Petro-yuan. Is it a geopolitical gambit? Or attempt to relieve desperate pressure of a dollar shortage?
20:53 Is China’s economy (e.g. retail sales, industrial production) affected by monetary destruction?

What’s In The Same Number? China’s Part In The (euro)Dollar Story: https://bit.ly/3ahCjND
Reading the Tea Leaves About China (Making Sense Episode 14): https://youtu.be/UTTjUGp-K-o
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7