201805.21
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China’s Monetary Shell Game (Confirmed for Step 2)

Chinese bank reserves contracted in April 2018 for the first time in almost two years. The decline was small, just 0.2%, but it is still represents a significant deviation from the limited growth since the turmoil in 2015 and early 2016. The decline in reserves further corroborates our theory of events. To briefly review, China…

201805.11
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Chart of the Week: PBOC Clumsily Stumbles Into Step 1

A few weeks ago, the PBOC stunned many mainstream observers by reducing the RRR. It cut against the preferred narrative that the central bank was “tightening” in anticipation of an economic and therefore inflationary breakout (labor shortages, don’t you know). It didn’t seem to make sense. From the perspective of globally synchronized growth, it wouldn’t….

201804.25
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Good Time To Review China Money Basics

Since the announced conditional cut in China’s RRR won’t begin to show up in various figures (particularly for the MLF) until next month, the updated PBOC balance sheet for March 2018 is somewhat anti-climactic. Not only is it too early for what may follow given the policy shift, there are the usual if not more…

201804.17 8

China’s Monetary Shell Game

Throughout much of last year, we were told repeatedly that the PBOC was tightening monetary policy. China’s central bank had raised its reverse repo rate twice early on, and then once more last December (and would do so again just last month). These moves coincided with Federal Reserve “rate hikes”, seemingly in line with the…

201803.05
8
3

China Going Boom

For a very long time, they tried it “our” way. It isn’t working out so well for them any longer, so in one sense you can’t blame them for seeking answers elsewhere. It was a good run while it lasted. The big problem is that what “it” was wasn’t ever our way. Not really. The…

201802.20
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What The Petroyuan Is Not

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…

201801.26
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This Explains A LOT (And It’s Still Not Enough)

NOTE: This is really the second half of an earlier missive on the changing nature of the eurodollar system post 2014-16. While it’s not absolutely necessary to read the first here, it’s probably a good idea. The reason nothing ever goes in a straight line is that first everything is always changing. How and why…

201712.19
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Sick of ‘Dollars’, But What Else Is There?

If China wishes to ever throw off the shackles of the eurodollar system, and they do, to eventually go out on its own in an RMB dominated world there is a lot to cleanup long before that’s ever an attainable goal. To start with, we don’t know near enough about what’s going on inside that…

201712.18
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2

Chinese Really Are Not Tightening, Though They Would Be Thrilled If You Thought That

Why would any central bank try to disguise the fact that it is being highly accommodative in its own money markets? That would be a strange place to start, made all the more so by the further observation the same central bank is perfectly happy if you thought it was doing the opposite. Cryptic introduction…