China cuts interest rates again to spur economic growth

[Harsh Jones]

Five interest rate cuts from January through August and five reductions of the TripleR should have accomplished something in the CCP China but it has not produced anything positive. Instead, all this panic cutting and slashing only indicates the CCP Boyz in Beijing are flailing over an economy they can no longer control. After the sudden and shock depreciation of the yuan, the central bank is now going in a radically opposite direction, saying the yuan will appreciate over the next 2-3 years. The bottom line here is that the CCP Boyz don't have two or three years.

Lombard Research told the G-20 meeting the past week in Turkey that China GDP went negative in Q1 this year and that 2015 growth is at the least 3 percent lower than any claims the CCP Boyz are making. That is still awfully generous as the Boyz are claiming 7% growth this year even though they're now suggesting it might be in the area of 6+ percent. So Lombard says less than 4% growth while Nomura which was the first to call the bursting of the housing bubble during Q1 last year says 2.2 percent growth this year. This is in an economy that needs 8 percent annual growth to keep up with labor market demands.

The CCP Boyz now have the Trump Syndrome of needing to provide specific details of policies and programs the Boyz don't have nor will they have. The G-20 just told the CCP Boyz to provide specifics.

"Viable alternatives—not rhetoric—should be presented," South Korean Finance Minister Choi Kyung-hwan said in an interview ahead of a meeting of G-20 finance ministers and central bankers Friday and Saturday.

"There are questions being raised about Chinese policy-making over the last several months," said Ted Truman, a senior fellow at the Peterson Institute for International Affairs and former top financial diplomat at the U.S. Treasury. "They look less like a smooth-oiled machine and more like they are making it up as they go along. That has unnerved some people."

"The question is, are they managing that transition in an effective and orderly way," U.S. Treasury Secretary Jacob Lew told CNBC Wednesday.

Dr. Yao Yudong, head of the People's Bank of China Research Institute of Finance and Banking, said even if the yuan's inclusion in the International Monetary Fund's currency basket, known as Special Drawing Rights (SDR), were made, effective January 2017, it would not help to "immediately" ease a shortage of liquidity globally. Yao said any such easing may not happen for another 20 years due to China's sustained current account surplus. "China's high savings rate means China cannot provide liquidity to the world via the current account right now," he said. The CCP Boyz in Beijing don't have another twenty years either.

http://www.foxbusiness.com/economy-policy/2015/09/04/g-20-seeks-reassurances-that-china-plans-to-calm-markets/

Lol

China is doing exactly what the US has done the last 30 years when the economy rolls over. More easing. Lower rates. QE.

But the USSA boyz are special. This is what the IMF and the USSA did and told SE Asia to do in the wake of the Asian finanical crisis in 1997.

This is how the dominos fell the last time there was a crisis in Asia. (This was when Asia was the debtors and had trade deficits)

The powerful negative shock also sharply reduced the price of oil, which reached a low of about $11 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters.

The reduction in oil revenue also contributed to the 1998 Russian financial crisis, which in turn caused Long-Term Capital Management in the United States to collapse after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bailout. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis).^[56]

What the IMF said to do:

The IMF's support was conditional on a series of economic reforms, the "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to reduce government spending and deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values.

Why the USSA boyz and the IMF are a crew of rank scumbag hypocrites with no credibility:

Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.

They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001, and arguably the same in the fiscal and monetary policies during the 2008–2009 Global Financial Crisis.

[Publicus]

Five interest rate cuts from January through August and five reductions of the TripleR should have accomplished something in the CCP China but it has not produced anything positive. Instead, all this panic cutting and slashing only indicates the CCP Boyz in Beijing are flailing over an economy they can no longer control. After the sudden and shock depreciation of the yuan, the central bank is now going in a radically opposite direction, saying the yuan will appreciate over the next 2-3 years. The bottom line here is that the CCP Boyz don't have two or three years.

Lombard Research told the G-20 meeting the past week in Turkey that China GDP went negative in Q1 this year and that 2015 growth is at the least 3 percent lower than any claims the CCP Boyz are making. That is still awfully generous as the Boyz are claiming 7% growth this year even though they're now suggesting it might be in the area of 6+ percent. So Lombard says less than 4% growth while Nomura which was the first to call the bursting of the housing bubble during Q1 last year says 2.2 percent growth this year. This is in an economy that needs 8 percent annual growth to keep up with labor market demands.

The CCP Boyz now have the Trump Syndrome of needing to provide specific details of policies and programs the Boyz don't have nor will they have. The G-20 just told the CCP Boyz to provide specifics.

"Viable alternatives—not rhetoric—should be presented," South Korean Finance Minister Choi Kyung-hwan said in an interview ahead of a meeting of G-20 finance ministers and central bankers Friday and Saturday.

"There are questions being raised about Chinese policy-making over the last several months," said Ted Truman, a senior fellow at the Peterson Institute for International Affairs and former top financial diplomat at the U.S. Treasury. "They look less like a smooth-oiled machine and more like they are making it up as they go along. That has unnerved some people."

"The question is, are they managing that transition in an effective and orderly way," U.S. Treasury Secretary Jacob Lew told CNBC Wednesday.

Dr. Yao Yudong, head of the People's Bank of China Research Institute of Finance and Banking, said even if the yuan's inclusion in the International Monetary Fund's currency basket, known as Special Drawing Rights (SDR), were made, effective January 2017, it would not help to "immediately" ease a shortage of liquidity globally. Yao said any such easing may not happen for another 20 years due to China's sustained current account surplus. "China's high savings rate means China cannot provide liquidity to the world via the current account right now," he said. The CCP Boyz in Beijing don't have another twenty years either.

http://www.foxbusiness.com/economy-policy/2015/09/04/g-20-seeks-reassurances-that-china-plans-to-calm-markets/

Lol

China is doing exactly what the US has done the last 30 years when the economy rolls over. More easing. Lower rates. QE.

But the USSA boyz are special. This is what the IMF and the USSA did and told SE Asia to do in the wake of the Asian finanical crisis in 1997.

This is how the dominos fell the last time there was a crisis in Asia. (This was when Asia was the debtors and had trade deficits)

The powerful negative shock also sharply reduced the price of oil, which reached a low of about $11 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters.

The reduction in oil revenue also contributed to the 1998 Russian financial crisis, which in turn caused Long-Term Capital Management in the United States to collapse after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bailout. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis).^[56]

What the IMF said to do:

The IMF's support was conditional on a series of economic reforms, the "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to reduce government spending and deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values.

Why the USSA boyz and the IMF are a crew of rank scumbag hypocrites with no credibility:

Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.

They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001, and arguably the same in the fiscal and monetary policies during the 2008–2009 Global Financial Crisis.

China is doing exactly what the US has done the last 30 years when the economy rolls over. More easing. Lower rates. QE.

It is plenty safe to say anyone who thinks what applies to the USA economy and its financial sector applies to the CCP Boyz and their command economy marked by its massively humongous ideological and financial corruption would indeed believe in the Austrian school of Mad Max political economics. Nor are the CCP Boyz doing QE.

A major factor btw in the CCP having to struggle trying to get the yuan in to the IMF basket of SDR currencies is that the People's Bank of China central bank is not independent. CCP owns and operates PBoC at all times. The PBoC belongs to the CCP as their personal toy and plaything. The central bank of the world's second largest economy is not independent; it is indeed an extension of the one and only ruling party there.

The great concern of the G-20 finance ministers, bankers, central bankers etc who gathered in Turkey the past week is that the CCP Boyz are looking at a multiplicity of simultaneous crashes and collapses that are wildly jumping a jig on the head of a pin. That what is occurring is beyond the Boyz' control. This is not a single event as several of 'em had occurred in recent years and that could be dealt with singularly by covering it over then move along to cover over the next one. The current disasters are occurring in a cascade. They are systemic faults; a paradigm failure. Predictable and of epic proportions.

Even if the CCP Boyz were half as competent as they have cleverly projected themselves to be to the casual looker-in, and they never were competent, the present collapses and crashes are beyond the control of any ruling elite anywhere any time.

This is radically different than was the Great Depression, far worse systemically and ideologically. Fundamentally.

[Scott]

A post with oversized graphic has been removed. Graphics which are too large mess up the formatting of the page.

[ExpatOilWorker]

The reduction in oil revenue also contributed to the 1998 Russian financial crisis, which in turn caused Long-Term Capital Management in the United States to collapse after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bailout. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis).^[56]

The $4.6 and $ 3.625 billion sound like small numbers. compared what is being thrown around today. Typo?

Harsh Jones, Since you brought up the issue of banking credentials, I have wanted to ask you for a while if you ever spend any time in China? If so how long time and what did you do there?

[Harsh Jones]

Five interest rate cuts from January through August and five reductions of the TripleR should have accomplished something in the CCP China but it has not produced anything positive. Instead, all this panic cutting and slashing only indicates the CCP Boyz in Beijing are flailing over an economy they can no longer control. After the sudden and shock depreciation of the yuan, the central bank is now going in a radically opposite direction, saying the yuan will appreciate over the next 2-3 years. The bottom line here is that the CCP Boyz don't have two or three years.

Lombard Research told the G-20 meeting the past week in Turkey that China GDP went negative in Q1 this year and that 2015 growth is at the least 3 percent lower than any claims the CCP Boyz are making. That is still awfully generous as the Boyz are claiming 7% growth this year even though they're now suggesting it might be in the area of 6+ percent. So Lombard says less than 4% growth while Nomura which was the first to call the bursting of the housing bubble during Q1 last year says 2.2 percent growth this year. This is in an economy that needs 8 percent annual growth to keep up with labor market demands.

The CCP Boyz now have the Trump Syndrome of needing to provide specific details of policies and programs the Boyz don't have nor will they have. The G-20 just told the CCP Boyz to provide specifics.

"Viable alternatives—not rhetoric—should be presented," South Korean Finance Minister Choi Kyung-hwan said in an interview ahead of a meeting of G-20 finance ministers and central bankers Friday and Saturday.

"There are questions being raised about Chinese policy-making over the last several months," said Ted Truman, a senior fellow at the Peterson Institute for International Affairs and former top financial diplomat at the U.S. Treasury. "They look less like a smooth-oiled machine and more like they are making it up as they go along. That has unnerved some people."

"The question is, are they managing that transition in an effective and orderly way," U.S. Treasury Secretary Jacob Lew told CNBC Wednesday.

Dr. Yao Yudong, head of the People's Bank of China Research Institute of Finance and Banking, said even if the yuan's inclusion in the International Monetary Fund's currency basket, known as Special Drawing Rights (SDR), were made, effective January 2017, it would not help to "immediately" ease a shortage of liquidity globally. Yao said any such easing may not happen for another 20 years due to China's sustained current account surplus. "China's high savings rate means China cannot provide liquidity to the world via the current account right now," he said. The CCP Boyz in Beijing don't have another twenty years either.

http://www.foxbusiness.com/economy-policy/2015/09/04/g-20-seeks-reassurances-that-china-plans-to-calm-markets/

Lol

China is doing exactly what the US has done the last 30 years when the economy rolls over. More easing. Lower rates. QE.

But the USSA boyz are special. This is what the IMF and the USSA did and told SE Asia to do in the wake of the Asian finanical crisis in 1997.

This is how the dominos fell the last time there was a crisis in Asia. (This was when Asia was the debtors and had trade deficits)

The powerful negative shock also sharply reduced the price of oil, which reached a low of about $11 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters.

The reduction in oil revenue also contributed to the 1998 Russian financial crisis, which in turn caused Long-Term Capital Management in the United States to collapse after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bailout. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis).^[56]

What the IMF said to do:

The IMF's support was conditional on a series of economic reforms, the "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to reduce government spending and deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values.

Why the USSA boyz and the IMF are a crew of rank scumbag hypocrites with no credibility:

Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.

They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001, and arguably the same in the fiscal and monetary policies during the 2008–2009 Global Financial Crisis.

China is doing exactly what the US has done the last 30 years when the economy rolls over. More easing. Lower rates. QE.

It is plenty safe to say anyone who thinks what applies to the USA economy and its financial sector applies to the CCP Boyz and their command economy marked by its massively humongous ideological and financial corruption would indeed believe in the Austrian school of Mad Max political economics. Nor are the CCP Boyz doing QE.

A major factor btw in the CCP having to struggle trying to get the yuan in to the IMF basket of SDR currencies is that the People's Bank of China central bank is not independent. CCP owns and operates PBoC at all times. The PBoC belongs to the CCP as their personal toy and plaything. The central bank of the world's second largest economy is not independent; it is indeed an extension of the one and only ruling party there.

The great concern of the G-20 finance ministers, bankers, central bankers etc who gathered in Turkey the past week is that the CCP Boyz are looking at a multiplicity of simultaneous crashes and collapses that are wildly jumping a jig on the head of a pin. That what is occurring is beyond the Boyz' control. This is not a single event as several of 'em had occurred in recent years and that could be dealt with singularly by covering it over then move along to cover over the next one. The current disasters are occurring in a cascade. They are systemic faults; a paradigm failure. Predictable and of epic proportions.

Even if the CCP Boyz were half as competent as they have cleverly projected themselves to be to the casual looker-in, and they never were competent, the present collapses and crashes are beyond the control of any ruling elite anywhere any time.

This is radically different than was the Great Depression, far worse systemically and ideologically. Fundamentally.

It is plenty safe to say anyone who thinks what applies to the USA economy and its financial sector applies to the CCP Boyz

=

Ahh the old arithmetic doesn't matter to the US because it has the reserve currency. So we can't compare the real world to the US.

This is partially true. It is not a proper comparison per se. But do you have any idea why ? Because when you have the reserve currency and the rest of the world so happens to still be functioning and dumb enough to buy your debt as reserve, you have an almost endless amount of rope for which to hang yourself. This rope is in the form of US treasuries. As long as this trend was in motion, (functioning emerging markets who are dumb enough to buy US debt), the US could keep spending wreckless abandon with no consequences in the debt or FX markets.

David Stockman has a piece out today that hits the point home clearly that this is a two way street. And he is no China apologist.

Why Hedge Fund Hot Shots Finally Got Hammered

The Bernanke Fed’s egregious, desperate and utterly unwarranted bailout of Wall Street at the time of the post-Lehman crash taught the gamblers a profound lesson. That is, they could be exceedingly confident that the Fed would keep the free money flowing at all hazards, and that it would resort to any price rigging intervention as might be necessary to keep the stock averages rising.

Indeed, never in all of history have a few ten thousand punters made so many trillions in return for so little economic value added. But what Dalio did in this context was to invent an even more efficient machine to strip-mine the Fed’s monumental largesse.

To wit, Bridgewater’s computers buy more stocks on the “rips”, when equity volatility is falling and prices are rising; and then on the “dips” they rotate funds into more bonds when equity volatility is rising and the herd is retreating to the safe haven of treasuries and other fixed income securities, thereby causing the price of the latter to rise.

In short, there is a payday in every type of short-run financial weather because Bridgewater’s computers are monetary sump pumps; they constantly purge volatility from the portfolio.

But here’s the thing. The above chart could never exist in an honest free market.

You couldn’t create algorithms to safely pump out volatility and milk the market on alternating strokes because the regularity of the waves on which it is based are not natural; they are the handiwork a central bank that has been taken hostage by the casino gamblers.

As it happened, however, in the last few weeks the long reign of the global money printers has begun to sprout fractures. Over on the other side of the earth in China what had become a 20-year long $4 trillion cumulative “bid” for US treasuries and other DM fixed income securities has gone serious “offers”.

This will prove to be one of the great financial pivots of history. During the course of their stupendous inflation of China’s $28 trillion Credit Ponzi, the red suzerains of Beijing bought treasuries hand over fist and thereby kept their price rising and the volatility of the world bond market falling.

To be sure, this wasn’t charity for America’s debt besotted shoppers and governments. It was done in order to peg the RMB exchange rate and thereby keep its mercantilist export machine humming and the people grateful to their beneficent communist party rulers.

But at length it became too much of a good thing because every time the Peoples Bank Of China (PBOC) bought Uncle Sam’s debt it similtaneously expanded the internal banking system and supply of RMB credit. Moreover, after Beijing launched its madcap infrastructure building campaign in response to the the 2008 financial crisis the phony construction and investment boom which ensued attracted increasing waves of hot money from abroad, thereby inflating the domestic Chinese economy to a fever pitch.

In fact, the PBOC was forced to let the RMB slowly rise against the dollar to keep its banking system from becoming a financial runaway. But the steadily rising RMB drastically accelerated the inflow of foreign capital and speculative funds into the Chinese economy, thereby filling the vaults of the PBOC to the brim at more than $4 trillion early this year compared to a few hundred billion at the turn of the century.

But these weren’t monetary reserves in any meaningful or historic sense of the term; they were the fruits of an utterly stupid mercantilist trade policy and the conversion of a naïve old man, and survivor of Mao’s depredations, to the view that communist party power could be better administered from the end of a printing press than from the barrel of a gun.

But Mr. Deng merely unleashed a Credit Monster that sucked in capital and resources from all over the globe into a domestic whirlpool of digging, building, borrowing, investing and speculation that was inherently unstable and incendiary. It was only a matter of time before this edifice of economic madness began to wobble and sway and to eventually buckle entirely.

That time came in 2015—-roughly 30 years after Mr. Deng proclaimed it is glorious to be rich. So saying, he did not have a clue that a credit swollen simulacrum of capitalism run by communist apparatchiks was a doomsday machine.

In any event, what is happening in China now is that the speculators—-both domestic and foreign—–see that the jig is up. That is especially the case after Beijing’s incredibly botched effort to alleviate its massive corporate debt problem by inciting a $5 trillion stock market bubble that is now being blown to smithereens.

This has happened notwithstanding the party bosses sending out truckloads of cash to arrest the stock market’s collapse and then doubling down by sending fleets of paddy wagons to arrest any one who might be tempted into overzealous offers to sell what the PBOC is trying to buy. It means that confidence in the Red Ponzi has at last been shattered.

Accordingly, money is leaking out of China thru a thousand rivulets, by-ways and financial back alleys. To prevent the RMB exchange rate from plunging and thereby inciting even more capital fright and flight, the PBOC has shifted into reverse gear in a large, sustained and strategic way—-as opposed to tactical FX management—– for the first time since the putative miracle of red capitalism incepted.

Ray Dalio wasn’t counting on this because despite Bridgewater’s proficiency in concocting trading algorithms, its vaunted macroeconomics staff consists of standard issue Keynesians—-with a dash of Minskyites thrown in for good measure. Alas, they were not prepared for the possibility that Austrians have said is inevitable all along.

To wit, that Beijing’s experiment with Red Capitalism would eventually end in a crackup boom, causing the seemingly endless Red Bid for US treasuries to become a disruptive and unwelcome Red Offer to sell hundreds of billions of said paper and like and similar dollar/euro/yen liabilities.

To make a long story short, during the gyrations of August bond prices didn’t rise like they were supposed to when the stock market plunged by 12% to its Bullard Rip low at 1867 on the S&P 500. Accordingly, Bridgewater’s risk party portfolio became swamped with too much volatility on both the bond and equity side of Dalio’s big boat. So the algorithmic sump pumps went into over-time dumping stocks in order to drain the ship.

Consequently, Bridgewater wiped out its entire profits for the year in a few days during August, pushing the momo chasers like Cooperman into the drink in the process. Needless to say, the capsizing Big Boats in the casino are now firing at each other, but also lining-up for a full court press at the Eccles Building.

Ray Dalio has already said its time for QE4. He apparently realizes that the Fed’s big fat bid is needed to replace the missing Red Bid in the treasury market, and thereby get his risk parity algorithms working again.

At the same time, Goldman today sent out its chief economist to pronounce that today’s Jobs Friday report tipped the case to no rate increase at the Fed’s upcoming September meeting. Why we need an 81st month of ZIRP when 80 months so far have not succeeded, he didn’t say.

No matter. You can be sure of this. If the market holds above next week’s retest of the 1967 Bullard Rip low, the Fed will likely announce a “one and done” move in September, causing the casino to stage a short-lived, half-heated rally.

By the same token, if the market drops through the Bullard Rip low, the Fed will plead market instability and defer its 25 bps pinprick yet again, thereby causing the same short-lived half-hearted rally.

What won’t happen, however, is another leg higher in the phony bull market engineered by the Fed and its fellow- traveling central banks. That’s because the global “dollar short” is finally coming home to roost.

For nearly two decades the central banks of EM mercantilists have been buying treasury paper, as have the commodity producers and the petro-states. So doing they have helped the Fed drive the benchmark rate to absurdly non-economic levels.

That’s what happens when the printing press is used to generate $12 trillion of so-called FX reserves and $22 trillion of total footings for the consolidated monetary roach motels of the world, otherwise known as central banks and sovereign wealth funds.

In turn, this massive stash became the collateral for the private issuance of friskier dollar denominated corporate and sovereign credits throughout the EM world, thereby slacking the thirst for yield among desperate money managers.

But now China’s house of cards is cratering, causing economies to plunge throughout the worldwide China supply chain. Witness Brazil where industrial production is down 8% from a year ago, and slipping rapidly from there; or South Korea where exports have plunged by double digits.

Metaphorically speaking, dollars are hightailing back to the Eccles building. China and the petro-states are selling and off-shore dollar lenders are effectively making a margin call.

[Naam]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

[ExpatOilWorker]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

china-foreign-exchange-reserves.jpg

And with good right, they should be scared. In a growing export driven economy model, foreign reserves should go up, not down. But, maybe not everything is right. Something is rotten in the state of Denmark, I mean China.

[Naam]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

china-foreign-exchange-reserves.jpg

And with good right, they should be scared. In a growing export driven economy model, foreign reserves should go up, not down. But, maybe not everything is right. Something is rotten in the state of Denmark, I mean China.

not every export driven economy contains necessarily something rotten if forex reserves or in some cases the value of a country's wealth fund is declining

Norway’s sovereign wealth fund, the world’s biggest, lost more than 5 percent on its investments in the past month, the head of the $840 billion fund said.

The revelation follows the biggest selloff in Chinese stocks in two decades. The most recent developments suggest China’s transition to a more consumer-driven economy is proving difficult...

http://www.bloomberg.com/news/articles/2015-08-27/norway-s-wealth-fund-lost-more-than-5-in-past-month-ceo-says

[Publicus]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

china-foreign-exchange-reserves.jpg

That is the current snapshot. Keep your mobile with its camera handy to take another snapshot in six weeks time. Then to take another snapshot at the end of the calendar year. Etc.

The zenith of the line at $4 Trillion has a trend line to the left and the beginning of a trend line to the right as we look at the chart. In fact roll your tape to catch the trend line at the right because if the CCP Boyz do as they say, during the next six weeks they will sell $500 bn of US government bonds, US state or local government bonds, and some private US corporate bonds they purchased.

YoY August to August the Boyz spent $317 bn to support the yuan and trade; during last month they dropped another $100 bn and the tally of forex reserves sold has just begun from now going well in to next year. Only 20% of the CCP debt is covered by reserves and the fewer USD to Boyz have the less domestic support the yuan gets with the Boyz only printing more yuan.

The Boyz btw don't actually have all the instruments they purchased and instead have legal notes of purchase from the US Treasury and other government entities which enables their transactions that can be frozen at any time by order of POTUS to the Secretary of the Treasury.

And in another btw, Putin was in Beijing Thursday for the big military parade but it turns out nobody noticed.

[Harsh Jones]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

china-foreign-exchange-reserves.jpg

That is the current snapshot. Keep your mobile with its camera handy to take another snapshot in six weeks time. Then to take another snapshot at the end of the calendar year. Etc.

The zenith of the line at $4 Trillion has a trend line to the left and the beginning of a trend line to the right as we look at the chart. In fact roll your tape to catch the trend line at the right because if the CCP Boyz do as they say, during the next six weeks they will sell $500 bn of US government bonds, US state or local government bonds, and some private US corporate bonds they purchased.

YoY August to August the Boyz spent $317 bn to support the yuan and trade; during last month they dropped another $100 bn and the tally of forex reserves sold has just begun from now going well in to next year. Only 20% of the CCP debt is covered by reserves and the fewer USD to Boyz have the less domestic support the yuan gets with the Boyz only printing more yuan.

The Boyz btw don't actually have all the instruments they purchased and instead have legal notes of purchase from the US Treasury and other government entities which enables their transactions that can be frozen at any time by order of POTUS to the Secretary of the Treasury.

And in another btw, Putin was in Beijing Thursday for the big military parade but it turns out nobody noticed.

Your last paragraph is a joke. China has possession of this US paper. How the hell else do you think they can use foreign subsidiaries like Belgium to hold this paper ?

Yeah and that foreign support trend in the treasury market Is why US debt and the value of the dollar has been able to withstand reality for so long. This is the reserve currency at work. You reverse that trend, you reverse the support of the dollar.

Or do you think it is simply magic that makes US debt able to withstand reality ?

Edited September 6, 2015 by Harsh Jones

[Publicus]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

china-foreign-exchange-reserves.jpg

That is the current snapshot. Keep your mobile with its camera handy to take another snapshot in six weeks time. Then to take another snapshot at the end of the calendar year. Etc.

The zenith of the line at $4 Trillion has a trend line to the left and the beginning of a trend line to the right as we look at the chart. In fact roll your tape to catch the trend line at the right because if the CCP Boyz do as they say, during the next six weeks they will sell $500 bn of US government bonds, US state or local government bonds, and some private US corporate bonds they purchased.

YoY August to August the Boyz spent $317 bn to support the yuan and trade; during last month they dropped another $100 bn and the tally of forex reserves sold has just begun from now going well in to next year. Only 20% of the CCP debt is covered by reserves and the fewer USD to Boyz have the less domestic support the yuan gets with the Boyz only printing more yuan.

The Boyz btw don't actually have all the instruments they purchased and instead have legal notes of purchase from the US Treasury and other government entities which enables their transactions that can be frozen at any time by order of POTUS to the Secretary of the Treasury.

And in another btw, Putin was in Beijing Thursday for the big military parade but it turns out nobody noticed.

Your last paragraph is a joke. China has possession of this US paper. How the hell else do you think they can use foreign subsidiaries like Belgium to hold this paper ?

Yeah and that foreign support trend in the treasury market Is why US debt and the value of the dollar has been able to withstand reality for so long. This is the reserve currency at work. You reverse that trend, you reverse the support of the dollar.

Or do you think it is simply magic that makes US debt able to withstand reality ?

Your last paragraph is a joke

Wrong again but thx anyway for the implicit vote of confidence in the other paragraphs of my post.

You and I can't agree on the time of day so let's just say the CCP China is in deep deep do-do but it won't disappear. It won't disappear because the USA needs the CCP China market whether it is on the upswing it's had the past 30 years of the downfall it is experiencing that will also require multiple years of US investments and new market based policy directions and institutions to straighten it out.

I say again, after this downfall takes its ultimate toll the CCP's new five-year plan will come from the US Treasury Dept, the Fed, IMF, ECB. Right now the CCP Boyz should instead be meeting with the Greeks to find out about bail out packages.

What David Stockman won't tell us is that while he was Reagan's budget director he spent each day putting out huge numbers to cut and slash and burn that a decade later out of government he admitted he pulled out of his the air. Stockman later said no one had any idea of the numbers involved either way, existing or how much to cut and slash. No one knew what the impact of all the numbers was going to be. That the first casualty of the madness was Prez GHW Bush who lost re-election in 1992 after he responsibly recognized he had to break his no new taxes pledge in order to keep the economy minimally afloat.

The only significant difference between David Stockman's numbers then and the CCP Boyz numbers now is the magnitude of it. That is, any number we see in the CCP China is ten times or more the US numbers Stockman pulled out of his arse hat. And the CCP Boyz have the opposite syndrome, i.e., they try to play down the present numbers and their negative impact.

The CCP has hit a great wall and the reality is well known globally so no one needs to read David Stockman's blog to be aware of the fact. The G-20 meeting in Turkey the past week told the CCP Boyz to put up or shut up, to shit out find some solutions or a wall will go up around China to contain the cascading calamities. So the real challenge now is for the Austrian school of Mad Max political economists to wish strongly enough for the CCP Boyz to also take down the school's declared evil empire of the United States. For that youse guyz will need your black robes, pointed hats and fairy wands.

[Harsh Jones]

Who came to the US's rescue in 2008 ?

[Harsh Jones]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

china-foreign-exchange-reserves.jpg

That is the current snapshot. Keep your mobile with its camera handy to take another snapshot in six weeks time. Then to take another snapshot at the end of the calendar year. Etc.

The zenith of the line at $4 Trillion has a trend line to the left and the beginning of a trend line to the right as we look at the chart. In fact roll your tape to catch the trend line at the right because if the CCP Boyz do as they say, during the next six weeks they will sell $500 bn of US government bonds, US state or local government bonds, and some private US corporate bonds they purchased.

YoY August to August the Boyz spent $317 bn to support the yuan and trade; during last month they dropped another $100 bn and the tally of forex reserves sold has just begun from now going well in to next year. Only 20% of the CCP debt is covered by reserves and the fewer USD to Boyz have the less domestic support the yuan gets with the Boyz only printing more yuan.

The Boyz btw don't actually have all the instruments they purchased and instead have legal notes of purchase from the US Treasury and other government entities which enables their transactions that can be frozen at any time by order of POTUS to the Secretary of the Treasury.

And in another btw, Putin was in Beijing Thursday for the big military parade but it turns out nobody noticed.

Your last paragraph is a joke. China has possession of this US paper. How the hell else do you think they can use foreign subsidiaries like Belgium to hold this paper ?

Yeah and that foreign support trend in the treasury market Is why US debt and the value of the dollar has been able to withstand reality for so long. This is the reserve currency at work. You reverse that trend, you reverse the support of the dollar.

Or do you think it is simply magic that makes US debt able to withstand reality ?

Your last paragraph is a joke

Wrong again but thx anyway for the implicit vote of confidence in the other paragraphs of my post.

You and I can't agree on the time of day so let's just say the CCP China is in deep deep do-do but it won't disappear. It won't disappear because the USA needs the CCP China market whether it is on the upswing it's had the past 30 years of the downfall it is experiencing that will also require multiple years of US investments and new market based policy directions and institutions to straighten it out.

I say again, after this downfall takes its ultimate toll the CCP's new five-year plan will come from the US Treasury Dept, the Fed, IMF, ECB. Right now the CCP Boyz should instead be meeting with the Greeks to find out about bail out packages.

What David Stockman won't tell us is that while he was Reagan's budget director he spent each day putting out huge numbers to cut and slash and burn that a decade later out of government he admitted he pulled out of his the air. Stockman later said no one had any idea of the numbers involved either way, existing or how much to cut and slash. No one knew what the impact of all the numbers was going to be. That the first casualty of the madness was Prez GHW Bush who lost re-election in 1992 after he responsibly recognized he had to break his no new taxes pledge in order to keep the economy minimally afloat.

The only significant difference between David Stockman's numbers then and the CCP Boyz numbers now is the magnitude of it. That is, any number we see in the CCP China is ten times or more the US numbers Stockman pulled out of his arse hat. And the CCP Boyz have the opposite syndrome, i.e., they try to play down the present numbers and their negative impact.

The CCP has hit a great wall and the reality is well known globally so no one needs to read David Stockman's blog to be aware of the fact. The G-20 meeting in Turkey the past week told the CCP Boyz to put up or shut up, to shit out find some solutions or a wall will go up around China to contain the cascading calamities. So the real challenge now is for the Austrian school of Mad Max political economists to wish strongly enough for the CCP Boyz to also take down the school's declared evil empire of the United States. For that youse guyz will need your black robes, pointed hats and fairy wands.

Your premise that the US will not be effected in any meaningful way by the red capitalist bust in China is simply contrary to facts. There is nothing to agree or disagree on.

These two economies are really just one. It is not an accident that China's reserves have gotten bigger as the US debt has gotten bigger. Reserves are the inverse of debt. It is not an accident that China's trade surplus has gotten bigger as the US's trade deficits have gotten bigger. They are one economy.

To remove the reserve accumulator out of this equation is to remove the debt emitter from the equation also. If you remove the trade surplus from the equation, you remove the trade deficit going the other way. This is reality.

[NeverSure]

Reserves are the inverse of debt. It is not an accident that China's trade surplus has gotten bigger as the US's trade deficits have gotten bigger. They are one economy.

None of this is true. Reserves, in this case foreign reserves are what China must hold to engage in international trade. No one will accept China's money for goods or services nor will anyone pay in China's currency. China has to keep the world convinced that it can pay in USD.

Thus you see why China can let its reserve numbers fall as its exports and imports fall. If China didn't need the reserves it would be a real seller. It needs to raise cash.

Your statement that reserves are the inverse of debt really showcases your ignorance. For instance the UK has to hold foreign reserves but its debt is almost equal to that of the US as a percentage of GDP. Most countries with debt have foreign reserves for the same reason.

BTW your ignorance is getting old and I backed out of this. Now if you'd just pay attention to Publicus you'd learn something.

Cheers.

[Publicus]

Who came to the US's rescue in 2008 ?

The post seems to suggest the CCP Boyz somehow bailed out the United States .

By early 2009 CCP China exports to the USA had collapsed and in one week 30 million Chinese lost their jobs. The Boyz needed dollars to back up yuan that they could (and did) high pressure pour in to the economy to prevent a major social calamity that would have endangered their rule.

From late 2008 through 2009 the Boyz sharply increased their purchase of Treasuries mainly because they had lost the significant source of their USD income when businesses and corporations of the export sector suffered a sharp and severe dropoff. The exporters had fewer USD for the government to buy from them in yuan. So the Boyz needed to rush to buy USG bonds, lots of 'em and fast.

That in fact began an addiction to a huge spending spree of reams of new yuan paper and an enormously increased debt over there. The Boyz kept pumping money into the economy and new bridges kept being built that connected to bridges that already had been connected to other bridges that led to bridges somewhere else no one knew where. As US short-seller Jim Chanos put it, three new international airports on Hainan Island seemed not enough when one humongous sprawling new one was quite more than enough already.

Neither did the Fed need Chinese purchases of Treasuries for it to pour hot toddy QE with a twist. The hot money from the US and elsewhere into the CCP China continued to flow, without which the Boyz would have been hard pressed indeed.

The major fault of the CCP here that goes back to Deng Xiao Peng and his engineering of the economy that advanced ordinary CCP Chinese is that the paradigm ignored externalities. Deng's conception, economic design and comprehensive programs focused only on events and developments in the CCP China. No one in the CCP ever considered the world economy outside of the CCP China, to include especially global systems and institutions of finance.

So as the 2008 shock in the US hit in China, the Boyz reacted thinking only of their baby the CCP China. The Boyz still have no clue as they literally expect the Fed on Sept 16&17 to do whatever is best for the CCP. The Boyz are probably in for another external shock to be visited upon them for which they are also entirely unprepared.

[ExpatOilWorker]

hard evidence that China is broke! the CCP boyz in Beijing must be scared 'faeces'-less

china-foreign-exchange-reserves.jpg

And with good right, they should be scared. In a growing export driven economy model, foreign reserves should go up, not down. But, maybe not everything is right. Something is rotten in the state of Denmark, I mean China.

not every export driven economy contains necessarily something rotten if forex reserves or in some cases the value of a country's wealth fund is declining

Norways sovereign wealth fund, the worlds biggest, lost more than 5 percent on its investments in the past month, the head of the $840 billion fund said.

The revelation follows the biggest selloff in Chinese stocks in two decades. The most recent developments suggest Chinas transition to a more consumer-driven economy is proving difficult...

http://www.bloomberg.com/news/articles/2015-08-27/norway-s-wealth-fund-lost-more-than-5-in-past-month-ceo-says

Comparing Norway with China is like comparing apples with Durian. Still China should be and probably are worried about their decline in foreign reserves:

"The political correctness of an economy influences what it considers to be an adequate level of foreign exchange reserves. A centrally planned economy like China is not a politically correct economy. Nor, today, is Venezuela. Such countries see themselves as needing to avoid placing themselves in a position where they are forced to change their regimes. This comment is not in any way intended to be judgmental about any regime, but it is interesting to note that it was not until Indonesia came close to running out of foreign exchange reserves in the mid nineties that it was forced to change its regime from the family-run government system which had been in place for several decades. They had to privatise a number of family businesses, many of which were owned by the government in power. While this is not to condone their system, it is quite likely, that had they not come close to running out of foreign exchange reserves, they would have been able to continue with that system of government for many years."

r060123c.pdf

[ExpatOilWorker]

Who came to the US's rescue in 2008 ?

The post seems to suggest the CCP Boyz somehow bailed out the United States .

By early 2009 CCP China exports to the USA had collapsed and in one week 30 million Chinese lost their jobs. The Boyz needed dollars to back up yuan that they could (and did) high pressure pour in to the economy to prevent a major social calamity that would have endangered their rule.

From late 2008 through 2009 the Boyz sharply increased their purchase of Treasuries mainly because they had lost the significant source of their USD income when businesses and corporations of the export sector suffered a sharp and severe dropoff. The exporters had fewer USD for the government to buy from them in yuan. So the Boyz needed to rush to buy USG bonds, lots of 'em and fast.

That in fact began an addiction to a huge spending spree of reams of new yuan paper and an enormously increased debt over there. The Boyz kept pumping money into the economy and new bridges kept being built that connected to bridges that already had been connected to other bridges that led to bridges somewhere else no one knew where. As US short-seller Jim Chanos put it, three new international airports on Hainan Island seemed not enough when one humongous sprawling new one was quite more than enough already.

Neither did the Fed need Chinese purchases of Treasuries for it to pour hot toddy QE with a twist. The hot money from the US and elsewhere into the CCP China continued to flow, without which the Boyz would have been hard pressed indeed.

The major fault of the CCP here that goes back to Deng Xiao Peng and his engineering of the economy that advanced ordinary CCP Chinese is that the paradigm ignored externalities. Deng's conception, economic design and comprehensive programs focused only on events and developments in the CCP China. No one in the CCP ever considered the world economy outside of the CCP China, to include especially global systems and institutions of finance.

So as the 2008 shock in the US hit in China, the Boyz reacted thinking only of their baby the CCP China. The Boyz still have no clue as they literally expect the Fed on Sept 16&17 to do whatever is best for the CCP. The Boyz are probably in for another external shock to be visited upon them for which they are also entirely unprepared.

It seems like the head of China's central bank also don't really have a clue:

http://www.bloomberg.com/news/articles/2015-09-04/china-s-zhou-kept-repeating-the-bubble-burst-at-g-20-meeting

[NeverSure]

^^^ "Foreign Exchange Reserves". Reserves they can exchange for goods or services or other currencies. Only the USD is the international unit of trade and can be readily exchanged for any currency or good or service. That puts China in the position of having to hold sufficient amounts of USD for exchange.

China was recently rebuffed in Europe while trying to get its currency included in an international basket of currencies because the other countries don't trust China, especially with its lack of transparency. Those countries hold their own opinions of China's financial position and...

All of those stupid advanced countries fail to have the knowledge that our poster Mr. H. J. has or surely they would be on board with China, right?

[Naam]

Comparing Norway with China is like comparing apples with Durian. Still China should be and probably are worried about their decline in foreign reserves:

"The political correctness of an economy influences what it considers to be an adequate level of foreign exchange reserves. A centrally planned economy like China is not a politically correct economy. Nor, today, is Venezuela. Such countries see themselves as needing to avoid placing themselves in a position where they are forced to change their regimes. This comment is not in any way intended to be judgmental about any regime, but it is interesting to note that it was not until Indonesia came close to running out of foreign exchange reserves in the mid nineties that it was forced to change its regime from the family-run government system which had been in place for several decades. They had to privatise a number of family businesses, many of which were owned by the government in power. While this is not to condone their system, it is quite likely, that had they not come close to running out of foreign exchange reserves, they would have been able to continue with that system of government for many years."

there's no comparison in my posting. but i detect, if not wet dreams, then wishful thinking

and an outright ridiculous comparison of China vs. Indonesia and Venezuela.

Such countries see themselves as needing to avoid placing themselves in a position where they are forced to change their regimes.

Edited September 7, 2015 by Naam

[Naam]

^^^ "Foreign Exchange Reserves". Reserves they can exchange for goods or services or other currencies. Only the USD is the international unit of trade and can be readily exchanged for any currency or good or service. That puts China in the position of having to hold sufficient amounts of USD for exchange.

China was recently rebuffed in Europe while trying to get its currency included in an international basket of currencies because the other countries don't trust China, especially with its lack of transparency. Those countries hold their own opinions of China's financial position and...

All of those stupid advanced countries fail to have the knowledge that our poster Mr. H. J. has or surely they would be on board with China, right?

"only the US-Dollar is the international unit of trade"

bla-bla yakety-yak yeah right!

-the japanese importer of BMWs from Germany changes his ¥EN into USD, transfers them to Germany where BMW changes the Dollars into €URos "because only...",

-the French companies delivering beef to Germany require the German importer to pay in US-Dollars which they exchange then into €URos because "only the US-Dollar...",

-the German specialised machinery manufacturer demands from their Australian clients payment in US-Dollars because its employees demand to be paid in US-Dollars and because "only the US-Dollar...",

-the swap agreements between China and Brazil, India, Chile, Argentina, Australia and Russia (just to name a few), valued several hundred billion Dollars were all signed exclusively for the purpose that the CCP boyz and the counter-signatories can enjoy parties where champagne and caviar is served and not to substitute payments in USD because "only the US-Dollar..."

China began the process of internationalizing its currency in November 2010 when then-Russian Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao announced that Russia and China had decided to use their own national currencies for bilateral trade, instead of the U.S. dollar. The yuan started trading against the ruble in the Chinese bank market in Shanghai immediately, and in December 2010, began trading on the Moscow Interbank Currency Exchange.

http://www.forbes.com/sites/jackperkowski/2012/06/26/china-busy-signing-currency-deals/

[Harsh Jones]

Reserves are the inverse of debt. It is not an accident that China's trade surplus has gotten bigger as the US's trade deficits have gotten bigger. They are one economy.

None of this is true. Reserves, in this case foreign reserves are what China must hold to engage in international trade. No one will accept China's money for goods or services nor will anyone pay in China's currency. China has to keep the world convinced that it can pay in USD.

Thus you see why China can let its reserve numbers fall as its exports and imports fall. If China didn't need the reserves it would be a real seller. It needs to raise cash.

Your statement that reserves are the inverse of debt really showcases your ignorance. For instance the UK has to hold foreign reserves but its debt is almost equal to that of the US as a percentage of GDP. Most countries with debt have foreign reserves for the same reason.

BTW your ignorance is getting old and I backed out of this. Now if you'd just pay attention to Publicus you'd learn something.

Cheers.

All of it is a fact.

For example, a Chinese company exports something to the US. The American importer only has US dollars. Not Chinese Yuan. The exporter can't spend the US dollars in China either. So the payment for the export goes to the central bank of China. They print Yuan and hand the Yuan to the exporter. After that the central bank of China still has these dollars. Normally if trade is close to balanced, it doesn't matter. But with China and the US , the US isn't exporting much back so these dollars pile up at the CB of China. What do they do with them ? They buy US treasuries with them.

Because the Balance of Payment accounts are based on double-entry bookkeeping, the annual current account and capital account have to net to zero, so that any current account deficit is offset one-to-one by a capital account surplus (deficit) and the balance of payments therefore always nets out to (equals) zero. And that's why it's called the "balance" of payments, because once we account for trade flows and capital flows, everything balances, and there are no deficits or surpluses on a net basis.

The way the US sells Treasuries to China means the US has a "capital account surplus." And China has a "capital account deficit." You see, when the US ships currency to China in exchange for real stuff, that's a deficit for the US. But when China ships currency to the US in exchange for Treasury bonds, that's a deficit for China.

Class dismissed

[Harsh Jones]

The more debt the US goes into, the higher China's forex "reserves" go. Because China is using uncashed checks from the US as reserves. The debt chart is a reflection of the checks being written by the US and the reserves chart is a reflection of the checks being stacked by China.

But if red capitalism has indeed blown up, then China will not be buying this debt anymore. It will instead be selling. Which it has been doing. This will have serious ramifications for the US.

Edited September 7, 2015 by Harsh Jones

[sandyf]

China was recently rebuffed in Europe while trying to get its currency included in an international basket of currencies because the other countries don't trust China, especially with its lack of transparency. Those countries hold their own opinions of China's financial position and...

European nations and the US are split over the inclusion of the yuan in the SDR basket.

Major European countries such as Britain and Germany are openly voicing support for the move. Both are trying to cement their status as major offshore centers for the yuan.

Britain favors the eventual inclusion of the yuan in the SDR basket, according to Finance Minister George Osborne, adding it is important to include emerging powers in the world system.

By contrast, US Treasury Secretary Jack Lew said the Chinese currency is not ready to join SDR.

Three countries especially in Europe want the yuan included in the SDR of the IMF, which are UK, Netherlands, Germany. The three are competing to be the major European clearinghouse of the yuan in global trade. If the French have no passion about the issue then who in Europe would? The concern in Europe is about Russia, the ruble, Ukraine, energy, not the yuan.

The yuan remains low on the global radar as a currency of trade or as a reserve currency. The yuan going in to this year constituted 2.3 percent of global trade and 1.1% of global currency reserves. In respect of the yuan in global trade, its share falls below 2 percent when domestic trade between Hong Kong and the Mainland is properly categorized and accounted, which the IMF is in the process of doing.

The yuan trails other currencies in the metrics the IMF tracks to determine the SDR basket. To qualify for the basket, currencies must be "widely used" to make payments in global transactions, and be "widely traded" in major exchange markets. Key indicators include its share of official reserves, international banking liabilities and global debt securities, as well as the volume of use in foreign exchange markets.

Last year the yuan ranked seventh among currencies as a share of official reserves, behind the four SDR members and Australian and Canadian dollars, according to the IMF. The yuan constituted 1.1% of official reserves, compared with 63.7% for the US dollar. The yuan also ranks outside the top five in terms of debt securities and currency trading.

The yuan is wholly unsuited to be a global currency of either trade or reserve status because the Chinese continue to save rather than spend. The new middle class CCP Chinese do spend to buy a very expensive item in China such as a car and to pay for the very expensive university education, but they do not buy a second home nor do they buy gizmos and gadgets that facilitate daily life at home or at work, such as air conditioning or dishwashing machines. The Chinese as a whole will never buy these things.

The CCP Chinese have been Chinese for far too long than to trust their rulers of any sort or stripe, ever at all. The Chinese for thousands of years have known their rulers are untrustworthy, unreliable, self-interested, temporary. That the present good times will perish and the present bad times will eventually improve. Given the past 30 years of upward economic movement, and the present systemic crashes and collapses, the Chinese know yet another period of good times is passing.

In short, the CCP current account cannot provide the global liquidity required of a global reserve currency, or that is required of the global currency of trade. It is further well known and understood the CCP would also need to run deficits in its current account which is is incapable of doing because of the continued high rate of savings by the ordinary CCP Chinese to include the new middle class of Chinese.

The yuan probably eventually will be included in the SDR basket, but not until the United States is satisfied the yuan is properly aligned and that the CCP capital markets are opened sufficiently to global banks and investors. The CCP Boyz are not going to get even a few of the fruits of this basket for doing nothing, which is their wont. They're going to have to cash up to the guy who made the basket and who filled it, which is the USA.

10 out of 10, good story. Time will tell, it usually does.

[ExpatOilWorker]

We need to extend that graph a bit: http://www.wsj.com/articles/china-august-forex-reserves-down-by-93-9-billion-as-pboc-intervenes-1441614856

BEIJINGChinas foreign-exchange reserves fell by a record $93.9 billion in August, a result of aggressive intervention in the currency market by the countrys central bank to prevent the yuan from free-falling and limit money leaving Chinese shores.
The People’s Bank of China on Monday reported $3.56 trillion in its foreign-exchange holdings as of the end of last month, compared with $3.65 trillion as of July. China’s currency reserves, still the world’s largest, have been falling from a peak of $3.99 trillion

Edited September 7, 2015 by ExpatOilWorker

[capcc76]

Five interest rate cuts from January through August and five reductions of the TripleR should have accomplished something in the CCP China but it has not produced anything positive. Instead, all this panic cutting and slashing only indicates the CCP Boyz in Beijing are flailing over an economy they can no longer control. After the sudden and shock depreciation of the yuan, the central bank is now going in a radically opposite direction, saying the yuan will appreciate over the next 2-3 years. The bottom line here is that the CCP Boyz don't have two or three years.

Lombard Research told the G-20 meeting the past week in Turkey that China GDP went negative in Q1 this year and that 2015 growth is at the least 3 percent lower than any claims the CCP Boyz are making. That is still awfully generous as the Boyz are claiming 7% growth this year even though they're now suggesting it might be in the area of 6+ percent. So Lombard says less than 4% growth while Nomura which was the first to call the bursting of the housing bubble during Q1 last year says 2.2 percent growth this year. This is in an economy that needs 8 percent annual growth to keep up with labor market demands.

The CCP Boyz now have the Trump Syndrome of needing to provide specific details of policies and programs the Boyz don't have nor will they have. The G-20 just told the CCP Boyz to provide specifics.

"Viable alternativesnot rhetoricshould be presented," South Korean Finance Minister Choi Kyung-hwan said in an interview ahead of a meeting of G-20 finance ministers and central bankers Friday and Saturday.

"There are questions being raised about Chinese policy-making over the last several months," said Ted Truman, a senior fellow at the Peterson Institute for International Affairs and former top financial diplomat at the U.S. Treasury. "They look less like a smooth-oiled machine and more like they are making it up as they go along. That has unnerved some people."

"The question is, are they managing that transition in an effective and orderly way," U.S. Treasury Secretary Jacob Lew told CNBC Wednesday.

Dr. Yao Yudong, head of the People's Bank of China Research Institute of Finance and Banking, said even if the yuan's inclusion in the International Monetary Fund's currency basket, known as Special Drawing Rights (SDR), were made, effective January 2017, it would not help to "immediately" ease a shortage of liquidity globally. Yao said any such easing may not happen for another 20 years due to China's sustained current account surplus. "China's high savings rate means China cannot provide liquidity to the world via the current account right now," he said. The CCP Boyz in Beijing don't have another twenty years either.

http://www.foxbusiness.com/economy-policy/2015/09/04/g-20-seeks-reassurances-that-china-plans-to-calm-markets/

Lol

China is doing exactly what the US has done the last 30 years when the economy rolls over. More easing. Lower rates. QE.

But the USSA boyz are special. This is what the IMF and the USSA did and told SE Asia to do in the wake of the Asian finanical crisis in 1997.

This is how the dominos fell the last time there was a crisis in Asia. (This was when Asia was the debtors and had trade deficits)

The powerful negative shock also sharply reduced the price of oil, which reached a low of about $11 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters.

The reduction in oil revenue also contributed to the 1998 Russian financial crisis, which in turn caused Long-Term Capital Management in the United States to collapse after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bailout. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis).^[56]

What the IMF said to do:

The IMF's support was conditional on a series of economic reforms, the "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to reduce government spending and deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values.

Why the USSA boyz and the IMF are a crew of rank scumbag hypocrites with no credibility:

Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.

They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001, and arguably the same in the fiscal and monetary policies during the 20082009 Global Financial Crisis.

China is doing exactly what the US has done the last 30 years when the economy rolls over. More easing. Lower rates. QE.

It is plenty safe to say anyone who thinks what applies to the USA economy and its financial sector applies to the CCP Boyz and their command economy marked by its massively humongous ideological and financial corruption would indeed believe in the Austrian school of Mad Max political economics. Nor are the CCP Boyz doing QE.

A major factor btw in the CCP having to struggle trying to get the yuan in to the IMF basket of SDR currencies is that the People's Bank of China central bank is not independent. CCP owns and operates PBoC at all times. The PBoC belongs to the CCP as their personal toy and plaything. The central bank of the world's second largest economy is not independent; it is indeed an extension of the one and only ruling party there.

The great concern of the G-20 finance ministers, bankers, central bankers etc who gathered in Turkey the past week is that the CCP Boyz are looking at a multiplicity of simultaneous crashes and collapses that are wildly jumping a jig on the head of a pin. That what is occurring is beyond the Boyz' control. This is not a single event as several of 'em had occurred in recent years and that could be dealt with singularly by covering it over then move along to cover over the next one. The current disasters are occurring in a cascade. They are systemic faults; a paradigm failure. Predictable and of epic proportions.

Even if the CCP Boyz were half as competent as they have cleverly projected themselves to be to the casual looker-in, and they never were competent, the present collapses and crashes are beyond the control of any ruling elite anywhere any time.

This is radically different than was the Great Depression, far worse systemically and ideologically. Fundamentally.

It is plenty safe to say anyone who thinks what applies to the USA economy and its financial sector applies to the CCP Boyz

=

Ahh the old arithmetic doesn't matter to the US because it has the reserve currency. So we can't compare the real world to the US.

This is partially true. It is not a proper comparison per se. But do you have any idea why ? Because when you have the reserve currency and the rest of the world so happens to still be functioning and dumb enough to buy your debt as reserve, you have an almost endless amount of rope for which to hang yourself. This rope is in the form of US treasuries. As long as this trend was in motion, (functioning emerging markets who are dumb enough to buy US debt), the US could keep spending wreckless abandon with no consequences in the debt or FX markets.

David Stockman has a piece out today that hits the point home clearly that this is a two way street. And he is no China apologist.

Why Hedge Fund Hot Shots Finally Got Hammered

The Bernanke Feds egregious, desperate and utterly unwarranted bailout of Wall Street at the time of the post-Lehman crash taught the gamblers a profound lesson. That is, they could be exceedingly confident that the Fed would keep the free money flowing at all hazards, and that it would resort to any price rigging intervention as might be necessary to keep the stock averages rising.

Indeed, never in all of history have a few ten thousand punters made so many trillions in return for so little economic value added. But what Dalio did in this context was to invent an even more efficient machine to strip-mine the Feds monumental largesse.

To wit, Bridgewaters computers buy more stocks on the rips, when equity volatility is falling and prices are rising; and then on the dips they rotate funds into more bonds when equity volatility is rising and the herd is retreating to the safe haven of treasuries and other fixed income securities, thereby causing the price of the latter to rise.

In short, there is a payday in every type of short-run financial weather because Bridgewaters computers are monetary sump pumps; they constantly purge volatility from the portfolio.

But heres the thing. The above chart could never exist in an honest free market.

You couldnt create algorithms to safely pump out volatility and milk the market on alternating strokes because the regularity of the waves on which it is based are not natural; they are the handiwork a central bank that has been taken hostage by the casino gamblers.

As it happened, however, in the last few weeks the long reign of the global money printers has begun to sprout fractures. Over on the other side of the earth in China what had become a 20-year long $4 trillion cumulative bid for US treasuries and other DM fixed income securities has gone serious offers.

This will prove to be one of the great financial pivots of history. During the course of their stupendous inflation of Chinas $28 trillion Credit Ponzi, the red suzerains of Beijing bought treasuries hand over fist and thereby kept their price rising and the volatility of the world bond market falling.

To be sure, this wasnt charity for Americas debt besotted shoppers and governments. It was done in order to peg the RMB exchange rate and thereby keep its mercantilist export machine humming and the people grateful to their beneficent communist party rulers.

But at length it became too much of a good thing because every time the Peoples Bank Of China (PBOC) bought Uncle Sams debt it similtaneously expanded the internal banking system and supply of RMB credit. Moreover, after Beijing launched its madcap infrastructure building campaign in response to the the 2008 financial crisis the phony construction and investment boom which ensued attracted increasing waves of hot money from abroad, thereby inflating the domestic Chinese economy to a fever pitch.

In fact, the PBOC was forced to let the RMB slowly rise against the dollar to keep its banking system from becoming a financial runaway. But the steadily rising RMB drastically accelerated the inflow of foreign capital and speculative funds into the Chinese economy, thereby filling the vaults of the PBOC to the brim at more than $4 trillion early this year compared to a few hundred billion at the turn of the century.

But these werent monetary reserves in any meaningful or historic sense of the term; they were the fruits of an utterly stupid mercantilist trade policy and the conversion of a naïve old man, and survivor of Maos depredations, to the view that communist party power could be better administered from the end of a printing press than from the barrel of a gun.

But Mr. Deng merely unleashed a Credit Monster that sucked in capital and resources from all over the globe into a domestic whirlpool of digging, building, borrowing, investing and speculation that was inherently unstable and incendiary. It was only a matter of time before this edifice of economic madness began to wobble and sway and to eventually buckle entirely.

That time came in 2015-roughly 30 years after Mr. Deng proclaimed it is glorious to be rich. So saying, he did not have a clue that a credit swollen simulacrum of capitalism run by communist apparatchiks was a doomsday machine.

In any event, what is happening in China now is that the speculators-both domestic and foreignsee that the jig is up. That is especially the case after Beijings incredibly botched effort to alleviate its massive corporate debt problem by inciting a $5 trillion stock market bubble that is now being blown to smithereens.

This has happened notwithstanding the party bosses sending out truckloads of cash to arrest the stock markets collapse and then doubling down by sending fleets of paddy wagons to arrest any one who might be tempted into overzealous offers to sell what the PBOC is trying to buy. It means that confidence in the Red Ponzi has at last been shattered.

Accordingly, money is leaking out of China thru a thousand rivulets, by-ways and financial back alleys. To prevent the RMB exchange rate from plunging and thereby inciting even more capital fright and flight, the PBOC has shifted into reverse gear in a large, sustained and strategic way-as opposed to tactical FX management for the first time since the putative miracle of red capitalism incepted.

Ray Dalio wasnt counting on this because despite Bridgewaters proficiency in concocting trading algorithms, its vaunted macroeconomics staff consists of standard issue Keynesians-with a dash of Minskyites thrown in for good measure. Alas, they were not prepared for the possibility that Austrians have said is inevitable all along.

To wit, that Beijings experiment with Red Capitalism would eventually end in a crackup boom, causing the seemingly endless Red Bid for US treasuries to become a disruptive and unwelcome Red Offer to sell hundreds of billions of said paper and like and similar dollar/euro/yen liabilities.

To make a long story short, during the gyrations of August bond prices didnt rise like they were supposed to when the stock market plunged by 12% to its Bullard Rip low at 1867 on the S&P 500. Accordingly, Bridgewaters risk party portfolio became swamped with too much volatility on both the bond and equity side of Dalios big boat. So the algorithmic sump pumps went into over-time dumping stocks in order to drain the ship.

Consequently, Bridgewater wiped out its entire profits for the year in a few days during August, pushing the momo chasers like Cooperman into the drink in the process. Needless to say, the capsizing Big Boats in the casino are now firing at each other, but also lining-up for a full court press at the Eccles Building.

Ray Dalio has already said its time for QE4. He apparently realizes that the Feds big fat bid is needed to replace the missing Red Bid in the treasury market, and thereby get his risk parity algorithms working again.

At the same time, Goldman today sent out its chief economist to pronounce that todays Jobs Friday report tipped the case to no rate increase at the Feds upcoming September meeting. Why we need an 81st month of ZIRP when 80 months so far have not succeeded, he didnt say.

No matter. You can be sure of this. If the market holds above next weeks retest of the 1967 Bullard Rip low, the Fed will likely announce a one and done move in September, causing the casino to stage a short-lived, half-heated rally.

By the same token, if the market drops through the Bullard Rip low, the Fed will plead market instability and defer its 25 bps pinprick yet again, thereby causing the same short-lived half-hearted rally.

What wont happen, however, is another leg higher in the phony bull market engineered by the Fed and its fellow- traveling central banks. Thats because the global dollar short is finally coming home to roost.

For nearly two decades the central banks of EM mercantilists have been buying treasury paper, as have the commodity producers and the petro-states. So doing they have helped the Fed drive the benchmark rate to absurdly non-economic levels.

Thats what happens when the printing press is used to generate $12 trillion of so-called FX reserves and $22 trillion of total footings for the consolidated monetary roach motels of the world, otherwise known as central banks and sovereign wealth funds.

In turn, this massive stash became the collateral for the private issuance of friskier dollar denominated corporate and sovereign credits throughout the EM world, thereby slacking the thirst for yield among desperate money managers.

But now Chinas house of cards is cratering, causing economies to plunge throughout the worldwide China supply chain. Witness Brazil where industrial production is down 8% from a year ago, and slipping rapidly from there; or South Korea where exports have plunged by double digits.

Metaphorically speaking, dollars are hightailing back to the Eccles building. China and the petro-states are selling and off-shore dollar lenders are effectively making a margin call.

Oh dear lawdy, how does anyone who actually participates in the real world have any time to read, much less write, so much. Lol, it was all I could do to et and scroll past the non-sense to write this!??!@$&!?

Everyone is an expert on everything these days with Google, cut and paste and Wikipedia. No need to get a higher education or actually work in a field with Goigle. Unfortunately, we have nutty Internet sites written by satirist and the delusional or paranoid that appear to be considered as educational tools by some.

[Publicus]

Reserves are the inverse of debt. It is not an accident that China's trade surplus has gotten bigger as the US's trade deficits have gotten bigger. They are one economy.

None of this is true. Reserves, in this case foreign reserves are what China must hold to engage in international trade. No one will accept China's money for goods or services nor will anyone pay in China's currency. China has to keep the world convinced that it can pay in USD.

Thus you see why China can let its reserve numbers fall as its exports and imports fall. If China didn't need the reserves it would be a real seller. It needs to raise cash.

Your statement that reserves are the inverse of debt really showcases your ignorance. For instance the UK has to hold foreign reserves but its debt is almost equal to that of the US as a percentage of GDP. Most countries with debt have foreign reserves for the same reason.

BTW your ignorance is getting old and I backed out of this. Now if you'd just pay attention to Publicus you'd learn something.

Cheers.

All of it is a fact.

For example, a Chinese company exports something to the US. The American importer only has US dollars. Not Chinese Yuan. The exporter can't spend the US dollars in China either. So the payment for the export goes to the central bank of China. They print Yuan and hand the Yuan to the exporter. After that the central bank of China still has these dollars. Normally if trade is close to balanced, it doesn't matter. But with China and the US , the US isn't exporting much back so these dollars pile up at the CB of China. What do they do with them ? They buy US treasuries with them.

Because the Balance of Payment accounts are based on double-entry bookkeeping, the annual current account and capital account have to net to zero, so that any current account deficit is offset one-to-one by a capital account surplus (deficit) and the balance of payments therefore always nets out to (equals) zero. And that's why it's called the "balance" of payments, because once we account for trade flows and capital flows, everything balances, and there are no deficits or surpluses on a net basis.

The way the US sells Treasuries to China means the US has a "capital account surplus." And China has a "capital account deficit." You see, when the US ships currency to China in exchange for real stuff, that's a deficit for the US. But when China ships currency to the US in exchange for Treasury bonds, that's a deficit for China.

Class dismissed

Even Paul Volker cut that class at Princeton as did everyone else everywhere else except the quack political economists of the Austrian school of Mad Max economics, finance and collapse. Come to think of it, the Mad Max economists whose hair is on fire to see the United States destroyed teach only one another.

For the vast number of us however the text has instead become the boring instructions to an already failed computer game called "How to defeat the evil fiat currency empire by net balancing payments using double entry zero hedge bookkeeping."

The only boom bang and pow in this game is the exploding heads of the Mad Max Austrian school guyz on the screen. It's the magic of debit-credit-explanation brought to life in its full action on your computer screen.

Lord give me strength.

[Harsh Jones]

It is plenty safe to say anyone who thinks what applies to the USA economy and its financial sector applies to the CCP Boyz

=

Ahh the old arithmetic doesn't matter to the US because it has the reserve currency. So we can't compare the real world to the US.

This is partially true. It is not a proper comparison per se. But do you have any idea why ? Because when you have the reserve currency and the rest of the world so happens to still be functioning and dumb enough to buy your debt as reserve, you have an almost endless amount of rope for which to hang yourself. This rope is in the form of US treasuries. As long as this trend was in motion, (functioning emerging markets who are dumb enough to buy US debt), the US could keep spending wreckless abandon with no consequences in the debt or FX markets.

David Stockman has a piece out today that hits the point home clearly that this is a two way street. And he is no China apologist.

Why Hedge Fund Hot Shots Finally Got Hammered

The Bernanke Feds egregious, desperate and utterly unwarranted bailout of Wall Street at the time of the post-Lehman crash taught the gamblers a profound lesson. That is, they could be exceedingly confident that the Fed would keep the free money flowing at all hazards, and that it would resort to any price rigging intervention as might be necessary to keep the stock averages rising.

Indeed, never in all of history have a few ten thousand punters made so many trillions in return for so little economic value added. But what Dalio did in this context was to invent an even more efficient machine to strip-mine the Feds monumental largesse.

To wit, Bridgewaters computers buy more stocks on the rips, when equity volatility is falling and prices are rising; and then on the dips they rotate funds into more bonds when equity volatility is rising and the herd is retreating to the safe haven of treasuries and other fixed income securities, thereby causing the price of the latter to rise.

In short, there is a payday in every type of short-run financial weather because Bridgewaters computers are monetary sump pumps; they constantly purge volatility from the portfolio.

But heres the thing. The above chart could never exist in an honest free market.

You couldnt create algorithms to safely pump out volatility and milk the market on alternating strokes because the regularity of the waves on which it is based are not natural; they are the handiwork a central bank that has been taken hostage by the casino gamblers.

As it happened, however, in the last few weeks the long reign of the global money printers has begun to sprout fractures. Over on the other side of the earth in China what had become a 20-year long $4 trillion cumulative bid for US treasuries and other DM fixed income securities has gone serious offers.

This will prove to be one of the great financial pivots of history. During the course of their stupendous inflation of Chinas $28 trillion Credit Ponzi, the red suzerains of Beijing bought treasuries hand over fist and thereby kept their price rising and the volatility of the world bond market falling.

To be sure, this wasnt charity for Americas debt besotted shoppers and governments. It was done in order to peg the RMB exchange rate and thereby keep its mercantilist export machine humming and the people grateful to their beneficent communist party rulers.

But at length it became too much of a good thing because every time the Peoples Bank Of China (PBOC) bought Uncle Sams debt it similtaneously expanded the internal banking system and supply of RMB credit. Moreover, after Beijing launched its madcap infrastructure building campaign in response to the the 2008 financial crisis the phony construction and investment boom which ensued attracted increasing waves of hot money from abroad, thereby inflating the domestic Chinese economy to a fever pitch.

In fact, the PBOC was forced to let the RMB slowly rise against the dollar to keep its banking system from becoming a financial runaway. But the steadily rising RMB drastically accelerated the inflow of foreign capital and speculative funds into the Chinese economy, thereby filling the vaults of the PBOC to the brim at more than $4 trillion early this year compared to a few hundred billion at the turn of the century.

But these werent monetary reserves in any meaningful or historic sense of the term; they were the fruits of an utterly stupid mercantilist trade policy and the conversion of a naïve old man, and survivor of Maos depredations, to the view that communist party power could be better administered from the end of a printing press than from the barrel of a gun.

But Mr. Deng merely unleashed a Credit Monster that sucked in capital and resources from all over the globe into a domestic whirlpool of digging, building, borrowing, investing and speculation that was inherently unstable and incendiary. It was only a matter of time before this edifice of economic madness began to wobble and sway and to eventually buckle entirely.

That time came in 2015-roughly 30 years after Mr. Deng proclaimed it is glorious to be rich. So saying, he did not have a clue that a credit swollen simulacrum of capitalism run by communist apparatchiks was a doomsday machine.

In any event, what is happening in China now is that the speculators-both domestic and foreignsee that the jig is up. That is especially the case after Beijings incredibly botched effort to alleviate its massive corporate debt problem by inciting a $5 trillion stock market bubble that is now being blown to smithereens.

This has happened notwithstanding the party bosses sending out truckloads of cash to arrest the stock markets collapse and then doubling down by sending fleets of paddy wagons to arrest any one who might be tempted into overzealous offers to sell what the PBOC is trying to buy. It means that confidence in the Red Ponzi has at last been shattered.

Accordingly, money is leaking out of China thru a thousand rivulets, by-ways and financial back alleys. To prevent the RMB exchange rate from plunging and thereby inciting even more capital fright and flight, the PBOC has shifted into reverse gear in a large, sustained and strategic way-as opposed to tactical FX management for the first time since the putative miracle of red capitalism incepted.

Ray Dalio wasnt counting on this because despite Bridgewaters proficiency in concocting trading algorithms, its vaunted macroeconomics staff consists of standard issue Keynesians-with a dash of Minskyites thrown in for good measure. Alas, they were not prepared for the possibility that Austrians have said is inevitable all along.

To wit, that Beijings experiment with Red Capitalism would eventually end in a crackup boom, causing the seemingly endless Red Bid for US treasuries to become a disruptive and unwelcome Red Offer to sell hundreds of billions of said paper and like and similar dollar/euro/yen liabilities.

To make a long story short, during the gyrations of August bond prices didnt rise like they were supposed to when the stock market plunged by 12% to its Bullard Rip low at 1867 on the S&P 500. Accordingly, Bridgewaters risk party portfolio became swamped with too much volatility on both the bond and equity side of Dalios big boat. So the algorithmic sump pumps went into over-time dumping stocks in order to drain the ship.

Consequently, Bridgewater wiped out its entire profits for the year in a few days during August, pushing the momo chasers like Cooperman into the drink in the process. Needless to say, the capsizing Big Boats in the casino are now firing at each other, but also lining-up for a full court press at the Eccles Building.

Ray Dalio has already said its time for QE4. He apparently realizes that the Feds big fat bid is needed to replace the missing Red Bid in the treasury market, and thereby get his risk parity algorithms working again.

At the same time, Goldman today sent out its chief economist to pronounce that todays Jobs Friday report tipped the case to no rate increase at the Feds upcoming September meeting. Why we need an 81st month of ZIRP when 80 months so far have not succeeded, he didnt say.

No matter. You can be sure of this. If the market holds above next weeks retest of the 1967 Bullard Rip low, the Fed will likely announce a one and done move in September, causing the casino to stage a short-lived, half-heated rally.

By the same token, if the market drops through the Bullard Rip low, the Fed will plead market instability and defer its 25 bps pinprick yet again, thereby causing the same short-lived half-hearted rally.

What wont happen, however, is another leg higher in the phony bull market engineered by the Fed and its fellow- traveling central banks. Thats because the global dollar short is finally coming home to roost.

For nearly two decades the central banks of EM mercantilists have been buying treasury paper, as have the commodity producers and the petro-states. So doing they have helped the Fed drive the benchmark rate to absurdly non-economic levels.

Thats what happens when the printing press is used to generate $12 trillion of so-called FX reserves and $22 trillion of total footings for the consolidated monetary roach motels of the world, otherwise known as central banks and sovereign wealth funds.

In turn, this massive stash became the collateral for the private issuance of friskier dollar denominated corporate and sovereign credits throughout the EM world, thereby slacking the thirst for yield among desperate money managers.

But now Chinas house of cards is cratering, causing economies to plunge throughout the worldwide China supply chain. Witness Brazil where industrial production is down 8% from a year ago, and slipping rapidly from there; or South Korea where exports have plunged by double digits.

Metaphorically speaking, dollars are hightailing back to the Eccles building. China and the petro-states are selling and off-shore dollar lenders are effectively making a margin call.

Oh dear lawdy, how does anyone who actually participates in the real world have any time to read, much less write, so much. Lol, it was all I could do to et and scroll past the non-sense to write this!??!@$&!?

Everyone is an expert on everything these days with Google, cut and paste and Wikipedia. No need to get a higher education or actually work in a field with Goigle. Unfortunately, we have nutty Internet sites written by satirist and the delusional or paranoid that appear to be considered as educational tools by some.

Yep thats Capc76 saying that David Stockman , Director of the office of budget under Regan and BlackStone leveraged buyout expert, doesn't know what he's talking about.

Funny how someone doesn't understand something or anything on the subject at hand so they blame the author. And the counter offered on the subject speaks volumes.

[metisdead]

Some posts in violation of fair use policy have been removed.

[Harsh Jones]

Reserves are the inverse of debt. It is not an accident that China's trade surplus has gotten bigger as the US's trade deficits have gotten bigger. They are one economy.

None of this is true. Reserves, in this case foreign reserves are what China must hold to engage in international trade. No one will accept China's money for goods or services nor will anyone pay in China's currency. China has to keep the world convinced that it can pay in USD.

Thus you see why China can let its reserve numbers fall as its exports and imports fall. If China didn't need the reserves it would be a real seller. It needs to raise cash.

Your statement that reserves are the inverse of debt really showcases your ignorance. For instance the UK has to hold foreign reserves but its debt is almost equal to that of the US as a percentage of GDP. Most countries with debt have foreign reserves for the same reason.

BTW your ignorance is getting old and I backed out of this. Now if you'd just pay attention to Publicus you'd learn something.

Cheers.

All of it is a fact.

For example, a Chinese company exports something to the US. The American importer only has US dollars. Not Chinese Yuan. The exporter can't spend the US dollars in China either. So the payment for the export goes to the central bank of China. They print Yuan and hand the Yuan to the exporter. After that the central bank of China still has these dollars. Normally if trade is close to balanced, it doesn't matter. But with China and the US , the US isn't exporting much back so these dollars pile up at the CB of China. What do they do with them ? They buy US treasuries with them.

Because the Balance of Payment accounts are based on double-entry bookkeeping, the annual current account and capital account have to net to zero, so that any current account deficit is offset one-to-one by a capital account surplus (deficit) and the balance of payments therefore always nets out to (equals) zero. And that's why it's called the "balance" of payments, because once we account for trade flows and capital flows, everything balances, and there are no deficits or surpluses on a net basis.

The way the US sells Treasuries to China means the US has a "capital account surplus." And China has a "capital account deficit." You see, when the US ships currency to China in exchange for real stuff, that's a deficit for the US. But when China ships currency to the US in exchange for Treasury bonds, that's a deficit for China.

Class dismissed

Even Paul Volker cut that class at Princeton as did everyone else everywhere else except the quack political economists of the Austrian school of Mad Max economics, finance and collapse. Come to think of it, the Mad Max economists whose hair is on fire to see the United States destroyed teach only one another.

For the vast number of us however the text has instead become the boring instructions to an already failed computer game called "How to defeat the evil fiat currency empire by net balancing payments using double entry zero hedge bookkeeping."

The only boom bang and pow in this game is the exploding heads of the Mad Max Austrian school guyz on the screen. It's the magic of debit-credit-explanation brought to life in its full action on your computer screen.

Lord give me strength.

How the international monetary system works has nothing to do with Austrian economics or Zerohedge. But I guess I have to provide some educational material to get the point across. You are welcome to explain how the balance of payments system works in your world.

From Wikipedia

Definition

The balance of trade forms part of the current account, which includes other transactions such as income from the net international investment position as well as international aid. If the current account is in surplus, the country's net international asset position increases correspondingly. Equally, a deficit decreases the net international asset position.

Since the mid-1980s, the United States has had a growing deficit in tradeable goods, especially with Asian nations (China and Japan) which now hold large sums of U.S debt that has funded the consumption.[

Double-entry Accounting System

Compilation of a BoP Account follows a double-entry accounting system where every external transaction is presented by two entries, a credit and a debit, with exact equal values but in opposite sign. The two BoP entries are used to denote the giving and receiving sides of external transactions. For example, if a resident of an economy sells goods to a non-resident (i.e. exports) and receives foreign currency in return, the two related BoP entries are: goods exported (a credit) and an increase in financial claim on non-resident (a debit).

Edited September 7, 2015 by Harsh Jones

[Publicus]

The CCP Boyz in Beijing reach for the finance textbooks too every time they have a crisis on their hands which explains why the Boyz have hit a great wall. It was going to happen sooner or later and everyone knew it. The CCP has never known what it was doing, supposed to be doing, could do or not do.

Beijing needs now more than ever to be unmistakably clear to the G-20 (the other 19) that it is a serious participant in the international system, that it can manage and control its own economy, and that it is not going to start any kind of currency or financial wars. Beijing knows the stakes and that Beijing will need to work within existing systems, structures, institutions.

The shocked global reaction and its aftermath in the markets was caused by the CCP Boyz stepping outside the rules both wantonly and brazenly. It is an unwritten rule at the IMF and outward globally that a currency depreciating is reluctantly acceptable if the depreciation simply reflects market realities as the realities may be. However, the serious trouble comes when a government consciously and deliberately acts to depreciate its currency. Governments acting is what's called a currency war and nobody wants an active race to depreciate currencies. The tit-for-tat of a currency war also implies protective tariffs and seriously devalued assets across the board.

The CCP Boyz need to show now they are not the incompetents they appear to be, or that they are not as malevolent as their action was to actively depreciate the yuan. It is well known and appreciated by the G-20 there are powerful anti-reform forces in Zhongnanhai (Beijing's Kremlin) that are insisting on a depreciation of 10% total now and even as much as 15% now.

Which is why people have been asking for weeks where Xi Jinping is because no one has seen him or heard from him about the current crashes and calamities. PM Li Kejiang has been out of sight and hearing too. Xi showed up for the military parade last Thursday then disappeared as quickly as he appeared. This is serious enough without the kind of CCP factional infighting between pro and anti reformers that led up to the 1989 Tiananmen Square turning point.