Chinese markets plunge again causing more global shudders

[Publicus]

 

It really has no more bullets left.

Apart from 3.6 trillion US dollars of foreign reserves; that is 3,600 billion; that is USD3,600,000,000,000; that is 9 years of Thailand's total GDP.

The 3.6 is the total value of the CCP's combined foreign reserves. It is not all in USD. USD value in their reserves are estimated to be $1.1 Trillion, maybe $1.2 Tn. Not any more however.

Societe General last week estimated from bond market activity globally the CCP Boyz in Beijing have sold $1.2 Trillion of forex since September. Daiwa Securities in September forecast 20% off GDP by 2020 but that looks like it might need revision to more lost and sooner.

Lombard Research says the Boyz in 2016 will have to sell another $2 Trillion of forex, perhaps as much as $2.5 Trillion. This is called reserve reversal and it is the end of the road for any country caught up in it. Forex reserves are in reversal and the yuan is submerging into depreciation. Deflation took full effect this time last year. Fifty percent of all bank loans are tied up in the bursting housing bubble. Banks are bone dry of liquidity so the central bank needs to sell forex reserves to get usd. Strange thing is, they need usd desperately cause there's not enough yuan. Yet the more usd they grab hold of an throw into the mix, the fewer yuan there are....etc etc as the dog chases its tail until the dumb mutt collapses.

CCP forex reserves presently total something like $3.4 Trillion of instruments of US, Euros, Yen, Pounds. That's it. Nothing significant in Russian rubles, nothing significant in Brazil reals, nothing significant in South Africa rands or in any other loser currencies of the now defunct and busted Brics to include their rah-rah lights out development bank.

Thailand btw will survive very comfortably throughout all of this. There are a lot of CCP proposals on the table worth many billions of imaginary dollars, baht, yuan. It's a matter of two lands of make-believe that delight in waving the magic wand. What is worse for Thailand however is to end up alone.

I am sure you are correct, but can you explain this in a few more details. How can China be short on yuan?

In a sentence, CCP has to pay more yuan to buy fewer usd.

The reason to begin with is that yuan naturally strengthens against the usd as China exports goods to the US. To keep exports going and growing, Beijing must depreciate the always strengthening yuan (rmb).

Manufactured goods leave the country where more new workers are being paid. So preventing a concomitant balooning inflation is also necessary. Constantly depreciating the yuan tends to this problem too. (CCP's only serious post-1990 inflation occurred in 2008 and 2009 when the US financial blowout took with it a lot of expectations, rules, practices.)

Since 2009 the People's Bank of China has printed four times more money than the Fed in its three rounds of QE. CCP Boyz liked it so much they kept right on doing it regardless. Now the Boyz are $28 Trillion in debt and having to depreciate the yuan. Deflation is in and people are saving up to half their income. Beijing needs usd cause the yuan is spent, expended, busted.

GDP growth this year was maybe 2% if they're lucky. CCP has it all together already however and it will in a few days announce GDP for 2015 and we can bet it will be close to the standard 7%. It might even be a miraculous 6.9%. Western governments btw don't get their GDP stuff together till at least March for some, April for others, and for still others not until May. (CCP has fast calculators.)

The long and the short of it is that Beijing has fewer usd to buy back yuan once the currency speculators start to circle. Currency speculators are already circling. Many here remember the former LOS in 1997.

[Publicus]

What is happening here?

"China aims at speculators with offshore yuan rates of 94%"

http://in.reuters.com/article/us-china-offshore-yuan-idINKCN0UQ1JC20160112

Yep as I'd just finished checking that out myself.

Here's how today's WSJ put it.....

China’s War on Speculators: Who Will Win the Yuan?

Dominating the small yuan market in Hong Kong is one thing; solving China’s fundamental currency conundrum is another

Closing the gap between onshore and offshore yuan is meant to reverse investor expectations for continued yuan depreciation. But the outflows driving the yuan lower have fundamental drivers. Growth is slowing and interest rates are falling in China, driving down investment returns available there, even as the U.S. is set to keep raising rates. As a result, money is naturally leaving China and seeking better returns elsewhere.

China can muscle the small CNH market into submission, but until it convinces its own people to stop pouring money out of the country, the appearance of control will be illusory.

http://www.wsj.com/articles/chinas-muscling-hong-kong-wont-save-yuan-1452588194

A vital additional aspect no one talks about is that CCP runs two regimes of the identical currency. One is for the onshore mainland yuan (CNY), and other is for the offshore Hong Kong yuan (CNH). Nonetheless, the two are supposed to closely match up (as it's impossible to have them be identical). Today the yuan in Hong Kong went to a 2 percentage point differential against the mainland yuan. The bit of capital that enters the mainland does so through Hong Kong. So HKG traders are offering an effective discount to buyers and other investors they can't get on the mainland.

It can look like Hong Kong is in the state of harmony with Beijing that says all for one, one for all and every man for himself.

[tonbridgebrit]

https://uk.finance.yahoo.com/news/airbus-beats-boeing-2015-order-100522128.html



(from the article )
[ Europe's Airbus (AIR.PA) is unperturbed by China's financial turmoil, sticking to robust demand forecasts on Tuesday after beating arch-rival Boeing (BA.N) in the annual tally of global aircraft orders, despite failing to close a gap on total deliveries with the world's largest jetmaker.
Despite a recent sell-off in markets in China, where Airbus has an assembly plant, the Chinese continue to spend on aviation, planemaking chief Fabrice Bregier said.
"It’s a sign that the vision you have that share prices drop and everything collapses is disconnected from the real economy, he said at the company's annual news conference. ]

[Publicus]

https://uk.finance.yahoo.com/news/airbus-beats-boeing-2015-order-100522128.html

(from the article )

[ Europe's Airbus (AIR.PA) is unperturbed by China's financial turmoil, sticking to robust demand forecasts on Tuesday after beating arch-rival Boeing (BA.N) in the annual tally of global aircraft orders, despite failing to close a gap on total deliveries with the world's largest jetmaker.

Despite a recent sell-off in markets in China, where Airbus has an assembly plant, the Chinese continue to spend on aviation, planemaking chief Fabrice Bregier said.

"It’s a sign that the vision you have that share prices drop and everything collapses is disconnected from the real economy, he said at the company's annual news conference. ]

China is not going to disappear y'know. It will still be there and it will continue to, well, continue. That is all China has ever done.

While a swarm of Chinese have left the country to take their money and families with them -- to the West -- China will continue to have a market.

There still will be something like 300 million to sell to, from commercial airliners to cars to mobile phones etc etc. That is in fact a pretty good market by any standard.

They'll have to build the Great Wall a thousand times over to keep out the billion ignored Chinese, but there still will be a remnant of the nouveau riche; the nouveau middle class.

[Publicus]

Here is an accurate diagnosis that provides a basis for the prognosis that the CCP's economy is, at a minimum, facing serious challenges.

The profound and pervasive challenges means the Boyz in Beijing need to be busy domestically for an indeterminate period of time.

Their big task of the present is to keep the currency speculators away. Yet, once the currency speculators start to move in, it's already past time to turn out the lights.

Ebbing confidence in China's policymaking has fueled investors' retreat from the slowing economy, and expectations that the currency will fall further has widened the gap between the tightly managed onshore yuan and the Hong Kong-based offshore rate.

Perceived mis-steps by the authorities have stoked concerns in global markets that Beijing might be losing its grip on economic policy, just as the country looks set to post its slowest growth in 25 years.

Fitch Ratings said the government was grappling with a "sharpening dilemma between a perceived need to keep interest rates low to help the economy manage its debt burden, and downward pressure on the Chinese yuan and foreign reserves".

http://in.reuters.com/article/china-markets-idINKCN0UQ0W320160112

[Scott]

An off-topic post has been removed.

[Pakboong]

Because I get paid in dollars, I do hope for a China collapse but, I don't believe everything is as it appears. China is chasing many things perhaps most importantly, control of gold pricing with the Shanghi exchange. Long term they want control of the reserve currency and want that currency to be backed in gold. Nobody knows how much gold they have but estimates believe they are the world's #6. If there is gold in Ft Knox, as we report, the US is reasonably well positioned, if that gold is gone as many suspect, we are in for some trouble. We haven't inventoried the gold in Ft Knox since the early 50s. A lot has happened since.

BRICS has serious competition. The US controls over 17% of the IMF vote and China has less than 4% of that vote. I am trying to read between the lines to see what they are up to really. I know they are not stupid and have something huge up their sleeves. The mystery behind their gold reserves is just one of many but, the largest.

The bottom has fallen off the Baltic Dry Index, no ships are moving and it appears that affects China the most but I am not so sure how that will play out. Early in the week, there were no active ships in the North Atlantic. That has never happened in all of shipping history. All of those ships are anchored or in port. Doesn't look good for the world economy.

Gold holdings will keep the playing field level. Right now, China Russia and India have bought record amounts of gold and China leads the world in gold production. It will be interesting.

Edited January 13, 2016 by Pakboong

[Chicog]

Its labor is no longer cheap and shipping costs to and from China and the West are too high to make it pay for manufacturing. Robots are replacing a lot of cheap labor.

With fuel at the price it is, I would imagine shipping costs are significantly cheaper at the moment than a few years ago.

[Prbkk]

It really has no more bullets left.

Apart from 3.6 trillion US dollars of foreign reserves; that is 3,600 billion; that is USD3,600,000,000,000; that is 9 years of Thailand's total GDP.

Uh, You haven't been paying attention to how much of that they've sold trying to prop up their failing economy and even their stock market.

Don't forget that China HAS to have a lot of USD to engage in international trade - its biggest business. No one will accept Yuan for payment and it's all done in USD. China has sold about as much of its foreign reserves (US treasuries) as it can without going out of business. It can't keep selling more to raise cash as it has been.

It's out of bullets.

Cheers.

Growing pains rather than terminal illness. In any case, there won't be any glee about this in the US because if push comes to shove the Chinese might start dumping US debt (as could Japan) and send the U.S. economy into an unrecoverable tail spin. It's a problem for the whole world.

How would that be a problem for anyone but China itself? Those T-bills and notes, and the interest they provide, are the best economic thing China has got going at the moment. Only an out of their mind Chinese central banker or President would EVER get rid of them. And even if they did...so what...doesn't effect the US at all...some other lucky investor or country gets to buy them and makes a rock-solid investment. Why in the heck to you think all these central banks stuff their vaults with the stuff and never sell it...because they're still the platinum standard investment and the foundation of most other countries monetary stability and fiscal policies.

Your argument assumes there are others out there able to buy....and I can't see where that money is going to come from. Most of the U.S. debt is domestic but in recent decades a significant chunk of it has been bought by China and Japan. They no longer have the money and are net sellers. Unless the domestic demand increases there will be a shortfall as no other country can buy in those volumes. If the debt level is not reduced...and there is a shortage of buyers....then that would force a damaging increase in interest rates.

The debt has already been sold by the US Treasury...so whatever price the Chinese get for it in the secondary market doesn't effect the US Treasury or interest rates...these are set at the original sale. In any case, there has never been, and is not likely to be, any shortage of buyers for US government debt, especially at the current time, with the lack of stable and safe alternatives at the moment. You gloom and doomsters have been shown to be wrong with all your predictions regarding the US's debt load...but never stops you guys from saying that disaster is right around the corner...probably just talking up bad bets you've made against the direction of Treasuries. With interest rates still pretty much at zero, I think the US economy and savers could withstand a rise interest rates to historical norms just fine.

With a debt/GDP ratio of 104% and rsing fast, ( China is <50).I fail to see how you can continue to spin this as some kind of 'win' for the U.S. economy. That debt has to be sourced ( and, eventually, paid for). Who, in the current climate, is going to buy it? Not China, not Japan, not Saudi Arabia.
China is a bad news story for everyone. The ripple effects could be devastating for many countries, including Thailand, Australia, Canada, others. The US is not immune from serious risk in this situation.

[trogers]

Awaiting the Mother of all fireworks in the financial world before all the cards are laid out...

[Publicus]

Because I get paid in dollars, I do hope for a China collapse but, I don't believe everything is as it appears. China is chasing many things perhaps most importantly, control of gold pricing with the Shanghi exchange. Long term they want control of the reserve currency and want that currency to be backed in gold. Nobody knows how much gold they have but estimates believe they are the world's #6. If there is gold in Ft Knox, as we report, the US is reasonably well positioned, if that gold is gone as many suspect, we are in for some trouble. We haven't inventoried the gold in Ft Knox since the early 50s. A lot has happened since.

BRICS has serious competition. The US controls over 17% of the IMF vote and China has less than 4% of that vote. I am trying to read between the lines to see what they are up to really. I know they are not stupid and have something huge up their sleeves. The mystery behind their gold reserves is just one of many but, the largest.

The bottom has fallen off the Baltic Dry Index, no ships are moving and it appears that affects China the most but I am not so sure how that will play out. Early in the week, there were no active ships in the North Atlantic. That has never happened in all of shipping history. All of those ships are anchored or in port. Doesn't look good for the world economy.

Gold holdings will keep the playing field level. Right now, China Russia and India have bought record amounts of gold and China leads the world in gold production. It will be interesting.

Wuz waiting for a goldbug to flit in.

If there is gold in Ft Knox, as we report, the US is reasonably well positioned, if that gold is gone as many suspect, we are in for some trouble.

There is no reason to question or doubt the US has the gold reserves it asserts it does have, going back to WW2. The Government of the United States takes the matter of gold as seriously as life itself (for the nation). Price of gold has been long term low compared to expectations because of one cumulative purchaser country not mentioned in the post.

I know they are not stupid and have something huge up their sleeves.

CCP Dictators in Beijing are astoundingly focking stupid and so are their storytellers. No one should confuse devious dishonest or duplicitous with intelligence.

[ExpatOilWorker]

 

It really has no more bullets left.

Apart from 3.6 trillion US dollars of foreign reserves; that is 3,600 billion; that is USD3,600,000,000,000; that is 9 years of Thailand's total GDP.

The 3.6 is the total value of the CCP's combined foreign reserves. It is not all in USD. USD value in their reserves are estimated to be $1.1 Trillion, maybe $1.2 Tn. Not any more however.

Societe General last week estimated from bond market activity globally the CCP Boyz in Beijing have sold $1.2 Trillion of forex since September. Daiwa Securities in September forecast 20% off GDP by 2020 but that looks like it might need revision to more lost and sooner.

Lombard Research says the Boyz in 2016 will have to sell another $2 Trillion of forex, perhaps as much as $2.5 Trillion. This is called reserve reversal and it is the end of the road for any country caught up in it. Forex reserves are in reversal and the yuan is submerging into depreciation. Deflation took full effect this time last year. Fifty percent of all bank loans are tied up in the bursting housing bubble. Banks are bone dry of liquidity so the central bank needs to sell forex reserves to get usd. Strange thing is, they need usd desperately cause there's not enough yuan. Yet the more usd they grab hold of an throw into the mix, the fewer yuan there are....etc etc as the dog chases its tail until the dumb mutt collapses.

CCP forex reserves presently total something like $3.4 Trillion of instruments of US, Euros, Yen, Pounds. That's it. Nothing significant in Russian rubles, nothing significant in Brazil reals, nothing significant in South Africa rands or in any other loser currencies of the now defunct and busted Brics to include their rah-rah lights out development bank.

Thailand btw will survive very comfortably throughout all of this. There are a lot of CCP proposals on the table worth many billions of imaginary dollars, baht, yuan. It's a matter of two lands of make-believe that delight in waving the magic wand. What is worse for Thailand however is to end up alone.

I am sure you are correct, but can you explain this in a few more details. How can China be short on yuan?

In a sentence, CCP has to pay more yuan to buy fewer usd.

The reason to begin with is that yuan naturally strengthens against the usd as China exports goods to the US. To keep exports going and growing, Beijing must depreciate the always strengthening yuan (rmb).

Manufactured goods leave the country where more new workers are being paid. So preventing a concomitant balooning inflation is also necessary. Constantly depreciating the yuan tends to this problem too. (CCP's only serious post-1990 inflation occurred in 2008 and 2009 when the US financial blowout took with it a lot of expectations, rules, practices.)

Since 2009 the People's Bank of China has printed four times more money than the Fed in its three rounds of QE. CCP Boyz liked it so much they kept right on doing it regardless. Now the Boyz are $28 Trillion in debt and having to depreciate the yuan. Deflation is in and people are saving up to half their income. Beijing needs usd cause the yuan is spent, expended, busted.

GDP growth this year was maybe 2% if they're lucky. CCP has it all together already however and it will in a few days announce GDP for 2015 and we can bet it will be close to the standard 7%. It might even be a miraculous 6.9%. Western governments btw don't get their GDP stuff together till at least March for some, April for others, and for still others not until May. (CCP has fast calculators.)

The long and the short of it is that Beijing has fewer usd to buy back yuan once the currency speculators start to circle. Currency speculators are already circling. Many here remember the former LOS in 1997.

A Chinaman walks into Super Rich China Inc. with 6.6 million yuan, exchange them to $1 million and take the afternoon flight to LAX. The central bank is $1 million short, but that million is now in the pocket of a happy Chinaman in the USA, but the total amount of yuan is still the same or what am I missing here?

Edited January 13, 2016 by ExpatOilWorker

[Publicus]

 

It really has no more bullets left.

Apart from 3.6 trillion US dollars of foreign reserves; that is 3,600 billion; that is USD3,600,000,000,000; that is 9 years of Thailand's total GDP.

The 3.6 is the total value of the CCP's combined foreign reserves. It is not all in USD. USD value in their reserves are estimated to be $1.1 Trillion, maybe $1.2 Tn. Not any more however.

Societe General last week estimated from bond market activity globally the CCP Boyz in Beijing have sold $1.2 Trillion of forex since September. Daiwa Securities in September forecast 20% off GDP by 2020 but that looks like it might need revision to more lost and sooner.

Lombard Research says the Boyz in 2016 will have to sell another $2 Trillion of forex, perhaps as much as $2.5 Trillion. This is called reserve reversal and it is the end of the road for any country caught up in it. Forex reserves are in reversal and the yuan is submerging into depreciation. Deflation took full effect this time last year. Fifty percent of all bank loans are tied up in the bursting housing bubble. Banks are bone dry of liquidity so the central bank needs to sell forex reserves to get usd. Strange thing is, they need usd desperately cause there's not enough yuan. Yet the more usd they grab hold of an throw into the mix, the fewer yuan there are....etc etc as the dog chases its tail until the dumb mutt collapses.

CCP forex reserves presently total something like $3.4 Trillion of instruments of US, Euros, Yen, Pounds. That's it. Nothing significant in Russian rubles, nothing significant in Brazil reals, nothing significant in South Africa rands or in any other loser currencies of the now defunct and busted Brics to include their rah-rah lights out development bank.

Thailand btw will survive very comfortably throughout all of this. There are a lot of CCP proposals on the table worth many billions of imaginary dollars, baht, yuan. It's a matter of two lands of make-believe that delight in waving the magic wand. What is worse for Thailand however is to end up alone.

I am sure you are correct, but can you explain this in a few more details. How can China be short on yuan?

In a sentence, CCP has to pay more yuan to buy fewer usd.

The reason to begin with is that yuan naturally strengthens against the usd as China exports goods to the US. To keep exports going and growing, Beijing must depreciate the always strengthening yuan (rmb).

Manufactured goods leave the country where more new workers are being paid. So preventing a concomitant balooning inflation is also necessary. Constantly depreciating the yuan tends to this problem too. (CCP's only serious post-1990 inflation occurred in 2008 and 2009 when the US financial blowout took with it a lot of expectations, rules, practices.)

Since 2009 the People's Bank of China has printed four times more money than the Fed in its three rounds of QE. CCP Boyz liked it so much they kept right on doing it regardless. Now the Boyz are $28 Trillion in debt and having to depreciate the yuan. Deflation is in and people are saving up to half their income. Beijing needs usd cause the yuan is spent, expended, busted.

GDP growth this year was maybe 2% if they're lucky. CCP has it all together already however and it will in a few days announce GDP for 2015 and we can bet it will be close to the standard 7%. It might even be a miraculous 6.9%. Western governments btw don't get their GDP stuff together till at least March for some, April for others, and for still others not until May. (CCP has fast calculators.)

The long and the short of it is that Beijing has fewer usd to buy back yuan once the currency speculators start to circle. Currency speculators are already circling. Many here remember the former LOS in 1997.

A Chinaman walks into Super Rich China Inc. with 6.6 million yuan, exchange them to $1 million and take the afternoon flight to LAX. The central bank is $1 million short, but that million is now in the pocket of a happy Chinaman in the USA, but the total amount of yuan is still the same or what am I missing here?

Understood, so it needs to be stated only the CCP government and its authorised banks, agents of finance, specified individuals, can buy or transact usd on the mainland. Your individual single guy can't get the usd unless he's specifically authorised by the CCP to do it.

The individual CCP Chinese is not the central matter however so I should have given a more focused reply.

If there are three things to keep in mind, they are these:

1) When a Chinese exporter gets paid in usd, or in euros, yen, pounds, the usd et al go to the central bank, the People's Bank of China (different from the Bank of China). PBOC reciprocates the going value in yuan to the exporter.

2) Importers use their account at the state banks to send usd abroad for foreign usd payment obligations, which are just about all of 'em. The state bank, which are the only banks, send the usd value to the foreign corporation. (Rumor has it, no one in the CCP China has ever seen a usd )

3) Both are off, down. Imports are down and exports are down. (December had an increase of exports but it is insignificant.) The inflow of usd from the everyday basic import/export trade and its commerce is off. CCP needs usd to control the exchange rate. They lose control of the exchange rate, they lose control of the economy and its financial system.

Add to this there's been a steadily increasing capital flight that early last year turned into a mass exodus from CCP China. That takes usd out, mostly illegally, but out.

Shadow banking system aggravates this, severely. It however only aggravates the fundamental flaws.

So inflow of usd is down the past several years. The currency is appreciating when it needs instead to be depreciated, so it's being depreciated by the Boyz. Depreciation helps slow capital outflow. It helps exports. This improves CCP possession of usd. But it's not significant however.

So PBOC, wholly owned and operated by the CCP itself, has to sell forex reserves, hence the $800 bn of forex sales almost for sure since September, perhaps as much as $1.2 Trillion. December alone saw capital hightailing it out in the amount of $108 bn.

Trouble is, once currency speculators see all of this --combined with the hundred unsolvable contradictions in the economy-- they sharpen their knives for the feast. CCP fought off speculators in Hong Kong last week and the weekend, but they'll be back reinforced.

It is the currency, not the stock markets that will be determinative. RMB has always been monopoly money.

Edited January 13, 2016 by Publicus

[trogers]

 




It really has no more bullets left.

Apart from 3.6 trillion US dollars of foreign reserves; that is 3,600 billion; that is USD3,600,000,000,000; that is 9 years of Thailand's total GDP.


The 3.6 is the total value of the CCP's combined foreign reserves. It is not all in USD. USD value in their reserves are estimated to be $1.1 Trillion, maybe $1.2 Tn. Not any more however.

Societe General last week estimated from bond market activity globally the CCP Boyz in Beijing have sold $1.2 Trillion of forex since September. Daiwa Securities in September forecast 20% off GDP by 2020 but that looks like it might need revision to more lost and sooner.

Lombard Research says the Boyz in 2016 will have to sell another $2 Trillion of forex, perhaps as much as $2.5 Trillion. This is called reserve reversal and it is the end of the road for any country caught up in it. Forex reserves are in reversal and the yuan is submerging into depreciation. Deflation took full effect this time last year. Fifty percent of all bank loans are tied up in the bursting housing bubble. Banks are bone dry of liquidity so the central bank needs to sell forex reserves to get usd. Strange thing is, they need usd desperately cause there's not enough yuan. Yet the more usd they grab hold of an throw into the mix, the fewer yuan there are....etc etc as the dog chases its tail until the dumb mutt collapses.

CCP forex reserves presently total something like $3.4 Trillion of instruments of US, Euros, Yen, Pounds. That's it. Nothing significant in Russian rubles, nothing significant in Brazil reals, nothing significant in South Africa rands or in any other loser currencies of the now defunct and busted Brics to include their rah-rah lights out development bank.

Thailand btw will survive very comfortably throughout all of this. There are a lot of CCP proposals on the table worth many billions of imaginary dollars, baht, yuan. It's a matter of two lands of make-believe that delight in waving the magic wand. What is worse for Thailand however is to end up alone.

I am sure you are correct, but can you explain this in a few more details. How can China be short on yuan?

In a sentence, CCP has to pay more yuan to buy fewer usd.

The reason to begin with is that yuan naturally strengthens against the usd as China exports goods to the US. To keep exports going and growing, Beijing must depreciate the always strengthening yuan (rmb).

Manufactured goods leave the country where more new workers are being paid. So preventing a concomitant balooning inflation is also necessary. Constantly depreciating the yuan tends to this problem too. (CCP's only serious post-1990 inflation occurred in 2008 and 2009 when the US financial blowout took with it a lot of expectations, rules, practices.)

Since 2009 the People's Bank of China has printed four times more money than the Fed in its three rounds of QE. CCP Boyz liked it so much they kept right on doing it regardless. Now the Boyz are $28 Trillion in debt and having to depreciate the yuan. Deflation is in and people are saving up to half their income. Beijing needs usd cause the yuan is spent, expended, busted.

GDP growth this year was maybe 2% if they're lucky. CCP has it all together already however and it will in a few days announce GDP for 2015 and we can bet it will be close to the standard 7%. It might even be a miraculous 6.9%. Western governments btw don't get their GDP stuff together till at least March for some, April for others, and for still others not until May. (CCP has fast calculators.)

The long and the short of it is that Beijing has fewer usd to buy back yuan once the currency speculators start to circle. Currency speculators are already circling. Many here remember the former LOS in 1997.

A Chinaman walks into Super Rich China Inc. with 6.6 million yuan, exchange them to $1 million and take the afternoon flight to LAX. The central bank is $1 million short, but that million is now in the pocket of a happy Chinaman in the USA, but the total amount of yuan is still the same or what am I missing here?

Understood, so it needs to be stated only the CCP government and its authorised banks, agents of finance, specified individuals, can buy or transact usd on the mainland. Your individual single guy can't get the usd unless he's specifically authorised by the CCP to do it.

The individual CCP Chinese is not the central matter however so I should have given a more focused reply.


If there are three things to keep in mind, they are these:

1) When a Chinese exporter gets paid in usd, or in euros, yen, pounds, the usd et al go to the central bank, the People's Bank of China (different from the Bank of China). PBOC reciprocates the going value in yuan to the exporter.

2) Importers use their account at the state banks to send usd abroad for foreign usd payment obligations, which are just about all of 'em. The state bank, which are the only banks, send the usd value to the foreign corporation. (Rumor has it, no one in the CCP China has ever seen a usd )

3) Both are off, down. Imports are down and exports are down. (December had an increase of exports but it is insignificant.) The inflow of usd from the everyday basic import/export trade and its commerce is off. CCP needs usd to control the exchange rate. They lose control of the exchange rate, they lose control of the economy and its financial system.


Add to this there's been a steadily increasing capital flight that early last year turned into a mass exodus from CCP China. That takes usd out, mostly illegally, but out.

Shadow banking system aggravates this, severely. It however only aggravates the fundamental flaws.

So inflow of usd is down the past several years. The currency is appreciating when it needs instead to be depreciated, so it's being depreciated by the Boyz. Depreciation helps slow capital outflow. It helps exports. This improves CCP possession of usd. But it's not significant however.

So PBOC, wholly owned and operated by the CCP itself, has to sell forex reserves, hence the $800 bn of forex sales almost for sure since September, perhaps as much as $1.2 Trillion. December alone saw capital hightailing it out in the amount of $108 bn.

Trouble is, once currency speculators see all of this --combined with the hundred unsolvable contradictions in the economy-- they sharpen their knives for the feast. CCP fought off speculators in Hong Kong last week and the weekend, but they'll be back reinforced.

It is the currency, not the stock markets that will be determinative. RMB has always been monopoly money.

And with the recent help from IMF, the RMB has been elevated into par with the USD and Yen...as a trading currency...?

[Publicus]

Not on a par. CNY was admitted at a 10.9 value when it wanted 16 points. Less than 10 would have been a laffer.

IMF got taken to the woods on it as the CCP has since gone ahead to arbitrarily devalue the yuan again, this time by 2.5%. This new devaluation proves the August devaluation was not to move the yuan more toward a floating rate. It's all about the CCP's stressed economy only.

So it's now a race to the bottom for currencies in the region cause CCP needs to devalue up to 15 percent (more likely 20%).

Yuan is not a free floating currency nor is the central bank an independent one. IMF violated its own rules.

IMF included the yuan to try to make loans more accessable to the CCP at foreign banks. CCP Boyz and their domestic banks are broke and they need bucks. That's not going well either.

Doesn't take effect until September this year, if CCP is still around then.

[ExpatOilWorker]

Did they just make this up?

"The premier also said that employment had expanded more than expected and that consumption contributed nearly 60 percent of economic growth."

http://www.reuters.com/article/china-economy-gdp-idUSB9N13602N

Edited January 16, 2016 by ExpatOilWorker

[copa8]

China is seriously crashing. It's big run is over. It's cashed in most of its liquidity trying to prop up its economy and its debt has soared. It really has no more bullets left.

Its labor is no longer cheap and shipping costs to and from China and the West are too high to make it pay for manufacturing. Robots are replacing a lot of cheap labor.

We're watching another communist dictatorship, in a long line of them, in its death throes. Communist China and Russia - the two biggest losers on the planet.

Cheers.

Just curious and serious question, but where would the world be after 2008 without China acting as the world's growth engine?

Below is your answer, even though he didn't quote you. He's spot on. Read it.

China's capital account is largely closed. The consequence is that It contributes nothing measurable to global capital growth or development. China sells products it makes for other people to buy and by using other people's money. China deals in prices, not capital. Prices are fluid and reflect global markets. CCP's capital is almost entirely internal, limited to domestic infrastructure and some tiddlywinks projects abroad.

Capital creation drives global markets. Capital creation and management is the force in global growth, from machinery to technology to bucks in global circulation. Trade is a (popular and profitable) byproduct of capital creation, development, growth. CCP China is not a player in creating capital or in driving capital growth. Never was, never will be.

So the world would be better off from 2008 forward had China (and other BRICS) not been there?

[trogers]

China is seriously crashing. It's big run is over. It's cashed in most of its liquidity trying to prop up its economy and its debt has soared. It really has no more bullets left.

Its labor is no longer cheap and shipping costs to and from China and the West are too high to make it pay for manufacturing. Robots are replacing a lot of cheap labor.

We're watching another communist dictatorship, in a long line of them, in its death throes. Communist China and Russia - the two biggest losers on the planet.

Cheers.

Just curious and serious question, but where would the world be after 2008 without China acting as the world's growth engine?

Below is your answer, even though he didn't quote you. He's spot on. Read it.

China's capital account is largely closed. The consequence is that It contributes nothing measurable to global capital growth or development. China sells products it makes for other people to buy and by using other people's money. China deals in prices, not capital. Prices are fluid and reflect global markets. CCP's capital is almost entirely internal, limited to domestic infrastructure and some tiddlywinks projects abroad.

Capital creation drives global markets. Capital creation and management is the force in global growth, from machinery to technology to bucks in global circulation. Trade is a (popular and profitable) byproduct of capital creation, development, growth. CCP China is not a player in creating capital or in driving capital growth. Never was, never will be.

So the world would be better off from 2008 forward had China (and other BRICS) not been there?

I hold this opinion. There not not have been the QEs for starters...

[Publicus]

Just curious and serious question, but where would the world be after 2008 without China acting as the world's growth engine?

Below is your answer, even though he didn't quote you. He's spot on. Read it.

China's capital account is largely closed. The consequence is that It contributes nothing measurable to global capital growth or development. China sells products it makes for other people to buy and by using other people's money. China deals in prices, not capital. Prices are fluid and reflect global markets. CCP's capital is almost entirely internal, limited to domestic infrastructure and some tiddlywinks projects abroad.

Capital creation drives global markets. Capital creation and management is the force in global growth, from machinery to technology to bucks in global circulation. Trade is a (popular and profitable) byproduct of capital creation, development, growth. CCP China is not a player in creating capital or in driving capital growth. Never was, never will be.

So the world would be better off from 2008 forward had China (and other BRICS) not been there?

Who said that?

Brics existed as a grouping at the time (no longer however).

It is in the present that Brazil, Russia, India, China, South Africa have fallen and scattered about in bits and pieces. So have their 70-odd other submerging emerging economies. India has separated from the Brics and is the only one from among 'em that is growing, 7.7% estimated for 2015.

The Fed did three of QE and CCP Boyz in Beijing got preferential treatement by US Treasury Department in sale of T-Bills. CCP bought a bunch of 'em. Loads and loads of 'em.

The CCP's personal bank, aka the People's Bank of China, had a grand go of it printing four times more money than the Fed fiddled with in its QE rounds. CCP Boyz have now found themselves $28 Trillion behind the eightball of debt, much of which is dollar denominated. The more CCP depreciates the yuan, the more it needs usd to pay off those particular debts or it will need to shat out even more (worthless) yuan.

Let's look at what's getting shaked out here as we turn the CCP Boyz upside down.

Fed has now reached the point of increasing its rate, with more to come, and the dollar is strengthening. CCP is instead depreciating the yuan again to try to slow fleeing capital and to try harder to ease their steadily falling exports; and, to try to compensate for selling off a slew of the T-Bills it had purchased. CCP forex is now down to $3.3 Trillion total (not only in usd purchases) with CCP facing a much tougher 2016 than the 2015 it crashed its way through.

CCP reserve reversal may be worse yet, however. Societe General last week estimated $1.1 Trillion of forex reserves sold since the stock market black hole opened during summer. If so, that would bring CCP forex reserves to less than $3 Trillion with another reduction of $1 to $2 Trillion or worse projected for this year. CCP debt to GDP ratio finally hit 300 percent during the Q4 just passed.

Currency speculators got driven off last week by the CCP's personal central bank when they tried to move against the yuan in Hong Kong. Everyone expects their return this week in strength, so we'll see how much each side can spend to control the yuan. We'll see how many arrows are in each quiver. Still, once currency speculators begin to move against your currency, an uphill fight quickly becomes a very high mountain before you.

[Publicus]

Did they just make this up?

"The premier also said that employment had expanded more than expected and that consumption contributed nearly 60 percent of economic growth."

http://www.reuters.com/article/china-economy-gdp-idUSB9N13602N

CCP keeps workers in the state corporations and state owned factories whether there's work or not. They stop producing inventory only when the stacked boxes reach up to the warehouse roof. CCP hires new labor market entrants whether there's work for 'em or not. Better to have idle workers in government controlled buildings rather than on the loose outside of 'em, is how CCP see it. Privately owned companies layoff or dismiss employees no longer needed. Bottom line is what we already know, i.e., CCP computes whatever numbers it likes.

So let's look at their best data for consumption. Xi JinPing and PM Li KeJiang well know CCP needs to become a consumer economy instead of an export based one. And to go easy on the mega infrastructure projects because they produce negative returns. Also to move across the board excess capacity out onto the global market. That's why they got put in charge. Cause otherwise it's bust.

The good news is that in 2014 disposable personal income (consumption) as a percentage of GDP hit an all time high of 44.0%. When Xi and Li took charge in 2011, it had been 41.5% of GDP.

The English fluent PM Li Kejiang said consumption is now 60% of economic growth, which is also excellent news. After that however comes that sinking feeling. Which is, even if consumption increases by 50% annually, by the end of the terms of Xi and Li, in 2023, consmption will still be only 53% of GDP. That is not only too late, it is too little still. Way too small a percentage of GDP. Now that the Brics bank is busted, CCP overcapacity is being offered (AIIB) to a global economy in retreat while yuan depreciation leads a currency war and race to the bottom.

So the old scheme is falling apart now.

Exports have been trending steadily downward since 2012. Too many Infrastructure projects have zero return. The bursting property bubble includes 63 million empty housing units and uncounted Trillions outstanding ($24 Trillion in Beijing alone). Banks can't lend and borrowers can't pay in both state banks and shadow banking. Stimulous doesn't work any more; last year the CCP's (personal) central bank, People's Bank of China, threw 11 Trillion yuan at the banks and economy. No growth from it cause most people paid lenders who owe other lenders, or made payments toward outstanding debts, to include foreign debts which continue to remain outstanding. Capital continues to flee. PBOC continues to depreciate the currency and speculators have begun to attack the yuan in Hong Kong.

Tomorrow comes GDP growth figures for 2015 from Beijing, perennially the first to report annually by a hundred furlongs. If they say 6.9% a lotta people are going to die laughing again.

https://www.worldbank.org/content/dam/Worldbank/document/EAP/China/ceu_06_15_en.pdf

[tonbridgebrit]

http://www.bbc.co.uk/news/business-35628733

"The pound hit its lowest level against the dollar in almost seven years on concerns about a possible UK exit from the European Union.

At one stage it was down as much as 2.4% at $1.4058, its lowest level since March 2009, before later recovering.

The move follows London Mayor Boris Johnson joining the campaign to leave the EU after Prime Minister David Cameron set a June referendum date."


All this talk about the Chinese yuan being devalued. I think we should look at the British pound, and be far more aware of whatever currency collapse. The yuan drops by a few percent, and there's hysteria. The pound will probably plunge 20% against the dollar if Britain leaves the EU. Now, THAT IS scary.