I don’t know how many different ways I can write this. Reserves are not insurance against monetary reversal, they are the calamity. If you have them, that only means you have a problem. And if you have a lot of them, well. The Financial Times yesterday writes again about Argentina. No matter what’s thrown at that country, nothing will staunch [...]
One equal part of inflation hysteria had been that as the US economy recovers and growth accelerates, foreign buyers would flee US Treasuries. The bond market would be hit with a double damning of higher inflation and and substantially reduced overseas purchases. Under such pressure, no way could yields hold under 3% for very long. To often make the case, [...]
Today for the first time in over a week, HKD moved. That’s not unsurprising, as we should expect that nothing goes in a straight line – even devaluation of this kind. The issue is more about why it might have moved, or what it cost to move it. The Hong Kong Monetary Authority (HKMA) had started carefully. They were only [...]
On Friday I wrote: Again, the size of your reserves reflects, and is proportional to, your potential need for funding. You can’t accumulate that many unless you have a similarly arrayed “dollar short.” The bigger the stockpile the more potential for it to get out of hand if things go the wrong way (usually on the self-reinforcing cycle of rising [...]
Earlier this month, China’s State Administration of Foreign Exchange (SAFE) reported a large increase in official reserve holdings. The biggest “inflows” in several years has, as you would expect, led to much optimistic commentary suggesting if not outright stating that the currency problems are no more. It is not the first time such claims have been made, as this has [...]
The mainstream narrative as it relates to Chinese money is “tightening.” Having survived the economic downturn last year, we are to believe that the PBOC is once again on bubble duty. They raised their reverse repo rates, considered to be their policy benchmarks, three times up to mid-March. The central bank also increased the rate on its Medium Term Lending [...]
I honestly don’t know how much clearer it could possibly get. The mainstream continues to struggle to identify the causes of the “rising dollar” when in all cases it is decidedly simple. The more the dollar goes up, the more whatever counterparty country is paying for those dollars. The entire world is in a synthetic short position created decades ago, [...]
Is Mexico about to go down the same road as China, Brazil, and so many others have the past few years? The more interesting question may be what took so long, if they are. Mexico’s central bank has been forced into action again, after interjecting itself last month supplying dollars directly to Mexican banks, as well as the same in [...]
China’s Foreign Exchange Agency reported a $12 billion drawdown in that country’s foreign “reserves” holdings during January 2017. That was considerably less than the past three months, where all three saw more than $40 billion pulled out, nearly $70 billion in just November. These results are not in any way surprising, and are actually quite consistent with observed behavior during [...]
China’s official reported reserves rose in March for the first time in five months. Though reserves had fallen to barely $3.2 trillion in February, that was down just $28.6 billion from January, being already hailed as a success and a step in the right direction since that was less than a third of the shocking decline in January (-$99.5 billion). [...]
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