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…


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….

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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…