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Interesting china liquidity crisis - 1/3/2014 2:43:15 PM

Phydeaux

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Mostly unreported was last weeks liquidity crisis in china that caused the central bank to inject $55 billion into the monetary system.

China is in the midst of a debt cycle unlike that the world has ever seen before. Current debit is $215% of GDP, having added 15 trillion over 4 years (roughly twice the size of its economy).

Trillions of renmimbi in shadow loans are non-performing with every increasing sums needed to guarantee the phantom loans on non-performig assets.

The state misdirection of wealth has, much like in the US in 2008 resulted in a huge bubble. The implications when it pops are - mind boggling. Commodity markets and emergening markets funds most likely to be affected.

Virtually every single country now is in the process of devaluing their currency, by central bank injections. China, Japan, Europe, the US.

It is a massive race to the bottom - and completely uncharted territory.

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RE: Interesting china liquidity crisis - 1/4/2014 8:15:48 AM

mnottertail

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The US has been doing central bank injections for years. Nothing to do with China directly. PBOC is sitting on 20 trillion yuan, what? around 3-4 trillion US dollars.

They are tightening debt, and shadow banking, and that sort of credit.

We have been trying (thru QE and such) to devalue our dollar against the world for a long long time.

I dont see the issue that same way. What we gotta be wary of, is China dropping their T-instruments and flooding the market with those.........there is your chaos....and Russia would be right there with them.

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RE: Interesting china liquidity crisis - 1/4/2014 11:05:39 AM

Phydeaux

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quote:

ORIGINAL: mnottertail

The US has been doing central bank injections for years. Nothing to do with China directly. PBOC is sitting on 20 trillion yuan, what? around 3-4 trillion US dollars.

They are tightening debt, and shadow banking, and that sort of credit.

We have been trying (thru QE and such) to devalue our dollar against the world for a long long time.

I dont see the issue that same way. What we gotta be wary of, is China dropping their T-instruments and flooding the market with those.........there is your chaos....and Russia would be right there with them.

Well Ron, I have to say that aren't you the same guy that said deficits aren't an issue? I share your concern to some extent about chinese dropping bonds, to some extent.

The chinese only have bonds because every year we spend more than we take in.

The bigger problem for the US would be a gradual move to an alternate currency. But returning to your comment for a minute - we are in an interesting environment right now - where nations do not *want* to defend their currency - at least the developped nations.

Right now china could place bonds on the market - and they could not be redeemed - except by the Fed. The dollar would indeed plunge. China attempted to commoditize its money - but that backfired badly, when it lost huge sums on oil and gold.

So chinas dollar holdings would be worthless. China's best play is what it was doing for a while - gradually unwinding dollar positions. But unwinding it into what is a huge challenge.

The euro is zone will devalue their currency to prevent job loss, setting off yet another run to the bottom.

Other than stimulating consumption by buying american products - I don't see what china can do that isn't MAD.

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RE: Interesting china liquidity crisis - 1/5/2014 7:32:52 AM

DesideriScuri

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quote:

ORIGINAL: Phydeaux
So chinas dollar holdings would be worthless. China's best play is what it was doing for a while - gradually unwinding dollar positions. But unwinding it into what is a huge challenge.

It might be a damn good thing for China to continue to fund our debt, but trade that debt for raw materials. That is, get a note for $1B (or whatever) and then trade that for $1B worth of production inputs. Let's say they trade it to Iran for $1B in oil. They get $1B in oil, and Iran is left holding the potentially worthless paper. China may have to reduce the value of the note, like, trade $1B in notes for $900M in oil, but they are still getting $900B in oil and continuing the near-unbridled profligacy of their #1 customer, while reducing their position's risk.

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RE: Interesting china liquidity crisis - 1/5/2014 8:09:47 AM

MrRodgers

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I am not going to put too fine a point on this but China's debt in renminbi is their own problem and only the Chinese will suffer from default.

Otherwise would you currency experts please tell me how the US dollar and other currencies are being devalued ? I wonder if you could tell me what the renminbi or the US dollar for that matter, is worth in something other than...another currency ?

I've grown weary of all of the continued talk about the US dollar as it is still the same dollar subject to a few percent of inflation, while still at or near the lowest bond rates in history during QEI, QEII and QEIII whatever you want to call it.

I mean just how bad can it be if the US treasury absolutely and with an economically corrupt complete search for a raise in income from this debt...was degraded from AAA to AA+...still didn't tank and in fact showed the ridiculousness in bond rating at all in the very next offering...happened to sell out in minutes and at still, historically low rates ?

I don't think I have one at all but would you monetarists please explain this problem to me. I'll stick around for a while as I am soon going out for a rare restaurant breakfast.

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RE: Interesting china liquidity crisis - 1/5/2014 1:47:06 PM

Phydeaux

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quote:

ORIGINAL: MrRodgers

I am not going to put too fine a point on this but China's debt in renminbi is their own problem and only the Chinese will suffer from default.

Otherwise would you currency experts please tell me how the US dollar and other currencies are being devalued ? I wonder if you could tell me what the renminbi or the US dollar for that matter, is worth in something other than...another currency ?

I've grown weary of all of the continued talk about the US dollar as it is still the same dollar subject to a few percent of inflation, while still at or near the lowest bond rates in history during QEI, QEII and QEIII whatever you want to call it.

I mean just how bad can it be if the US treasury absolutely and with an economically corrupt complete search for a raise in income from this debt...was degraded from AAA to AA+...still didn't tank and in fact showed the ridiculousness in bond rating at all in the very next offering...happened to sell out in minutes and at still, historically low rates ?

I don't think I have one at all but would you monetarists please explain this problem to me. I'll stick around for a while as I am soon going out for a rare restaurant breakfast.

US treasuries are selling out because the Fed is buying them.

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RE: Interesting china liquidity crisis - 1/7/2014 7:03:49 AM

mnottertail

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quote:

Well Ron, I have to say that aren't you the same guy that said deficits aren't an issue? I share your concern to some extent about chinese dropping bonds, to some extent.

Nope, have never ever said anything close to that, not ever. That is St. Wrinklemeat revisionist history.

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