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PBoC Raises RRR For Some Small And Medium Banks As China Aggressively Returning Bernanke's Inflation Back To Sender

Tyler Durden's picture





 

The Chinese New Year interest rate hike, as expected was just the beginning. China has just announced it is hiking the Reserve Requirement Ratio for select small and medium banks. This is merely an escalation in what is now becoming an open trade/monetary war between China and the US, which will be lost... by both.

From Bloomberg:

China’s central bank adjusted the reserve requirement ratio for some of the nation’s medium and small lenders, mainly local city commercial banks, the China Securities Journal reported, citing an unidentified person.

The adjustment was made after the Chinese New Year holiday ended Feb. 8, the Beijing-based newspaper reported today.

China’s central bank made the adjustment after new lending in January exceeded 1.2 trillion yuan, according to the report.

The newspaper didn’t say if the reserve requirement ratio for the banks was raised or lowered and didn’t identify which banks were affected by the adjustment.

Many more coming up as China now violently send Bernanke's inflation back to sender.

In the meantime, here is Ken Rogoff confirming that the risk of a full blown trade war is higher than at any time in the last several decades.

 


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Thu, 02/10/2011 - 19:16 | Link to Comment Bam_Man
Bam_Man's picture

And this is "bullish for stocks", right?

Thu, 02/10/2011 - 19:41 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

Many more coming up as China now violently send Bernanke's inflation back to sender.

Can someone explain it to me how tightening for Chinese banks is "sending the inflation sack back to Bernanke"?

You mean, is this like a warning shot, into their own foot?

If China wants to stop inflation it needs to stop selling yuans for dollars to further weaken the yuan ...

Like the doctor said: "If it hurts, don't do that".

Seriously, where is the link to Bernanke here?

 

Thu, 02/10/2011 - 19:44 | Link to Comment EscapeKey
EscapeKey's picture

Yeah, we get it. You're a Bernanke Kool-aid drinking whore. Now, if you could please explain to us all why you always "respond" to a post near the top if it isn't to draw attention to your own post, especially considering your own posts consist usually of nothing but Bernanke drivel, and most certainly nothing related to the post which you "reply" to.

Thu, 02/10/2011 - 20:31 | Link to Comment asdasmos
asdasmos's picture

.

Thu, 02/10/2011 - 20:31 | Link to Comment asdasmos
asdasmos's picture

.

Thu, 02/10/2011 - 20:32 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

I asked a really clear question here, which can be answered. I also made a clear claim which can be dis-proven. There ought to be a clear answer to both, which would prove me wrong.

But instead of proving me wrong you felt the need to insult me - which suggests that you have no real proof or argument.

 

Thu, 02/10/2011 - 20:40 | Link to Comment EscapeKey
EscapeKey's picture

No, I simply pointed out your "Critical Thinking" handle is absolutely ridiculous, considering you're just about the most readily Bernanke Kool-aid swallowing person here PLUS the fact that you practically always do whatever you can to make sure your post is as high up as possible, regardless of whether it's relevant to the discussion at hand.

The original post was "And this is "bullish for stocks", right?". Please be so kind to educate us how your response is in any way connected to this post, and not just an attempt to throw in another shallow LOOK AT ME LOOK AT ME LOOK AT ME post.

Thu, 02/10/2011 - 20:54 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

I can only repeat that your attempts to insult me are rather misplaced and are rather disingenuous: I asked a really clear question here, which can be answered and I also made a clear claim which can be dis-proven. I did not insult you.

All this suggests that you have no real proof or argument.

 

Thu, 02/10/2011 - 20:58 | Link to Comment EscapeKey
EscapeKey's picture

What it shows is absolutely zero interest from your side in answering other questions but the ones you want to answer.

You obviously go for publicity, and you don't even attempt to deny it. You reply to posts completely unrelated to what you want to say, in an attempt to get more impressions. You're either incredibly shallow, or paid to get your opinion up as high as possible.

Oh sorry, I'm again not answering your question. Because the entire world evolves around your head, right?

Thu, 02/10/2011 - 20:59 | Link to Comment asdasmos
asdasmos's picture

Maybe he should change his name to 'More Critical Thinking Needed"

Thu, 02/10/2011 - 21:13 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

What it shows is absolutely zero interest from your side in answering other questions but the ones you want to answer.

Sorry, I'm indeed not particularly interested in answering your insults.

 

Thu, 02/10/2011 - 21:15 | Link to Comment asdasmos
asdasmos's picture

Ahhh, stick your head in the sand route.

Thu, 02/10/2011 - 21:20 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

Ahhh, stick your head in the sand route.

No, why? I just have better things to do than to reply to childish insults like "Bernanke Kool-aid drinking whore".

I'll answer any questions related to the Chinese monetary policy actions reported in this ZH article though.

 

Thu, 02/10/2011 - 21:24 | Link to Comment asdasmos
asdasmos's picture

Is the truth really that hard to bear?

 

 

Thu, 02/10/2011 - 21:18 | Link to Comment EscapeKey
EscapeKey's picture

There you go, only wanting to answer your own questions.

Do you have a sheet with standard replies, or are they supplied as you ask for them?

Thu, 02/10/2011 - 21:22 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

There you go, only wanting to answer your own questions.

Not really.

I'll answer any questions related to the Chinese monetary policy actions described in this ZH article. I'm just not interested in your insults - sorry.

 

Thu, 02/10/2011 - 21:29 | Link to Comment EscapeKey
EscapeKey's picture

OK, I've cleaned up my question from below. Now you can respond to it.

The original post was "And this is "bullish for stocks", right?". Please be so kind to educate us how your response is in any way connected to this post, and not just an attempt to throw in another post parading your own point of view over the OPs?

Thu, 02/10/2011 - 21:44 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

(Well, I thought that's obvious - and I thought you were just trolling me here.)

The comment suggested that this is bullish for US stocks. That comment, like the article itself, assumed (IMO incorrectly) that indeed there's a direct link between reserve rates of Chinese banks and US stocks - i.e. inflation gets 'sent back' to Bernanke and the US.

I very much question that notion and made this opinion of mine rather clear in my response.

Does this answer your question?

 

Thu, 02/10/2011 - 21:49 | Link to Comment EscapeKey
EscapeKey's picture

Keep backtracking, but you won't get anywhere.

"Can someone explain it to me how tightening for Chinese banks is "sending the inflation sack back to Bernanke"?

You mean, is this like a warning shot, into their own foot?"

Please indicate exactly which part of this argument is directly related to the original post? "And this is "bullish for stocks", right?". He's talking about stock bullishness, and you apologize for Bernanke.

More fucking lies from a disinformation agent.

BTW - Do realize you follow the steps of Red Neck's "progressive admission"; once you've been found out, you admit just a little bit more. Originally, it was "oh the net Dollar transaction is zero", and now you've admitted that Dollar reserves grows, but "the growth is insignificant". EXACTLY the same argumentation style as Red Neck. Did you take the same course?

Anyway, you'll post more nensensical drivel no doubt, but you're absolutely transparent.

Thu, 02/10/2011 - 22:23 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

Please indicate exactly which part of this argument is directly related to the original post?

All of it - I have questioned the basis of the whole 'this affects the US' claim.

Are you really serious with this argument? I did not feel it necessary to quote that post but will consider doing it in the future, for the benefit of slow thinkers :-)

 

Thu, 02/10/2011 - 22:58 | Link to Comment fiftybagger
fiftybagger's picture

Junked X 6

Thu, 02/10/2011 - 23:46 | Link to Comment 10kby2k
10kby2k's picture

 

More critical----have you or have you not gone down on Ben?

Thu, 02/10/2011 - 22:45 | Link to Comment 11b40
11b40's picture

Maybe it's your Avatar.

Thu, 02/10/2011 - 22:15 | Link to Comment whacked
whacked's picture

And I was the one of the ones that junked you .. regardless of what was posted previously by anyone the question was legit .. I was wondering the same thing except to do so I have to troll through all your crap!

 

Thu, 02/10/2011 - 20:10 | Link to Comment JimmyTheHand
JimmyTheHand's picture

Uhh... US devalues dollar by printing more of them.  China says f-that, they print more money to match.  They don't want their money to be worth more, because then bye-bye exports and economy. 

Regarding the RRR hikes, they are forcing the banks to build up more capital rather than lending the sh!t out because like I mentioned above they are printing more money over there.  It is spilling out into the economy causing inflation.  Its the same reason the banks in the #$#ing USA are not lending out more money.  As soon as they do, hello Weimer.  Haven't you heard in the news about banks sitting on lots of money?  About how banks are NOT loaning out money as much?

How the hell do you not get that?  Seriously?

 

"It's not fu#$ing rocket appliance!" - Quote from Trailer Park Boys

Thu, 02/10/2011 - 20:36 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

How the hell do you not get that?

I got all of that. What I did not get was an answer to the question I asked: how does this action of Chinese regulators towards Chinese banks "send Bernanke's inflation back to sender"?

It is a really simple question.

 

Thu, 02/10/2011 - 20:50 | Link to Comment buzzsaw99
buzzsaw99's picture

I agree with you. This is an internal matter. As far as screwing the usa over china et al could crash their stock market devaluing the maggot's holdings over there. Aside from that chinese internal inflation has nothing to do with outside influences.

Thu, 02/10/2011 - 20:53 | Link to Comment JimmyTheHand
JimmyTheHand's picture

They have done this to slow yuan inflation over there.  This SENDS INFLATION BACK TO US, because Bernanke will now print more money over here, to further devalue the dollar against the yuan and that will cause a rise in inflation here (and arguably other places).  China will still keep printing though, even though they will lie about doing it. 

Each is trying to devalue their currency against the other.  So there is a constant exchange of policies put into place by each side so they can win.  They have to do it to keep up their exports.  The problem when any country tries to devalue their currency (by printing money) on purpose is that it causes inflation.  To combat that, governments stuff money where ever they can stick it to keep it out of the publics hands.  They stuff in banks, we stuff in M2 or M3 and banks, etc... etc..

It's a crappy deal because in the end everyone loses.  So China's doing what they can right now to lock up every commodity they can.  Just like they have done what they can to lock up all the rare earth's. 

 

Thu, 02/10/2011 - 21:07 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

They have done this to slow yuan inflation over there.  This SENDS INFLATION BACK TO US, because Bernanke will now print more money over here, to further devalue the dollar against the yuan and that will cause a rise in inflation here (and arguably other places).  China will still keep printing though, even though they will lie about doing it.

You raised several issues here and let me try to address them in order.

Firstly, I'd like to establish the link of causality: the weak yuan is not 'caused by Bernanke' - it is caused by China selling the yuan against the dollar, to fix its export prices to below the export prices of US industries. The 'peg' is a voluntary, protectionist measure by China that the US specifically asked China to not do, repeatedly.

If 'the peg' is hurting China then it is an entirely self-inflicted wound.

An analogy: if I started pulling out some hair every time the dollar weakens, would I get to blame Bernanke for my eventual baldness? :-)

Secondly, why would the weak dollar cause (food, etc.) inflation elsewhere? Dollar inflation does not cause 'global inflation' - it causes dollar inflation in the US. Here's an example calculation of how the dollar's strength is an invariant to the real price of commodities:

http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

So whatever effects the weak dollar has on China is a problem China created for themselves and there's nothing to 'send back to Bernanke'.

If they want to send back something then the return address is Beijing :-)

 

Thu, 02/10/2011 - 21:30 | Link to Comment EscapeKey
EscapeKey's picture

I'm so fucking tired of your standard argument which completely ignores the amount of US Dollars and denominated reserves are GROWING on a daily basis, and hence the final transaction CLEARLY does not take place.

What do you think will happen once these reserves no longer grow, and the US Dollar doesn't get to keep the "temporary" overvaluation?

Thu, 02/10/2011 - 21:34 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

I'm so fucking tired of your standard argument which completely ignores the amount of US Dollars and denominated reserves are GROWING on a daily basis, and hence the final transaction CLEARLY does not take place.

You have made this point before and when this point was again raised in a discussion yesterday I have made specific calculations to estimate impact on global trade dollar inventories - and the conclusion is that dollar inflation effects on them are trivial:

http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

So yes, I still find your point naive and I have answered it before - repeating your point with swearing attached wont make your point sound any more convincing to me. Providing some actual calculations or links to hard data could do the trick though.

In so far that you are suggesting that trading partners may keep their non-inventory sovereign reserves/investments in dollars whom are you kidding? If their speculative positions happens to be dollar short then will you blame Bernanke for strengthening the dollar, once he starts raising rates? :-)

If consenting adults keep their investments in dollars then any trading loss is their own problem. The 'reserve currency forced' dollar inventory itself is minuscule compared to global trade.

 

Thu, 02/10/2011 - 21:42 | Link to Comment EscapeKey
EscapeKey's picture

You answered nothing, and you know it. Dollar reserves = growing. You = ignore this key point. Who the fuck cares about the rupee, real, or any other particular currency you will use in a blatant attempt to divert attention elsewhere. And you compare the growth to daily global trade? Riiiight, so why don't we compare the US trade deficit to the the total volume of daily FX exchanges? Oh right, because they're COMPLETELY UNRELATED.

If the entire deal was self-sterilizing, the US Dollars would be sold. They're not being sold. You know this, and the fact that you push your argument regardless shows your agenda. Your original argument was that it the Dollar was being sold. It is not, and the consequence is that the US Dollar will gain as a net result. Stop fucking lying.

Thu, 02/10/2011 - 22:05 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

Dollar reserves = growing.

The question is - by how much? I gave you an estimation and told you that any rise there is miniscule compared to global trade, hence it cannot impact global inflation.

You answered nothing, and you know it.

I very much answered it, countered it, gave numbers and argued it. An answer does not get any more clearer - or are you one of those people who does not take 'no' as an answer? :-)

You = ignore this key point. Who the fuck cares about the rupee, real, or any other particular currency [...]

Doh, just about everyone else cares about those non-US currencies?

Have you ever looked at trade related foreign exchange flow statistics??

There's a huge planet here where most of the trade is not done using dollars. International trade very often touches the dollar at least temporarily, but do you realize why countries are trading with each other? Hint: not to keep the proceeds in dollars and to buy AAPL, believe me - they are moving the proceeds back into domestic markets, they invest, they pay workers, they speculate in local companies, they buy domestic bonds or put it into the bank. Almost all short-term interest rates are higher than that of the dollar's so it makes little sense to keep free cash in dollars.

Most trade is balanced so there's no huge reserve accumulations outside of China which as we know did it out of its own free will.

Go show me numbers that prove that all trade is flowing into dollars involuntarily and is staying there and is thus exposed to dollar inflation.

I have shown you the data and calculations that prove that it is not so. As a reminder, here's global food prices:

https://lh5.googleusercontent.com/_VgJQTp0Bsf0/TU6_YfTtTSI/AAAAAAAAAMU/2...

They moved in a narrow 1% channel up to last summer when the big eastern European hit grain/crop producing areas. They were absolutely insensitive to dollar weakening/strengthening. How is that possible under your theory that dollar inflation causes global inflation?

Really, as far as I can see you clearly have lost the argument and instead of conceding you entered the 'pounding on the table' phase ...

 

Thu, 02/10/2011 - 22:24 | Link to Comment whacked
whacked's picture

+1 for winning the rant

 

As regards what Bernank is doing I pass it to someone who has far more intellect than moi`

"One thing must of course be admitted right off the bat – Bernanke wanted to see his inflationary policy to have clearly discernible inflationary effects in the form of rising prices, and he sure got his wish. Along with this comes the usual inflationary illusion of 'economic growth', which we think should rather be termed 'capital consumption disguised as growth' that makes it appear as though the policy was 'working'. It does so  by misdirecting scarce capital into unprofitable ventures and creating illusionary profits, while in reality impoverishing us even further.

So Bernanke is actually correct when he says that rising treasury yields are part and parcel of his 'success'. After all, what else would inflation do to treasury yields? Unmentioned remained the previously uttered conceit that the Fed can actually 'control' said yields and keep them lower than they would otherwise be. It could, of course – by stopping the money printing exercise, but not by continuing and enlarging it."

Full text

 

http://www.acting-man.com/?p=6321

 

 


Thu, 02/10/2011 - 23:36 | Link to Comment fragrantdingleberry
fragrantdingleberry's picture

Escape Key: You are seriously fucked up. Get some help, and this is coming from someone who just took a lude and was cruising these posts.

Thu, 02/10/2011 - 21:16 | Link to Comment JimmyTheHand
JimmyTheHand's picture

The PEG helps China because allowing it to float they would be totally screwed.  They print and lie about it. 

Second, dollar inflation causes inflation all over the place because in order to transact business on the global scale (until recently) folks used dollars.  They traded in their money for dollars to carry out the transactions.  That's how dollar inflation inflates other places.

Thu, 02/10/2011 - 22:32 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

The PEG helps China because allowing it to float they would be totally screwed.  They print and lie about it.

Actually, no - floating the yuan would likely bring unprecedented prosperity to citizens of China (assuming corruption does not syphoon it away) - and they would still be able to grow in a nice way like Brazil does.

The super-weak yuan is basically centrally planned and centrally enforced slave labor. (It obviously helps that China is a dictatorship - voters in a democracy would not have tolerated the artificially low wages so long.)

China is producing cheap crap and is not producing much added value because labor is too cheap. Why have good automation in manufacturing if you can hire a thousand Chinese workers who will do the dangerous grunt work?

Yes, China is dominating international trade - but only by volume and only by (temporarily) winning the race to the bottom.

 

Thu, 02/10/2011 - 21:16 | Link to Comment Sean7k
Sean7k's picture

Dollar inflation, as the reserve currency, causes food and other commodity inflation as they are priced in dollars. The amount of goods has not increased, just the amount of dollars to purchase them. This drives up the cost of items as more dollars chase less goods. Even you should understand this.

Thu, 02/10/2011 - 22:36 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

Dollar inflation, as the reserve currency, causes food and other commodity inflation as they are priced in dollars.

Yes, commodities are priced in dollars but no, the strength of the dollar does not directly impact the real value of commodities and does not 'cause' global inflation:

An example that shows how it works in practice:

http://www.zerohedge.com/article/did-wikileaks-confirm-peak-oil-saudi-sa...

And a graph of global food prices showing that dollar inflation did not impact them from mid 2009 to mid 2010 - what moves them is supply & demand forces mostly:

https://lh5.googleusercontent.com/_VgJQTp0Bsf0/TU6_YfTtTSI/AAAAAAAAAMU/2...

 

Thu, 02/10/2011 - 22:49 | Link to Comment Sean7k
Sean7k's picture

Please read my response. Strength of the dollar is another subject. The quantity of dollars versus goods for sale causes prices to rise. Please refrain from your usually attempts to be obtuse and deal with the same terms.

 

Fri, 02/11/2011 - 12:40 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

Please read my response. Strength of the dollar is another subject.

You contradict yourself with your next sentence:

The quantity of dollars versus goods for sale causes prices to rise.

Did you know that when the 'quantity of dollars' goes up then the 'strength of the dollar' goes down? (all other things being equal) :-)

Also, which part of: "global food prices did not go out of a narrow 1% channel for a year, while the Fed was busy 'printing dollars'" chart I linked to did you not understand? The reality of commodity prices directly undermines your argument.

Translation: you have absolutely no idea what you are talking about. You pretend that the strength of the dollar is somehow independent of the number of dollars in circulation and you pretend that somehow I did not reply to your points. It is obviously not independent, the two are tightly coupled, and you can see how it works out in practice in all the material and data I linked to.

 

Thu, 02/10/2011 - 21:46 | Link to Comment Modus
Modus's picture

ft alphaville, Albert Edwards (SG strategist)

(link to full post provided below)

 

Our US economists believe that an additional factor which will drive core CPI up is that higher Chinese inflation is about to ripple onto US shores. Higher Chinese CPI inflation is set to feed through into higher Chinese import price inflation as wages move upwards in China – our economists note a four-month lag (see left-hand chart below). US goods inflation could be set to rise sharply in reaction to higher Chinese inflation (see right-hand chart below). So, despite Ben Bernanke’s firm denials that QE is not responsible for higher global food prices and hence higher Chinese inflation, to the extent that he is totally wrong (surely not!), the Fed’s QE policies are likely to have a ruinous effect on both bond and equity prices in the near term.

 

http://ftalphaville.ft.com/blog/2011/02/10/485176/prepare-for-a-major-ma...

Thu, 02/10/2011 - 22:47 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

That article mixes up cause and effect ... (I hope it wont get into the real FT and stays in the blog.)

China is keeping an aggressive protectionist policy in place to always undercut US production prices. It does it by buying dollars and selling the yuan, in effect.

Just to translate that argument into everyday terms:

If every time the dollar weakens I pull out a bit of my hair, do I get to blame Bernanke for my eventual baldness? :-)

Really, what the Chinese are doing is a self-inflicted wound. Their domestic inflation will hurt them much more than it can the US - and if they want it all to stop they can do it easily: they can float the yuan freely, like all other major economies do it with their currencies ...

And if they refuse to do it and if they voluntarily blow up their economy, then any global ripples will be their doing. It's not like Bernanke is the one who is selling yuans ...

 

Thu, 02/10/2011 - 22:53 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

Also, the article fails to explain that if their theory is true, why did we not see any such ripple effects during QE1?

Also, if the current 5% dollar index weakening is supposed to have such effects, why did we not see any such ripple effects while the dollar weakened by 40%+ during the Bush administration:

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=lin...

So their line of argument looks flawed from several obvious angles.

 

Thu, 02/10/2011 - 22:58 | Link to Comment Sean7k
Sean7k's picture

This is an excellent explanation why it would be suicide for the Chinese to let the Yuan float:    http://www.24hgold.com/english/news-gold-silver-chinese-puzzle.aspx?article=3335373562G10020&redirect=false&contributor=Antal+E.+Fekete 

Yes, it is to the advantage of the US. Go back to the FED troll camp will ya.                                       

Fri, 02/11/2011 - 12:46 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

Well, the article is largely nonsense - see the various pieces of hard data I linked to above which contradict the naive monetarist notion that dominates the article.

Btw., the article, in good monetarist tradition, is very light on verifiable data and heavy with unverifiable speculation. I guess I should not expect any quality material from a website named '24hgold.com' though :-)

 

Thu, 02/10/2011 - 20:09 | Link to Comment atomicwasted
atomicwasted's picture

OK, at the risk of getting beaten up myself, I'm just ignorant and I don't understand how the Chinese bank reserve ratio sends inflation to the US.  Does someone have a link to a site that explains it in small easily-understood words?  Thanks.

Thu, 02/10/2011 - 20:36 | Link to Comment tmosley
tmosley's picture

Holy shit!  I never thought I would see the day!

Congratulations on your first ever act of critical thinking!

Raising reserve requirements won't have any effect on inflation.  That might work in a "normal" economy, where the primary source of inflation is lending, but then the source of inflation is printing, as is the case here, it does nothing.

Thu, 02/10/2011 - 20:40 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

You apparently did not quite understand my question.

How does China's actions to regulate Chinese banks "send Bernanke's inflation back to sender"?

What is the mechanism for that? Do you think when Bernanke is reading his news today is he saying to himself:

"Holy crap, there's an inflation bag that China is sending my way, they have set new reserve requirements for Chinese banks, the HORRORS!!!!"

Is that what you mean? :-)

 

Thu, 02/10/2011 - 21:48 | Link to Comment tmosley
tmosley's picture

You apparently have trouble with reading comprehension.  I'm agreeing with you.  This action will not send any inflation back to the US.  Only severing the dollar peg will do that.  Practically any other action that they take will only exacerbate their inflation problem.

Understandable that you would misread me.  This is the first time I think we have ever been in agreement. 

Fri, 02/11/2011 - 13:06 | Link to Comment More Critical T...
More Critical Thinking Wanted's picture

 

You apparently have trouble with reading comprehension.  I'm agreeing with you. 

Indeed - sorry, my apologies!

This action will not send any inflation back to the US.  Only severing the dollar peg will do that. 


Practically any other action that they take will only exacerbate their inflation problem.

Yeah.

It will likely result in spectacular fireworks somewhere.

I'd not be surprised to see food or fuel riots in China.

The main structural problem China has (beyond being a dictatorship) is that it has two yuans: the external, cheap yuan that allows China to do state sponsored price dumping against all foreign competitors, and an internal, expensive yuan that China gives its workers to keep their labor cheap and which it uses to keep internal consumption low.

The central government keeps the differential and stuffs it into US treasuries, European bonds, equities and other passive investments.

China per government fiat disallows any direct physical trade between the internal and the external markets that would arbitrage (and balance out) the two rates in a free market: all trade has to occur in the set rates of the yuan and only the BoC is allowed to do foreign exchange.

But if you think about it it's a huge arbitrage opportunity: illegal barter and smuggling must already be rampant - China has a huge shoreline and central power is weak in the fringes.  Such illegal trade will further strengthen the fringes (economically and politically) and will further destabilize the central government.

So the dollar peg, as ironic as it may seem, is unstable economically and may bring about the downfall of Communist China as we know it today.

And I'm sure you disagree with me, but the Fed indirectly (it's clearly not their main purpose) putting the heat on the Chinese currency-weakening scheme may speed up that process and may bring more freedom to Chinese people.

More balanced international trade will help US export industries and US unemployment as well (which is definitely in the focus of of the Fed) and I simply do not understand why libertarians are not more supportive of US national interests in this particular matter ...

Is there only one variant possible, to hate the Fed 100% of the time? How about only hating it 90% of the time? Shades of gray and such ... :-)

 

Thu, 02/10/2011 - 21:55 | Link to Comment Village Smithy
Village Smithy's picture

MCT,

I think what Tyler is saying is this; if a year ago a container full of Barbies cost , I don't know let's say 1,000 Yuan (Y) and 1,000 Y was worth 500 U.S. dollars ($) then if I wanted to buy that load of Barbies I would give China 500$, they would in turn give me 1,000Y, and I would pay the Chinese factory the 1,000Y and get my Barbies. This year its a little different though because my government has devalued my U.S.$. Now if I give you the same 500$ for your Barbies you are getting a little less actual value or purchasing power. So what China is doing is saying "fine we will tighten the money supply and this will increase the cost of Barbies to you so you will have to pay more of your inflated dollars for the same load of barbies". Tightening the money supply causes the cost of Barbie to rise because assuming that demand for Barbies remains constant, supply will decrease due to the fact that increasing production capacity ie. building new factories, becomes more expensive due to higher borrowing costs. So if China limits the expansion of production capacity with tighter credit conditions, as long as the world keeps increasing its demand, we will have to pay more for our Walmart inventories. Up until now whenever a Chinese business built a new factory and started to build plastic s..t, another factory, using free money would spring up beside it and produce even more plastic s..t even cheaper. No more, now the last plastic s..t factory has been built. From now on Chinese plastic s..t supply will be controlled, and if we want more we will need to pay more. Thereby having our inflation returned to sender. As you probably know, our own easy money policy was supposed to stimulate production here. The thing that our government forgot to factor in though was that we have no demand for our products so business had no reason to borrow to build ghost factories. The banksters didn't want all that cash to just sit so they put it in the stock market for us. As they sell at the top they are going to send checks to everyone. I am by no means an economist but this is how I understand the situation myself. I will now press the save button and let the trashing of my effort begin.

  

Thu, 02/10/2011 - 20:51 | Link to Comment silver_serf
silver_serf's picture

Sadly it might be (bullish for stocks) if it slows down Benocides hot money train to china

Thu, 02/10/2011 - 22:05 | Link to Comment Freddie
Freddie's picture

Hope & Change.

Thu, 02/10/2011 - 19:17 | Link to Comment gwar5
gwar5's picture

It's going to get really messy. If China gets serious they could start buying PM outright.

Thu, 02/10/2011 - 19:18 | Link to Comment RobotTrader
RobotTrader's picture

Anybody else see this banner ad on ZH?

LOL....

Not that I'm looking for Chinese girls or anything....

This Google Ad campaign must be a blockbuster for Tyler and crew....

Last night at home, the ZH page was papered with ads of the exact products I had just purchased the last 6 months.  Including a Lenovo notebook and an ad for a wheelset, a jersey and a chain from Motosport Outlet.com, complete with photos... Amazing.

Maybe that means a Chinese girl is due to fall into my lap any minute now??

 

Thu, 02/10/2011 - 19:23 | Link to Comment EscapeKey
EscapeKey's picture

I usually get the Ukraine girls dating website.

Not that I mind Eastern European whores, but the fuck as if I'll marry one.

Thu, 02/10/2011 - 20:34 | Link to Comment asdasmos
asdasmos's picture

Doesn't google make personalized ads?

 

Wouldn't that be directed to RobotTrader and respectively the ones you mentioned to yourself?

 

ammrite here or .....

 

I get ads for livingsocial and pennystock trading. Personalized to area/user history/IP???

Thu, 02/10/2011 - 19:23 | Link to Comment Pure Evil
Pure Evil's picture

Hopefully, when she falls in your lab, your pants are down and she's buck naked.

Thu, 02/10/2011 - 19:29 | Link to Comment Rainman
Rainman's picture

....ad not seen by me, at least not on ZH. I would remember it. Maybe you wuz on another site like Yahoo and got all mixed up.....Chinee girl on mind not good for other memory function.

Thu, 02/10/2011 - 19:30 | Link to Comment truont
truont's picture

Me too robo, I just bought a coat on overstock.com, which I haven't used for years.  Now, I get DAILY ads from overstock about coats...from this site AND yahoo.com, of all places....

Creepy.....

Thu, 02/10/2011 - 20:42 | Link to Comment i.knoknot
i.knoknot's picture

i keep getting hit with ads for gold, silver, legos, ammo, alcohol, and ... cramer.

shit. who's been browsing on my machine? i never look at gold, silv...

well, ok, i've been to some lego sites. but just as a collector. honest. up 10% this year alone.

creepy is right.

Thu, 02/10/2011 - 19:43 | Link to Comment papaswamp
papaswamp's picture

Clear your cookies and browser history. The ads match to what you were buying and/or looking at recently on-line.

Thu, 02/10/2011 - 20:05 | Link to Comment lincolnsteffens
lincolnsteffens's picture

I scrolled up near the top of the page and that Ch. babe was there. Ohhh, she splitand I've got free bluetooth with a Windows phone package. I haven't bought either....yet.

Thu, 02/10/2011 - 20:34 | Link to Comment asdasmos
asdasmos's picture

+1

Thu, 02/10/2011 - 21:38 | Link to Comment Quinvarius
Quinvarius's picture

It means clear out your cookies, perv.

Thu, 02/10/2011 - 21:54 | Link to Comment Bernank Sheeple
Bernank Sheeple's picture

I got the Russian girls, which r my fave

Thu, 02/10/2011 - 22:12 | Link to Comment Freddie
Freddie's picture

Maybe you can buy one when you get a QE 5 check from Uncle Sam-Hussein.

Fri, 02/11/2011 - 07:35 | Link to Comment critical_mass_soon
critical_mass_soon's picture

dude you crack me up!

those adverts are not controlled by zh, rather that add space is probably managed my google ads, and depending on what you search for....yes you heard correctly...what youuuuu search for it will bring back adverts for similar things...lol

So if you were looking for flights to hong kong, the ads will show you travel companies advertising hong kong flights, hotels, car hire etc....

The question is....what have you been looking at whne the wife has been out shopping!

Enjoy your kung po prawns my man!

Fri, 02/11/2011 - 08:15 | Link to Comment spinone
spinone's picture

Google tacker sends personal ads to your browser based on your browsing history. 

Robo, you must have been vistiting Chinese dating websites.

 

Thu, 02/10/2011 - 19:18 | Link to Comment chet
chet's picture

CNN: "IMF calling for dollar alternative"

Lots of interesting stuff going down right now.

Thu, 02/10/2011 - 19:18 | Link to Comment Jason T
Jason T's picture

Granted, some frauds in Chinese stock names, but you are getting currency protection as the RMB soon goes to 2 for $1 Vs the 8.13 you used to get a few years ago to only 6.58 today.  

Thu, 02/10/2011 - 19:21 | Link to Comment RobotTrader
RobotTrader's picture

Yuan ETF looks pretty stable for now.

Thu, 02/10/2011 - 19:37 | Link to Comment Jason T
Jason T's picture

thats some kind of derivative fee filled bankster fund..no thanks.  

Thu, 02/10/2011 - 19:58 | Link to Comment Yen Cross
Yen Cross's picture

   I love your charts. Please tell me you are not trading a yuan etf? Most of the effect you aill likely see in yuan appreciation will be in internal tightening. eg: continued lending requirement tightening and rinsing 10's and 30's U.S. treasuries. They are not to be trusted and etf's carry a what? 42-55 % basket of out side investment. You should trade cdf's on those ghost cities when they default. They are all emerging money investments. Doe's Dubai ring a bell? Hell Chinas population is destitute. Why don' they ghost those homes to their own?

Thu, 02/10/2011 - 20:56 | Link to Comment topcallingtroll
topcallingtroll's picture

They probably will!

Plus it really doesnt matter if they raise the yuan or not as long as they spend the dollars. We will accept a permanent subsidy. What we wont accept is continued trade.surplus they convert into financial assets as they slowly steal our capital base.

Thu, 02/10/2011 - 21:34 | Link to Comment Yen Cross
Yen Cross's picture

Thanks TCP you always get read.

Thu, 02/10/2011 - 19:43 | Link to Comment bogey4
bogey4's picture

RobotTrader hit the nail on the head.  They can hike until they're blue in the face, but until they let the yuan float, they'll be importing our monetary policy.

Thu, 02/10/2011 - 20:02 | Link to Comment sschu
sschu's picture

I guess a response to the mercantilist is to debase your currency and make their holdings of dollars depreciate while increasing the costs of their imported raw materials.

The US allowed this to happen starting 10 or more years ago, the Chinese were foolish not to see where this was headed.  Smarter men than I could see what was going on and did nothing to end it.  It is now plain to even noobs like me that these trade and currency imbalances are unsustainable and someone has to back down.

Interesting how some of the first folks to really get hurt, those who spend a majority of their disposable income on food, had nothing to do with the problem (Egyptians?).  Bennie has blood on his hands, but there is plenty to go around.

Right now it is difficult to see how this ends peacefully.

sschu

 

 

Thu, 02/10/2011 - 20:03 | Link to Comment Yen Cross
Yen Cross's picture

They are not intrested in huge hikes. It's trivial. They will sell external debt. FX, and bonds to float their currency thru proxy. You can't buy china bonds on the open market.

Thu, 02/10/2011 - 20:17 | Link to Comment HedgeFundLIVE
HedgeFundLIVE's picture

Commodity stocks rallied as inflation fears grow. Inflation contracts equity multiples. These are just among the few things that have me worrisome in this market!: 

http://www.hedgefundlive.com/blog/friday-market-expectations-i-still-havent-found-what-i-am-looking-for

Thu, 02/10/2011 - 20:20 | Link to Comment Yen Cross
Yen Cross's picture

Thank you finally reason.

Thu, 02/10/2011 - 20:24 | Link to Comment Yen Cross
Yen Cross's picture

 The Chinese have over 2 trillion dollars on reserve currency. 800 billion plus a some cashbox of the amount is U.S. denominated. I trillion dollars goes a long way in emerging markets.

Thu, 02/10/2011 - 20:52 | Link to Comment topcallingtroll
topcallingtroll's picture

That is what we want them to do. Spend the dollars instead of converting them into financial assets. We want them to stop being mercantilist.

Thu, 02/10/2011 - 20:24 | Link to Comment sschu
sschu's picture

China and other BRICs with large export markets to the US have to know that they will not get paid (or paid in seriously devalued dollars), they are essentially giving us free stuff.  They do not have the military to enforce payment, so why do they continue to "sell" to us?

sschu 

Thu, 02/10/2011 - 20:42 | Link to Comment topcallingtroll
topcallingtroll's picture

Two reasons 1. They have a long term plan to take as much of our industrial and capital base away from us, then raise prices when they are in the advantaged position with industrial monopolies. They are willing to keep their people dirt poor in the meantime by not allowing the yen and internal demand to rise much in aggregate, at least not as much as it would rise naturally. 2. They also have to deceive their people to some degree. In order to keep employment growth as rapid as possible ( there are still 700 million chinese in the interior living a dark ages existence) they keep their product priced lower than businesses who have to justify a reasonable ROE to lenders. It is easier to hide a subsidy to the usa than to hide the closure of a plant. China has essentially been operating at a net loss with huge malinvestment, the mother of all ghost city real estate bubbles, and bank financial accounting and hidden losses that make our bankers look like angels. China may try to cause trouble because they are checkmated now by ben, but if.they really want a trade war their.government wont survive it. In any trade war either open or.covert.china.die.first!

Thu, 02/10/2011 - 20:41 | Link to Comment Yen Cross
Yen Cross's picture

1.6 billion and growing. That's why. China will melt down from within. The entitled total 300 million. Of that total maybe 50 million have any weath. Of that number 30 thousand control the wealth. What is a bric to you. Angola, Greece, Ziare, ?

Thu, 02/10/2011 - 21:43 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Was it about profit or was it about employment? The Chinese leadership saw the need to move 800MM people from an agrarian base to an urban one. As long as you can employ people without too much inflation everyone is happy and the excess dollars that were recycled into vendor financing T-Bonds helped keep inflation at bay and your exports more competitive and your workers in export jobs along with construction jobs to help facilitate the move to the urban base. IMHO, several trillion dollars in FX reserves are expendable. If they came back to China, the absurd expansion of the monetary base would explode. They sell to us because it keeps people working.

On the flip side of this, are US Corporations about employment or about profit?

Thu, 02/10/2011 - 20:35 | Link to Comment i.knoknot
i.knoknot's picture

both countries lose?

do you mean the PTB, or the general citizenry?

as a long-time reader, i *think* i know the answer.

Thu, 02/10/2011 - 20:43 | Link to Comment Yen Cross
Yen Cross's picture

Enlighten Me?

Thu, 02/10/2011 - 20:50 | Link to Comment AUD
AUD's picture

Raising reserve requirements doesn't help the quality of the banks' assets.

That goes all the way up to the PBoC.

Thu, 02/10/2011 - 21:36 | Link to Comment Yen Cross
Yen Cross's picture

Who ever said anything about QUALITY?

Thu, 02/10/2011 - 20:55 | Link to Comment Buck Johnson
Buck Johnson's picture

They raised it (and will continue to raise it because it's not enough) because all the markets in China are running red hot and they need to cool them down from the imported inflation.  Wouldn't it be funny if we start to see hyperinflation happening in China.

Thu, 02/10/2011 - 21:36 | Link to Comment ThreeTrees
ThreeTrees's picture

I'm beginning to think that that will indeed be the start of it.  The implications for EVERYONE are very disturbing.  If China cracks and the world goes short Yuan what are the chances they'll have to take extreme measures to protect the peg? (ie:  Liquidate their reserves, all $2.65 Trillion of em)

Thu, 02/10/2011 - 21:14 | Link to Comment ThreeTrees
ThreeTrees's picture

Oh those silly Chinese, thinking they can control where capital flows in an economy.  How have they not realized that the peg has tied their ship to one driven by a madman?  Actually they probably do know exactly where this is headed, they're just scared shitless of the kind of contraction they'd have in their economy if they let their silly paper currency float.

Thu, 02/10/2011 - 22:02 | Link to Comment Yen Cross
Yen Cross's picture

You are getting close. Good work Grass Hopper. Keep it up young Caine.

Thu, 02/10/2011 - 22:18 | Link to Comment i.knoknot
i.knoknot's picture

'Grass Hopper'  :^)

you're dating yourself

i just got the whole KF series on DVD. great show, calm-restraint - a long-lost art.

i wonder how he would approached the markets - heh.

Thu, 02/10/2011 - 21:24 | Link to Comment KTS
KTS's picture

Ok, so I feel quite stupid right now and hopefully someone can help me out here.

 

By raising the RRR, the Yuan will strengthen against the dollar, no? How does this send inflation back to the US?

 

edit: perhaps this equates to chinese goods are relatively more expensive so we will have to pay more in the short term (without seeing the effects on our own exports that come with a more "fair" exchange rate).

Thu, 02/10/2011 - 21:44 | Link to Comment ThreeTrees
ThreeTrees's picture

That's the problem, it doesn't strengthen it against the dollar, at least not significantly I don't think.  It's probably more aimed at cooling off their internal economy while still maintaining the peg to protect their exports.  By my interpretation (which could be totally wrong, I'm a mere college student) the RRR is like hiking a margin requirement on investment to entire sectors of their economy but doesn't affect the "official" exchange rate.

Thu, 02/10/2011 - 21:44 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

dupe

Thu, 02/10/2011 - 22:04 | Link to Comment Yen Cross
Yen Cross's picture

You answered the entry question? Oh jeese. I am that dumb. Shucks. Fire up the still.

Thu, 02/10/2011 - 22:22 | Link to Comment buzzsaw99
buzzsaw99's picture

How many yuan are in circulation in China has little to do with how many clownbux they accumulate. They stimulated their economy which overheated real estate and stocks. Now they are trying to rein in excesses. They will also subsidize food and fuel prices and may even impose price control so the peasants don't go hungry and revolt. I do not believe raising the reserve ratio at chinese banks will do much outside china. They may go on a shopping spree with their clownbux which has and will continue to pressure commodities but they don't just do that willy nilly because they don't like getting screwed over. China's mercantilism and trade deficits deflates the usa constantly. The only ones causing inflation in clownbux is the bernank and the CONgreff.

Thu, 02/10/2011 - 22:49 | Link to Comment rufusbird
rufusbird's picture

Is that a puddle on the floor between her feet?

Thu, 02/10/2011 - 22:56 | Link to Comment rufusbird
rufusbird's picture

How come this...by More Critical T... is dominating this thread?

Thu, 02/10/2011 - 23:26 | Link to Comment Cathartes Aura
Cathartes Aura's picture

appears to be the trend now, a troll takes up on a thread, and *presto* - highjacked.

really, really tedious.

Thu, 02/10/2011 - 23:34 | Link to Comment the grateful un...
the grateful unemployed's picture

so China directs more of its production to domestic consumers? less of it goes to America? America no longer has slave labor to make its products, has to hire real people, pay real wages? and while China continues to put a demand squeeze on oil, Americans pay the inflated rate, which feeds through to their CPI, (even though American slave labor is the best in the world?)

Thu, 02/10/2011 - 23:36 | Link to Comment the grateful un...
the grateful unemployed's picture

so China directs more of its production to domestic consumers? less of it goes to America? America no longer has slave labor to make its products, has to hire real people, pay real wages? and while China continues to put a demand squeeze on oil, Americans pay the inflated rate, which feeds through to their CPI, (even though American slave labor is the best in the world?)

Fri, 02/11/2011 - 00:51 | Link to Comment Zero Govt
Zero Govt's picture

Prof Rogoff (Harvard, IMF) talks of "global imbalances" like the Govts of China and America has any handle on the 1,000's of businesses that conduct international trade. What does Rogoff expect, the Chinese Govt to shutter or quota private businesses until the imbalances are addressed? Does this delusional Harvard-IMF retard know what he's asking!

When will we ever realise Prof Rogoff types live in a fantasy land of US Govt muppets talking to Chinese Govt muppets. They have zero control over international trade, it's private business decisions that drives the trade. Washington, Bijiing and that fuking forum for useless windbags, the G20, are just jawboning in a delusional political LaLa Land

I listened to a banking analyst who'd looked back at G20 agreements dating back 5-10 years. He said the agreements were worthless and achieved fuk all. What the G20 does is waffle and jawbone, that's it. Timmay Git'ners vast entourage to Bijiing last year was a big pile of worthless hot air balooning

Govts are full of crones and economists who do fuk all. Their trade agreements are fuking worthless. Their documents aren't worth the paper they're written on, their G20 meetings aren't worth the price of the table water,  their opinions have as much substance as a mental patients last murmerings

These delusional half-wits live in a fantasy world, a bubble of hot air. They need medical help not more money to fund the next worthless jolly to another G20 meeting for political fantasists... Govt is a false (delusional) construct rammed with worthless windbags like Prof Rogoff

Fri, 02/11/2011 - 02:03 | Link to Comment mt paul
mt paul's picture

panda bears 

bytches

 

Fri, 02/11/2011 - 04:00 | Link to Comment JW n FL
JW n FL's picture

No.. Tyler. it is another bullshit reason to stall trade and slow growth, thusly drawing out the limited energy available.

If anyone wanted a real or organic growth and could realize it in any form... the energy available to provide real growth does not exist.

There can be no growth, no real growth... there isnt enough energy to maintain growth or a rate needed to keep the world from sliping backwards. it is what it is.

Fri, 02/11/2011 - 04:33 | Link to Comment ivars
ivars's picture

Return inflation to sender...EXACTLY.

Fine job, ZH.

Do NOT follow this link or you will be banned from the site!