There are certain compounds that just do not go together without creating volatile reactions. These binary substances, when mixed, are exceedingly dangerous under even stable conditions. It seems as if there is a lot to be said of the latest near miss in Chinese bond defaults. Again, we are dealing with a relatively tiny business that should, on its own, [...]
Analyzing anything of and around China is difficult to begin with, so any misconceptions that form are understandable. That being said, there are certain methodologies to global finance that penetrate even these potential bends in conventional wisdom. I think that applies to recent commentary on the Chinese financial system as it relates to currency changes. After appreciating steadily since revaluation [...]
Gold has seen a healthy run since the first incidence of QE taper, again conforming to the idea that gold is tail risk insurance unrelated to inflation perceptions. That included a January rebuke to the collateral pressure/selloff pattern that we saw too much of in 2013. In the past few days, gold prices have come down a bit and that [...]
The core of 2014 Chinese defaults is really about control, as it ever is in 21st century finance. Central banks believe they have it and can exercise it with precision, a mysticism that is accepted widely by market participants. In allowing smaller firms to default, they are sending the signal that they want greater order in what is near-universally recognized [...]
So far in China this year there have been defaults and “bailouts” in the credit markets, but they are tiny in relative comparison to everything else. That they have occurred at all is why they have grabbed so much attention. We all have some inkling of the credit and monetary inequities that are roiling inside the Chinese economic gut, but [...]
I’m not sure what popular perception believes of international holdings of “reserves”, but I would wager there is a rather large disconnect between it and how the international system actually works. This is more than just theoretical notions of banking in eurodollar shadows, but the pipelines that connect and cross the globe. Central banks do not have massive stores of [...]
The Markit Manufacturing PMI for the Eurozone hit a 24-month high just above the magical 50 line. While the Services PMI fell just short of 50, it was at 49.6, a level not seen in 18 months. These snapshots of economic function have provided a spike of optimism against the dismal European depression that has been unshakable. There should be [...]
The Reserve Bank of India was again spotted in the forex markets, as the rupee again nears its record low against the dollar. While India has myriad problems that add up to foreign exchange imbalances, there is pressure on the dollar as globally firms are finding them harder to come by. That rising dollar has far-reaching implications across already-stressed markets [...]
Gold sank lower in coincidence with the reappearance of Chinese liquidity issues. Much like the Fed, the PBOC has both denied it would inject liquidity into the interbank markets while at the same time contradicting itself. The latest from PBOC governor Zhou Xiaochuan was centered on the ephemeral concept of “stability”: “The central bank will make comprehensive use of policy [...]
Late Friday the Treasury Department released its semi-annual report on global exchange rates or as I like to call it, the semi-annual report on why all other countries on planet earth should let their currencies rise against the UD Dollar. Or maybe the semi-annual report on how easy monetary policy by other countries' central banks is bad but it isn't [...]
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