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Chinese Interbank Liquidity Collapse Leads To 45% Lending Rate Surge
Following the now extremely well documented surge in short-term SHIBOR and Chinese repo rates, it appears that banks have begun attempting to extract the missing liquidity from end consumers. Various Chinese commercial banks raised lending rates between 10 and 45% over the benchmark rate because of a shortage of
funds, the China Securities Journal reported today, citing an
unidentified bank official. In the meantime, SHIBOR refuses to pull back, hitting an unsustainable 8.05%, which is worse than Portuguese 10 year rates. Will this sustain? Unclear - the Chinese new year must pass and the recent surge in snowfalls will have to recede before a steady state evaluation can be made, however as we have been warning since December, in a country having one of the biggest asset-liability mismatches, the negative curve convexity on tightening fears, will blow up the near end, isolating bank liquidity. To say that this is bad news if it persists is an understatement. On the other hand, for the news to matter, news will have to matter period: Bernanke has managed to indoctrinate the Pavlovian Dogs, as described by Grantham yesterday, with a sense that every action, no matter how bad only leads to rewards. Which, itself, is of course also very much unsustainable.
Today's SHIBOR:
From the Chine Securities Journal:
The loan burst at first beginning of this year caused an unprecedented shortage of credit source, some commercial banks began to increase its loan interest currently, a high-ranked banker based in Beijing told China Securities Journal yesterday.
The banker said, most commercial banks increased the loan interest for 10percent to 45 percent.
Another banker said, the central bank had ordered that the loan granted by one commercial in January should not exceed 12percent of the total quotas in 2011. Actually some banks broke such limit in the first two weeks, thus banks had to constrain the enthusiasms of loan.
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Some interesting freefall going on in the BDIY... http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
I don't like much this indicator, but it is still impressive
Why don't they have their central bank just print some more liquidity for them to lend? Duh!
They surely would be doing this right now if hyperinflation was not already threatening.
The end is nigh..
MOLE MONEY!! PLINT MOLE MONEY!!!!
Ooooh this kindling looks soo dry...better poor some gas on it so it will be nice and wet.
where's out of gas...
but we still have some of this old stuff laying arround. The lable is a bit worn but it says: Nitro...yrine
Maybe if you use a lot of it that it might still work?
I does look a bit crystalized...
Shake it! (maybe you have to mix everything up, like 'glowsticks')
I think sitting on it will be sufficient.
Gold being attacked, equities green, QEn....all things going as per normal....
no one expects the Spanish Inquisition, seems a good day for it.
Wall Street Executive Dogs
Hot Wall Street Dogs
Thinking about it, the fact is these computerized trading programs all have a very simply flaw, which is they believe the current share price represents fair value and then they just wait for the next piece of news and react to that as appropriate. Therefore, in order to prop up the ponzi, you need to defend a price in the face of bad news at that specific momnet (the computers read the buying interest and adjust their trading to assume the data was not so bad) and then wait for the next piece of information. So, if you are aware of data in advance, you can be prepared to buy into the bad news and stand aside for the good news. I don't know how true this is, but it explains why we always get that initial flurry of buying when bearish events happen. It also explains why the market has the memory of a goldfish...
Excuse me, but my Goldfish (Herman) always remembers me when I come home from the office. And his back flips are simply spectacular.
Now you understand the problems with the stochastic calculus. So-called "memoryless" functions simply probabilisitically figure out what could happen next, completely ignoring everything that has happened before. Even some of us egghead math-types find this dangerous.
+10000
The gold market in China is extremely tight these days, according to the Caijing Magaine website. Check the link below if you can read Chinese.
http://www.caijing.com.cn/2011-01-25/110627817.html
OT...but, China related. At the State dinner when Lang Lang played "My Motherland" why did no one (Barbra was there) leap to their feet and sing the Star Spangled Banner? It could have been a real-life White House Casablanca moment:
http://www.youtube.com/watch?v=oROASA1v92U
The only American attendee I could find on youtube singing the Star Spangled Banner was Hillary:
http://www.youtube.com/watch?v=bfZ_gXCHaMw&feature=related
FXI is up today.
The analysts said that, unlike in the west, it was almost impossible for China’s credit markets to freeze up because all the large banks were majority owned by the state and could be forced to lend to one another.
Almost and forced are the key words here.
This is a symptom from other "state" policies I believe ,it is not the illness . I believe this is from China starting to tighten credit .State Banks must know something about other State banks books and it cant be good by what the rates imply . If you are the head of a bank in China do you go to the "State" and say "I totally mismanged the banks funds (which are the peoples funds) " ? I don't think so unless I have money for the bullet and the burial that comes after I tell them .
so if china wants more money they raise rates instead of print, this will cause more cash to flow into the country not out, and keep inflation and keep presssure to raise the yuan even more.
personally id prefer 8.5% in my savings instead od 0.5%, assuminf im going to ever get it back of course.
Even after another 10 years of China hiring "bank experts" to clean up their bank sector, at the end of the day the banks will simply be ordered to fund however has the political connections to be funded - new loans or roll over maturities. Just like GM, AIG and the TBTF. Regrettably, the Fed and Corporate "America" have taken a cue from the Chinese fascist development model and now the Fed is no different the MINFIN/PBOC. For those of you old enough, remember how America embraced all things Japanese in the 1980's all the while the Japanese are buying Pebble Beach GC, etc at insane prices? All those big brains at Harvard and Stanford just said to be competitive, 'the US needs to model China, Inc.' Hence you get books like China, Inc. And the band played on ...
Credit as tight as a frogs ass. You only have to look at a credit card.. 29% to see something ain't right.
Could it be that there is no cash?
A sell off in the market would lead to a cash crush. Where will the cash come from? The Fed would have to print like crazy just to allow a market selloff.
Checkmate.
No, there never is any cash, per se, but rather credit. The marginal buyer of stocks is leveraged 50:1, when they sell, that money never comes into circulation, but is instantly vaporized as it cancels the funding leg.
You make it sound like everyone in the stock market is leveraged 50:1. Just who are those buyers at 50:1 leverage? Options are the stockmarket?
Uh. Oh.
Stoopid Commies - can't run a capitalist banking system!
Look at where the Chinese rank on this energy/GDP graph.
http://powerandcontrol.blogspot.com/2011/01/energy-is-wealth.html
They are not getting good use of the energy they are using.