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Very Loud Globally Synchronized Rhymes

By |2018-08-08T12:00:59-04:00August 8th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Globally synchronized growth has taken a beating so far in 2018. As a narrative, one factor after another has turned against it. Europe was booming and was even going to be in a leadership position for the global economy. Now? Not so much. The dollar would continue to fall just as it did in the years before Bear Stearns, a [...]

Big Mama Leaves Huge Footprints Stepping All Over ‘Devaluation’

By |2018-06-27T19:09:41-04:00June 27th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Not a good day to be a global central bank. Competitive devaluations all around? Kidding aside, it’s getting serious in China. CNY DOWN = BAD, so says Big Mama. "The kind of dollar selling from that bank was so aggressive that we knew instantly that it must be from the Big Mama," said a Shanghai-based senior currency trader at an [...]

Revisiting China and ‘Devaluation’ As China Revisits ‘Devaluation’

By |2018-06-25T13:21:27-04:00June 25th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

When the Chinese yuan suddenly plummeted in mid-August 2015, the world looked on in stunned confusion. It didn’t make sense. The global economy was about to take off, they thought, and it wouldn’t be doing that without China’s vast anticipated contributions. Such a large move in such a short time frame for a major currency was another big “unexpected.” To [...]

Further Early Confirmation on PBOC Intentions

By |2018-06-22T13:08:25-04:00June 22nd, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The level of Chinese bank reserves fell again in May 2018. Year-over-year, what is technically classified as Deposits of Other Depository Corporations on the PBOC’s liability (money) side of its balance sheet contracted by 1%. This advances a very different trend for reserves, breaking what had been a more continuous and determined effort toward at least minimal growth. The central [...]

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

By |2018-05-21T12:04:31-04:00May 21st, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 has a currency problem first [...]

Chart of the Week: PBOC Clumsily Stumbles Into Step 1

By |2018-05-11T17:04:19-04:00May 11th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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. Coming at it instead from [...]

China’s Monetary Shell Game

By |2018-04-17T17:57:08-04:00April 17th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 whole idea. Not only that, [...]

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

By |2017-12-18T17:25:09-05:00December 18th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 aside, it is obvious I [...]

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

By |2017-12-14T18:13:31-05:00December 14th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The PBOC has two seemingly competing objectives that in reality are one and the same. Overnight, China’s central bank raised two of its money rates. The rate it charges mostly the biggest banks for access to the Medium-term Lending Facility (MLF) was increased by 5 bps to 3.25%. In addition, its reverse repo interest settings were also moved up by [...]

PBOC RMB Restraint Derives From Experience Plus ‘Dollar’ Constraint

By |2017-09-19T18:05:25-04:00September 19th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Given that today started with a review of the “dollar” globally as represented by TIC figures and how that is playing into China’s circumstances, it would only be fitting to end it with a more complete examination of those. We know that the eurodollar system is constraining Chinese monetary conditions, but all through this year the PBOC has approached that [...]

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