"Livid" Top Chinese Economists Call BOJ Decision "Monetary Blackmail", Demand "Currency War" Retaliation

Tyler Durden's picture

The Chinese Central Bank has so far stoically endured the monthly injection of $85 billion in boiling hot money for the past seven months, lovingly delivered by the inhabitants of the Marriner Eccles building, even if it meant a proportionate hawkish response which has pushed the Shanghai Composite red for the year, and having to deal with a property market that is on the verge of another inflationary blow off top. But while the PBOC will grudgingly take this kind of monetary abuse from Bernanke, now that it has to deal with another de novo created $70+ billion in monthly central bank liquidity (poetically called Carry-O-QE by Deutsche's Jim Reid), this time coming from that loathed neighbor and one time invader across the East China Sea, China won't take it any more. As the SCMP reports, "Many of China's top economists are livid at what they view as an effective currency devaluation by Japan and are calling on the People's Bank of China to retaliate by weakening the yuan to defend itself in what they see as a new currency war." 

Of course, calling on the PBOC to "do something about it" is one thing, and certainly China whose GDP is still extremely reliant on net exports for economic growth would like nothing more than to crush the CNY, boost its exports and hurt Japan in the process. However, if it does that, it will merely accelerate already rampant home price inflation, which in the aftermath of the recent chicken culling birdflu outbreak and what is already a scracity of pork meat after last year's corn drought, will then spread to food prices and lead to mass social instability (something Japan, and its docile, irradiated population apparently has little to worry about).

More from South China Morning Post:

These economists, including Tsinghua University professor Li Daokui and ANZ Bank's Liu Ligang, see Japan's plan to double its monetary base within two years as "blackmail" and have criticised the Japanese central bank's decision to open the liquidity floodgates to bump up the economy.


Liu said Japan's unprecedented easing programme, aimed at ending more than two decades of deflation, was "a monetary blackmail" targeted at other export-driven Asian countries such as China and that the central bank should sell more yuan and buy the US dollar to push down the yuan.


He also called on authorities to guard against a fresh wave of hot money into China's fragile financial markets, warning that Japan's move would reignite the so-called carry trade, under which investors borrow in low-interest yen and invest in high- interest markets.


"The massive monetary stimulus by the Japanese central bank could spell doom for other nations in the region," said Tsinghua's Li, a former adviser to the People's Bank of China.

All spot on, and all well-known in advance, but apparently all the brilliant minds in the world forget that trade is a zero-sum game, and that Japan's current account and trade surplus gain (if any, recall both hit record lows recently) facilitated by a plunging yen, will come at the expense of other very angry exporting nations. This also ignores what happens to Japanese import energy and food prices, already exploding as has been documented here previously. The BOJ's hope: companies will promptly hike wages to make up for rising staples costs. We hope the central banker often confused with a Yankees pitcher is not holding his breath on that one...

As for countries hating Japan's guts right now, China may have to wait in line: if there is one country that has to be truly livid at Japan it is South Korea, whose net exports account for nearly 60% of its GDP. So yes: the next currency war salvo will come most likely not from China, which is already caught between a rock and a hard place, but from Seoul, where the perfect storm of a totally nutjob neighbor to the north has emerged just in time for Japan to do everything in its power to crush its economy.

In conclusion, if there is one thing Japan has done, is to make sure all the overnight angst so carefully focused on Europe in 2011 and 2012 (and where it is pretty much game over now following news that "success-story" Portugal will pay public workers in bonds not in cash, all it takes is someone to put down the time of death) shift forward, with the attention now focused not on the 3 am European open, but on what promises to be a daily 8 pm Eastern JGB volatity explosion each and every day.

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Uber Vandal's picture

I wonder how long before the BitCoin to gold ratio is 1:1 before the Dow to gold ratio is?

amusedobserver's picture

China is choosing the wrong retaliation.  It should demand gold in payment for trade debts.

The Abstraction of Justice's picture

They will turn around and give them an IOU gold instrument.

ACP's picture

Whever they do, these top Chicom "economists" and other policy-makers better get on the ball before the money they worked so hard to steal is devalued.

When the time comes to finally flee to Vanouver, they'll need enough money to live out the rest of their lives there and bribe Ivy League admissions officials to get their children into the best colleges illicit money can buy.

DoChenRollingBearing's picture

Speaking strictly my book here, I would encourage China S. Korea and Japan to ALL start lowering their currencies as quickly and deeply as possible...

Cheaper bearings for us...


Of course, that might do all all of those countries grave harm in the longer term.

knukles's picture

Don't print till you see the whites of their eyes.

markmotive's picture

China doesn't have to do go to war with Japan. Fukushima is doing China's dirty work already.

2 years later...the nuclear disaster rages on.


Supernova Born's picture

Currency manipulators livid about currency manipulation.

China is letting their proxy North Korea set the tone.

War will be currency manipulation by other means.

The world is a poker table full of well-armed cheating bastards. This ends in blood.

Parisnights's picture

Wondering if the missle N.korea tests fire next week will be aimed over Japan.

Parisnights's picture

Wondering if the missle N.korea tests fire next week will be aimed over Japan.  And  will we shoot it down?

Parisnights's picture

Wondering if the missle N.korea tests fire next week will be aimed over Japan.

Mugatu's picture

Just hilarious!  The world's greatest currency manipulator is mad because someone else is artifically moving their currency lower.  Oh this is going to be delicious!  How dare you  steal the money that we stole through an artificially low currency.

No tears here!

Mr. Magniloquent's picture

Germany is currently on the 8/0 year payment plan. I'm sure that the Federal Reserve would be more than happy to offer the Chinese the speed and convenience of a 1/0 year plan as an act of good faith.

Sudden Debt's picture

They're already buying half of Azia and Africa for something much more precious for the Chinese... Food and Water.
And water will be the nexr Azian war.

Rustysilver's picture

Sudden Debt,

Kashmir "conflict" is all about water.

ihedgemyhedges's picture

Reply from Japanese official:

"Prease do not retariarate. Here, flee sushi fo you.  It grows in dark, but prease not to woly.  Very ediber"

ihedgemyhedges's picture

dp.  meaning double post, not something else you sickos......

tbd108's picture

And so is the invasion of Tibet.

Sudden Debt's picture

So is India/Tibet conflict for the Himalaya glacier waters

So is the Laos and Vietnam conflict over the damming of the Mekong

And Russia and China also have conflicts over the Siberia forest and water. This is also where China and Russia had a meeting over 2 weeks ago.

Rustysilver's picture

Sudden Debt,

That's why looking at wider picture is better.  You won't miss stuff that's all ready there.

Deacon Frost's picture

Right SD, and this is also part of the reason they annexed Tibet, for the water sources coming from the Himalayas.

booboo's picture

Ask MF Global clients about the difference between buying and keeping. China (and the U.S.) can buy all the foreign dirt they want but keeping it from looting armies is another thing. If you think Asia and Africa have too many Kalashnikov's now, wait till thing really get going. Neutron bombs were made for this type of conflict. "Don't fuck up the natural resources or the infrastructure General McDipshit"

Cyrano de Bivouac's picture

If they do that they can expect a flood of opium in return.


dick cheneys ghost's picture

Been following Victor for a couple of yrs now..........He is an interesting fellow.........Nobody presents the dollar v euro argument better than Victor........

Bay of Pigs's picture

But he is terrible on gold and silver issues. 

dick cheneys ghost's picture

He is a 'freegolder' so he loves Gold........and hates silver......

Cyrano de Bivouac's picture

If the Chinese demand gold in payment for trade debts  they can expect a flood of opium in return.

kliguy38's picture

Wait until one of them says Fuck it and starts printing and just buys gold.....watch the SHTF......and of course the War soon to follow

honestann's picture

They ALL know they should do this.  But they all know what would happen --- exactly what you say: WAR.

honestann's picture

Absolutely.  And you know what?  They could let people buy $3000 worth of goods for 1 troy ounce of gold... and everyone would continue to pay in fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-note toilet-paper.  But if a few folks started to convert their fiat into gold to pay the Chinese, gold would exceed $3000 per ounce in roughly 20 minutes.

So hell, make that $10,000 worth of goods for 1 troy ounce of gold.  Why not?

Sudden Debt's picture

The Bitcoin has been hacked. Game is over.

JackT's picture

2 or 3 times now(known)

css1971's picture

I very much doubt it.

dark pools of soros's picture

the 'bitcoin' hasn't been hacked, just some exchanges and online wallets.. 

like no one ever robbed banks right?  Or banks robbed customers?  Or Corzined a country's GDP?

I can get 6oz of silver for 1 bitcoin right now


hmmtellmemore's picture

I'll accept a bit of hacking of bitcoin exchanges and wallets (which actually hardens the system quite well) over the wholesale theft of hundreds of billions of dollars that central banks perform every year.


Modified adage

Put a ounce of silver in one hand and a bit coin in the other and see which one fills up first

If you can hold it, you don't ultimately own it


debtor of last resort's picture

Nsa knows the code of course, just like many other agencies. And the establishment welcomes btc as another distraction, away from the precious metals. As long as it is a small digital playground, they will not call the plumber to close it down. Next week can be confiscation time, with a little help from anonymous, in return for not going to jail.

StychoKiller's picture

Knowing the algorithms is NOT the same as knowing the (private) keys.

orez65's picture

Exchange your Bitcoins for silver as soon as you can because that Ponzi Scheme is going to crash real hard.

TraderTimm's picture

@Sudden Debt

Honestly, you've had some great one-liners over the years - but you're acting like a complete muppet this time.

The only thing getting 'hacked' is every sovereign currency around the globe.

Bingfa's picture

Already in the US, regulators have taken note of the currency and moved to make firms report transactions worth $10,000 or more, according to the Wall Street Journal.

Just wait....

Rustysilver's picture


Fed wire triggers 10k threshold since forever. WSJ is on the case 20 years too late.

Bingfa's picture

Very true but.....Bitcoin users thought profits on their currency was tax free.

The IRS is going to be using different tactics this year....

"The Internal Revenue Service is collecting a lot more than taxes this year–it’s also acquiring a huge volume of personal information on taxpayers’ digital activities, from eBay auctions to Facebook posts and, for the first time ever, credit card and e-payment transaction records, as it expands its search for tax cheats to places it’s never gone before."


seek's picture

A bitcoin exchange was hacked. Not bitcoin itself. This has happened a few times in the past, and is because of the increaase in value. Don't leave your bitcoins on exchanges.

It caused a momentary decline in bitcoin last week. Pricing has already recovered, and is pushing $160 now -- higher than when the exchange hack happened.

MrNude's picture

He has got a point though I wouldn't trust Helicopter Ben, Paulie 'UFO WATCHER' Krugs or any other of the banking or central planning ilk to let Bitcoin stick around when the shit hits the fan it'll either get hacked by the DOD or outlawed. Can't have loose ends being a thorn in their sides and disrupting the narrative after all. 

Quinvarius's picture

It will be eventually.  There is instant payoff in it.  Reminds of when everyone said only MSFT products were hackable and you had to use AAPL or LINUX.  Eventually, someone is going to find a way to credit their account. 

useless_fact's picture

Any program that runs right is obsolete.