This week has already seen a “shocking” move from the PBOC that essentially disqualified almost half of repo collateral from usable status. That amounts to a massive tightening in a manner that is wholly unfamiliar to economists that remain fixated on simple variables like interest rates. The response to the move, especially with further economic data from China, is as [...]
As if it needed further reinforcement, the actions of the PBOC follow a simple script – huge monetarism doesn’t work and is ultimately harmful. That is why “reform” in China is being turned into something unrecognizable to the world’s stock investors especially at a time when China’s economy is expressly vulnerable. Only a week or so ago, China’s researchers issued [...]
For months now, really going back to the summer, the obvious decline in Chinese economic function has produced a resounding expectation that the PBOC would come to the rescue. It was taken axiomatically such was this Pavlovian reflex. Everything the PBOC did over the summer was characterized in that context: the introduction of the PSL and its implementation largely with [...]
Maybe the exuberance over the PBOC finally withdrew to a more realistic interpretation about what transpired by this afternoon, but it seems as if it had at least a fleeting lift to the global celebration over accelerating decay. Undoubtedly, commentary about the interest rate moves in China was unhelpful, as this AP summary shows: China's central bank unexpectedly slashed interest [...]
The relative calm in China may have finally broken, as the latest ebb in the negative credit trajectory may have reached another inflection. It is well-known and established that the Chinese economy is heading toward what was only a few years ago thought to be recessionary (when 7.5% GDP growth was believed an indication of severe distress), to which commentary [...]
China’s figures last week were not “helpful” to the “global growth” narrative, and now Japan and Europe have contributed their share of turning sentiment. It seems as if credit markets might actually be on to something with all this bearishness standing in stark contrast to stock markets that just don’t care about much except self-feeding participation and corporate indulgence. There [...]
There was not much good news from China last night, particularly as there were no PMI releases to allow the media and economists to project uncorrelated optimism. Everything from industrial production to retail sales came in under “estimates”, with industrial production in October particularly worrisome as the second worst month (only better than August) since 2008 and the depths of [...]
The re-emergence of “tight” dollar “supply” has created much the same problems as had been seen prior to October. That means the usual places exhibit duress to varying degrees. What I don’t think is really appreciated is how this year’s episode is transformative toward a different set “ruling” the global dollar short. In one sense, it is not surprising to [...]
The important point about doctrinaire ideology is its utmost rigidity. For the longest time that was relevant to the operations of central banks, as they practiced what might have been the most modern version of a new religion. From the end of the gold standard in the 1960’s (1971 was simply the last step in the process) until only recently [...]
I think there remains a lot of misunderstanding about global finance simply because very few people, including every economist I have seen, realize the systematic arrangement has drastically altered way beyond orthodox comprehension. The eurodollar system that replaced the gold standard has even itself morphed broadly in the past few decades (especially around 1995), and then again in the post-crisis [...]
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