If there is a better, more fitting way to head into the Christmas holiday in the United States than by digging into the finances and monetary flows of the People’s Bank of China, then I just don’t want to know what it is. Contrary to maybe anyone's rational first impression that this is somehow insane, there’s much we can tell [...]
It’s another one of those crisis-era programs, GFC1, the Fed probably hopes you never think too much about. Almost nobody noticed while the thing was operational. It was called the Supplementary Financing Program (SFP) which was thought up and initiated during the middle of September 2008 just two days after Lehman Brothers and AIG. Its purpose was, unbelievably, to drain [...]
Chinese monetary authorities announced today what will be for some of its banks a seventh round of “stimulus.” For the largest institutions, it will "only" be their sixth and the first one since January 2019. The PBOC has decided it is time for more RRR cuts. Effective September 16, the ratio all banks are required to hold of reserves will [...]
One of the very few central pillars supporting the hopes for a second half rebound was China’s “stimulus.” Since we’ve been conditioned to just accept whatever a central bank does as equal to it, throughout the last thirteen months since the first RRR cut was initiated that one as well as the four which followed (five for smaller and medium [...]
Earlier this month, the People’s Bank of China (PBOC) reduced the percentage of liquid reserves some banks are required to hold. Effective May 15, the Chinese central bank estimated that the policy change would release about RMB 280 billion into the system. This RRR discount, however, was only applied to small and medium-sized banks. The reserve rate for large banks [...]
A little less than three weeks ago, the overnight unsecured money market rate for Chinese renminbi (RMB), SHIBOR, had fallen sharply to 1.417%. This was among the lowest in history, though it has been happening more frequently since last summer. That sounds like a good thing, only the low rates don’t ever last. Instead, over the next eight market sessions [...]
Banks in China have to hoard liquidity ahead of their weeklong holidays, twice each year. The bigger of the two, related to the Chinese New Year, occurs in either January or February. The second, associated with China’s National Day, takes place at the beginning of every October and is still a formidable challenge to the monetary system. Depositories build up [...]
How big should the Fed’s balance sheet be? It’s a topic that has taken over a lot of academic discussions. Recall that before 2008 the level of bank reserves was practically nil. They didn’t play much of a role in any money market, required reserves or not (this should be a big clue). After four QE’s spaced out over many [...]
In mainstream monetary convention, bank reserves are at the center of the monetary pyramid. They are the byproduct of any central bank policy which requires direct action. In the US system, they had been absent, however, until around 2008. The reason was the Federal Reserve’s belief that it didn’t require any change in the corresponding balance of aggregate reserves to [...]
Five days ago, the Bank for International Settlements (BIS) published its Quarterly Review letter. Contained within it were the usual articles and releases of data that accompany every issue. There was the opening piece encouraged, as always, by the “strong outlook” though puzzled how it isn’t translating into inflation. And bowing to the enthusiasm and interest in things like Bitcoins, [...]
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