This page has been archived and commenting is disabled.
Spot China's "Hot Money" Time-Bomb
Over the weekend, FT noted that China’s central bank reported that companies and individuals sold RMB 684 billion ($109 billion) worth of foreign exchange and bought an equivalent amount of Chinese currency in January, a record for a single month. On the chart below, please point out the Chinese "hot-money" inflationary ticking time bomb (hint: highlighted).
Why "time bomb"? For the answer, we go to the simplest definition of inflation, which is as follows: "when too much money chases too few goods and services."
In January, the money in domestic circulation via FX conduits just soared by a record amount, without a comparable increase in goods and services. All else equal, this is called the "hot money" effect, and manifests itself in a surge in Chinese inflation usually with a 3 month lag to whenever the Chairsatan starts experiment with the US monetary base.
January just happens to be about three months after Bernanke announced QEternity. It also explains why China has been doing everything in its power in the past several weeks to reduce excess liquidity in its economy, and to telegraph that suddenly its economy is once again slowing down drastically, while inflation is ramping up.
Take home: China has had enough with the global, and certainly Japanese, reflation efforts as further proven by last week's repeated warnings by the entire Chinese political elite against currency wars.
How much longer will the "developed world" be able to push Chinese inflation before, like in 2011, it all just snaps?
»
- 20539 reads
- Printer-friendly version
- Send to friend
- advertisements -
just listen to kyle bass, mish shedlock and reggie middleton for your alpha
follow ray dallio for you general fund
easy way to turn your shitty fucking salary into a big house in the street
everybodys fucked.......hedge accordingly
How do we hedge against live rounds? Cue self sustaining man...
The Chinese can suck it.
"China is still flooding the world with excess goods, and is once again a net drain on global demand.
As you may have seen, Chinese exports surged 22pc in February. Imports fell 15pc.
This is exactly what pessimists feared. For all the talk of a great shift by China away from export-led growth to internal demand, the reality is that the Politburo is still propping up the same old system, still shovelling subsidies to loss-making firms and state behemoths to keeps factories open."
See Ambrose Evans Pritchard at this link.
Interesting article (why can't ZH be more like FT?) but misses a big part of the picture.
It looks as if China' shadow banking is unable to absorb as much foreign funds as in the past, so the PBoC is money-buyer of last resort. This indicates a very hard hit Chinese manufacturers as they have previously been able to leverage their overseas incomes at a far higher than the 'official' RMB rate. They have been able to do so in 'black' exchanges, lending new funds at extortionate rates of interest ... mostly to property developers ...
Hits to China manufacturers:
- Sharply higher input costs, mostly fuel,
- Declining domestic markets for manufactured goods,
- Declining overseas markets and a looming China trade/current account deficit (even if the decline is not in a straight line),
- Declining 'finance' earning from forex speculation and loan sharking.
- China developers are unable to gain financing to finish then sell projects which puts pressure on the above-ground economy.
Private sector leverage from foreign exchange is just another component of China credit bulge, the unraveling of which is now underway.
High Real Fuel Prices, Bitchez!
Go long condoms
I know, and when it comes down it will be horrible.
Nah, people are expendable in communist countries. China will just throw a state-loyal wall of humanity at the problem. They don't have to deal with the messy "human rights" issues that western countries have.
gold, silver, platinum, bitcoin (and palladium I guess).
Fertile land, food, water, ammunition, willing participants, fiat for tinder and cushion stuffing, condoms.
Currency war nuke.
At least this time they can't point the finger at The US with the DXY near 83.
DXY is fucking toilet paper
but should stay strong for at least a couple of years
Time for MDB to start writing that sequel to "DOW 36,000"
I, for one, can't wait.
Defration, prease.
China's turn to export inflation back into the global economy?
Wow, didn't see that one coming.
They are going to buy up everything they can as fast as they can. Why wouldn't they?
Defration, prease"".
That would actually be Japan. The Chinese simply don't speak ANY English. Or Engrish..
Arigato for the correction.
It would appear, then, that I've put a perpetual HEX CURSE of Deflation upon Japan for many decades to come.
Shazai, very sori. /bow
No, sorry Sepuku is the only solution. Failing that, Shinjuku. For a very late night....
We shall never speak of this again.
Rater, arrigator
China's inflation rate hits 10-month high in February
http://www.bbc.co.uk/news/business-21737871
All down to Lunar new year apparently.
all down to when the gov wants to report high inflation and when it doesnt
Foxconn had to cash in some investments and purchase some more "safety" (suicide prevention) nets.
"China has had enough with the global, and certainly Japanese, reflation efforts..."
You'll have to excuse me for not giving a fuck about what China "has had enough" of... they're naught but a bunch of thieving, honorless parasites. The sooner they go extinct the better for everyone else. I mean seriously... has any people ever taken as much from the rest of the world, while giving back so little? Name one thing China has given the world in the past three decades... besides massive overcapacity and computer backdoors... Any great inventions? Any innovative ideas? Bueller? Bueller? Nah... didn't think so...
That's a bit harsh now, isn't it? There are 1200 million people in China, which should make it kind of hard to generalize.
+1
The thing about insane people, I've noticed, is that they often project their own actions, intentions, and feelings of inadequacy through lack of any personal achievements on to others. Nuff said.
Not sure who do you mean is insane here. Me, or the guy who wants to wipe out the Chinese people?
Anyway I agree with your statement, only not just insane people project their failures onto others. Most of us do.
Not you! :). Rest assured you are better than most.
I often use +1 to indicate a thumbs up harking back to the days when ZH didn't have the silly green and red buttons to encourage editorial prostitution.
those green and red buttons are pretty useful if you ask me. tyler has a brilliant mind. if i'd make a site with comments section, it would be like this.
Yeah, it was a bit harsh.
It would have been better to say Chinese culture goes extinct. I've got nothing against the Chinese (or anyone else) on a biological or genetic basis... only on a cultural level. It was sloppy of me to not make that distinction. Sorry.
Most cultures teach their people to want to be slaves -- well-kept slaves, but slaves none the less. Normally, I wouldn't care about such things in a far away place, except that the powers that be have figured out how to use them as a sledgehammer against the marginally free peoples. Unfortunately, in a globalized world declining to the lowest common denominator, Chinese culture becomes our problem.
The economic world ain't gonna get any better until the cultural world changes, and the powers that be only allow movement in one direction these days -- downhill.
Substitute "China", with "CONgressCritter".
>Name one thing China has given the world in the past three decades...<
Really shitty products that aren't worth buying? Bird flu?
Governing Elite?
A population of locusts that consume everything and anything that moves and most things that do not.
Name one thing.........
A scapegoat for ruining this perfect economy.
It was going fine and I would have gotten away with it if it wasn't for those kids...and that dog.
@ tcs
there's a litany that i could suggest... but, rather than bore the ZH board, let's start with, "No Wars"?!
China is just playing its role in the globalization/merchantilism/credit-money BS world economy. Your anger is misplaced, I think.
China has given the US a place to dump our inflation for the last 30yrs.
Time for them to repay the favor.
They have produced some really amazing scientists who work in the U.S.. Nearly every article I read in Science Daily re an American research advance at an American university, involves a Chinese American who is either the lead scientist or an assistant or a grad student. They are inventing incredible things, here, and doing amazing medical research, here.
I agree that China is a disgusting pit (they abort their baby girls, leave toddlers to die when hit by cars, sell evil fake meds around the world, pollute with abandon, harvest the organs of political prisoners). But credit where credit is due.
Also, any time that you see a Chinese protester, or read of a Chinese political prisoner, you are reading about a very brave and self-sacrificing person.
So, the Chinese are fine with their money printing destroying foreign economies, but not OK with others doing the same. Got it.
You'll have to explain how the largest holder of foreign reserves is destroying other economies by money printing. They are soaking up the money printing by the West.
However, there will be a time when that ends and they cause a tsunami of money to flow back from where it came. Better that than simply hold onto to an ever declining "asset" as the West debases to the bottom. It will be a trickle at first (as it is now) but sometime it will be a flood of money back on the economies that printed it.
All the"experts" like Krugman will wonder where all the inflation came from. They didn't expect it, couldn't forecast it. It was all a surprise! There was no inflation until there was.
They will be so sorry for underestimating it but that is all a lie. They know now and they are actually hoping for it. It is the PLAN.
Last I checked RMB is not a free floating currency. By implication just about everything made in China is underpriced against the currencies of the export destination countries. Preeeetty straightforward that.
Careful, there. Inflation actually occurs when there is too much purchasing power chasing too few goods. Money is only one form of purchasing power. So, if you're watching one form of purchasing power, and it suddenly skyrockets, inflation might occur, or it might not if there are offsetting movements in other forms of purchasing power.
Tell me about this magical way in which you create money out of nothing and inflation doesn't occur.
STFU
It's called credit.
when the whole world is one big stuffed channel of goods that no-one needs. or infinate new shiny paper SLV and GLD shares! Open your mund jeebus! Plenty of imaginary paper PRODUCTS to absorb all that new money printing. Paper to spend your papaer non brillaint!
Um. They can break the USD peg any time they want (which is I think the point)... At which point CNY will become substantially stronger and the inflation will come back to the US.
p.s. The US has been exporting it's inflation to the rest of the world via the reserve currency for several decades. It's how the Keynesians can keep pointing "look no inflation", when in fact there is... In China and other exporting nations.
Let them stack enuff gold first at low prices.
China gave the world North Korea .... one of their brilliant moves ?
North Korea is just China's "bad dog on a leash".
The tail wags the dog .... China is a despicable country .... let's be honest .... they are cowards .... not leaders !
They are anything but cowards. You mistake patience for cowardice - a fatal mistake.
china gave south korea to eisenhower as a gift...
This is only one side of the story. What we do not know is the level of sterilization. It is widely known that the central bank sterilizes these inflows with offsetting asset sales from other parts of its balance sheet. We need to know how much was sterilized to then figure out what the net inflationary impact will be but in previous periods I understood inflows were almost completely offset through repos and/or other asset sales.
Sterilized money is no panacea; what if it is offset by invented assets or assets that are not marked to market or re-hypothecated assets?
China gave the world quilted winter uniforms for their barefoot soldiers .... worker's paradise ?
This was posted today
http://www.bloomberg.com/news/2013-03-11/kuroda-says-bank-of-japan-will-consider-buying-derivatives-1-.html
I dont fucking understand those guys!!!! The printing fuckfest will not even stop anytime soon!!! So who next want to buy the $700T in derivatives.. The fed only bought couple of Billions.
Read carefully. The article only implies that derivatives might be bought and then mentions the bond buying target of US$791B.
China has its own problems. Inflation is just one item the ruling elite will have to solve.
The only reason they are pissed with Japan debasing their currency is that if China does the same the chinese workers will riot due to the inflation that will result.
So the ruling elite will jawbone Japan but do nothing.
The chinese hierachy wants to keep the "party" going for as long as it can. One day though and soon, the music is going to stop.
Max
yup... their elite and our elite are no different, really. And when our elite and their elite talk mean to each other, rest assured that it's all for show. Everyone who profits from this unsustainable system wants the system to survive just a little bit longer. Even war between these two countries (it's coming) will be for show. The show will kill hundreds of millions... but it will still be a show.
War also conviently wipes out the young, aggressive, unemployed males that pose a threat to the domestic regime during times of economic distress.
"If you get into a fight, make sure you are strong enough." A long dead Chinese philosopher must have written something like that. Want to break Japanese cars? Fly daily to pester the Japanese coast guards? Welcome. Japan will certainly suffer with less exports to China, but how long can the politbureau survive with riots all over the place? The Yen WILL go to 110. That is by the way where the currency was in early 2008. China will soon feel like the inside of a rice cooker!
China accounts for 20% of japans exports. If China retaliates against Japan for their QE and shuts its markets to Japanese exports that could cause Japan to roll over and go belly up which would make Kyle Bass' year.
China doesn't need Japanese QE as the excuse. They still have a dispute over a small group of islands as another pretext and could act pre-emptively on that basis. The more pain at home the more the politicians need the distraction of a small war. That would also shut the Chinese market to Japanese exports. It would quicklly escalate by cutting a lot of shipping into and out of Japan as insurers will refuse to insure ships going "into the conflict zone". This would cause the Japanese financial system to lock up good and proper with international repercussions - and make Kyle Bass' year as well.
Yes but how much of this is assembled into finished products in China and reexported around the world? The Chinese would be shooting themselves in the foot. Also you can have skirmished but you cannot have "small" wars between two great nations. Once you start sinking boats, the economic damage will be so large that you immediately have a major war!
Something has to done to fix the global problem of too much manufacturing capacity. WWII did a remarkable job of closing down the surplus manufacturing capacity in Europe and Asia and giving the US a global advantage in the process. It will be different this time but I would hazzard a guess that it will be the same method used to solve the problem.
Blow up already. It's been years and miles of ghost cities.
build it, and they will come?... rather than a 19th century infrastructure we as american's live in today !
If the Chinese had any balls .... they'd kick Russia out of Siberia and Japan's northern islands .... oh, no .... they pick on South Korea, Viet Nam, Japan, Tibet, etc. ! Their cowardly interventions around the world are worse than a caricature of evil capitalists !
Jafo,
If China shuts markets to Japanese goods than other countries will do the same to China.
They would be too much pressure not to do it.
Hmm. They converted $109 billion of foreign currency to RMB? Kind of stupid I think. Like swapping diarrhoea for turds. I would have thought PMs would have worked better to lock down inflation and secure savings.
The premise of the article - that liquidity brings inflationary pressures - is a little tenuous. That applies if those holding the cash are rabid consumers and not savers, and depends on the ultimate intention of the conversion. Are they converting to buy or converting to hedge? Are we about to see the revaluation of RMB? We'll be back after the break with the answers to these questions and more.
China can go fuck off and build another empty city.
Where's John Madden with his fucking Tinactin!
What infant wrote this silly post? China is the worst nightmare for the human race: slave labor combined with currency manipulation.... a recipe for creation of billionaires and then global BUST.
Now is your turn to praise Russia and tell us what a bastion of freedom it is because Putin gave citizenship to some French self-entitled sociopath.
For how many weeks have I been telling everyone that EVERYTHING the Fed is doing is about 2 things?
1. Keep its GRC (Global Currency Reserve) status at any and all cost. Including war. By first waging war via proxy countries in the Middle East and Asia, and leading to WW3 if need be.
2. Keep China from taking over from the US as the #1 economy, to safeguard #1 (GRC) and its NWO ambitions.
The Fed is printing money and debt instruments to (a) inflate its way out of its foreign debt (especially to China!), and to bring inflation to China. By bringing inflation to China, they hope to destabilize the country via Inflation and fewer jobs, which lead to economic and political unrest. This will hopefully soften them up to start making a series of small but ‘dumb’ mistakes that will lead to bigger mistakes.
The Fed can avoid inflation at home IF: They get all other CB’s in the “developed world” (Club of 20?) to inflate also. If they take turns with currency inflation, they all circle the drain in synch and no one within that Circle is disadvantaged. Those outside the circle (Russia, China) will realize inflation also if they print, and currency appreciation and falling exports if they don’t.
To keep the US and other Developed economies going (i.e., CB’s on board), the US will have to assume a real and proclaimed leadership in oil & gas energies. This is vital to propping up the dollar.
This is all fine for the ruling and money Elite in the US & Friends, but is awful for its citizens, since they will feel the brunt of the same war of currency inflation, that will translate into food & resource inflation, if the energy supplies cannot be kept in abundance and at acceptable prices.
The countries that are not in Club Fed (not using gold as basis for money), like the BRICs+, will be targeted for inflation. The US will seek to bring India, Brazil, etc under its Fed umbrella, to isolate Russia and China. They, on the other hand, will be doing the opposite: Bring about a currency crisis in the USD, and create a new GRC standard – probably via a “Basket of Currencies” based on gold. The stage is set, the lines are drawn, and the game/war is “on”.
It comes down to mind over matter: TPTB don’t mind and if you’re not Elite, you certainly do not matter. And in case some people still didn’t/don’t get it: This war is not about “us” vs. “them”, but a war of the “Neo-Feudal Elite” vs. “The Rest”. Their NWO (New-World Order or New World-Order?) is about bringing back a very old world order: Feudalism. You’re either in or out. You won’t be able to “play Swiss” for much longer. Pick a side and plan accordingly. As always, you may of course play “ostrich politics”. Just expect life to treat you accordingly. :-)
The US (i.e. The Fed) will seek to prevent PM's from threatening its GRC status, and the PM crowd will seek the opposite. The issue comes to a crisis only when the demand for PM exceeds supply and this news goes viral and ends up on the MSM.
While the PM-suppression continues by the Fed+Friends, it allows for more 'stacking' in the East and West. Although the Fed can "print till the cows come home", no one can do the same to PM's.
When the fiat-vs-PM crisis does occur, the POTUS will use the IEEA to nationalize US mines and holdings of foreign gold held in the US. This will allow the Fed (JPM, GS, WF, BAC...) to reset/re-anchor the USD to gold, if forced to do so, but not to give up its GRC status -- which they plan to preserve at all costs, to dovetail toward a NWO (the geoplitical end-goal).
Can't China turn to revolt already? China in civil war would surely be bullish.
some of that money is the other countries trying to re-flate chinas economy to reduce their competitveness.
some of that money is the reforming of the financial markets allowing more fdi in the financial sector as the new government (who all want to get into the finance business in a big way) pushes its financial reform ideas. On the ground in china, all the cranes have started again so lots of money moving to real estate sector, stock market warming up and business has started to pick up. lots more foreign food coming in.
the reformers in this government are more technocratic. so i believe first prioirty will be to push reform even if it means short term inflation (short term could of course become forever abd lead to permanent food shortages). I think china will fight stagflation with focus on the growth component more than the inflation component.
some of that money is the other countries trying to re-flate chinas economy to reduce their competitveness.
some of that money is the reforming of the financial markets allowing more fdi in the financial sector as the new government (who all want to get into the finance business in a big way) pushes its financial reform ideas. On the ground in china, all the cranes have started again so lots of money moving to real estate sector, stock market warming up and business has started to pick up. lots more foreign food coming in.
the reformers in this government are more technocratic. so i believe first prioirty will be to push reform even if it means short term inflation (short term could of course become forever abd lead to permanent food shortages). I think china will fight stagflation with focus on the growth component more than the inflation component.
some of that money is the other countries trying to re-flate chinas economy to reduce their competitveness.
some of that money is the reforming of the financial markets allowing more fdi in the financial sector as the new government (who all want to get into the finance business in a big way) pushes its financial reform ideas. On the ground in china, all the cranes have started again so lots of money moving to real estate sector, stock market warming up and business has started to pick up. lots more foreign food coming in.
the reformers in this government are more technocratic. so i believe first prioirty will be to push reform even if it means short term inflation (short term could of course become forever abd lead to permanent food shortages). I think china will fight stagflation with focus on the growth component more than the inflation component.