As if we needed more evidence, the Chinese liquidity system is stuck. As much as authorities in China might complain about the global credit-based reserve currency system, as PBOC Governor Zhou Xiaochuan put it in March 2009, and quietly seek out its replacement, they not only allowed it to happen they quite eagerly participated in it so long as it [...]
The economy of 2015 started out “unexpectedly” weak before succumbing to “global turmoil.” It was the events of last summer that began to sow serious doubts about not just the economic narrative seeking to dismiss weakness (“transitory”) but rather central banking and QE itself. The repeat in January/February further eroded mainstream credibility, particularly since only a few weeks before the [...]
The July update to the Treasury International Capital flows (TIC) was mostly the same as we have observed throughout this year. The private segment continues to buy on net while the official sector continues to sell on net. I think it fairly reasonable to conclude that the latter is purposefully designed so that the former can take place. In other [...]
If it was quiet late last week with China dark for its Mid-Autumn festival, the return from holiday shattered the calm and further amplified what is already a significant problem. The activity in CNH markets continues to astound, but I still think it is domestic liquidity that is more significant. Unsecured offshore (CNH) lending (HIBOR) has all but dried up [...]
If anyone might wonder why yesterday and today seem far less noteworthy and less perhaps dangerous, the Chinese are once again on holiday. The Mid-Autumn festival began yesterday and extends today. The last money market trading, then, was early Thursday morning with offshore CNH coming back down if only slightly. What commentary there is in relation to CNH continues to [...]
In 1927, physicist Werner Heisenberg wrote in his paper defining the “uncertainty principle” that, “the more precisely the position is determined, the less precisely momentum is known in this instant, and vice versa.” It has also been called the “principle of indeterminacy” which simply means that you can only pick one variable. By doing so, you lose any chance for [...]
Speculators are a curious bunch, not in what they do or how they do it but more so in how and really when they attain notice. When the SEC in July 2008 banned naked short selling of GSE and primary dealer stocks, they were the obvious enemy creating “unnecessary” trouble that was amplifying what was supposed to be in the [...]
On August 30, the overnight SHIBOR rate jumped above 2.05% for the first time in more than a year. As the acronym indicates, SHIBOR is to Chinese RMB interbank liquidity as LIBOR is to eurodollars in London. In the summer of 2015, SHIBOR began rising steadily and often precipitously despite monetary policy “stimulus.” On June 27, 2015, the PBOC cut [...]
With the sudden interjection of uncertainty halting the surge in Brexit odds since the unfortunate attack on British MP Jo Cox last week, the financial world has benefitted from the pound’s resurrection. Sterling has had a very good couple of days in this reversal, especially today. As it rises it adds the same as we saw on the day of [...]
With stocks falling today continuing somewhat yesterday’s post-FOMC selloff there was going to be universal citation of monetary policy; or at least these new expectations of monetary policy coming supposedly for June. The dominant narrative remains in favor of Fed power where stocks don’t do well without it. So as the central bank removes so very slowly its “accommodation” we [...]
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