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Welcome To The Currency Wars, China (Yuan Devalues Most In 20 Years)

Tyler Durden's picture




 

The last 7 days have seen the unstoppable 'sure-thing' one-way bet of the decade appreciation trend of the Chinese Yuan reverse. In fact, the 0.95% sell-off is the largest since 1994 (bigger than the post-Lehman move) suggesting there is clear evidence that the PBOC is intervening.

 

The fact that this is occurring with relatively stable liquidity rates (short-term repo remains low) further strengthens the case that China just entered the currency wars per se as SocGen notes, intending to discourage arbitrage inflows. For the Chinese authorities, who do not care about the level of their stock market (since ownership is so low), and specifically want to tame a real-estate bubble, this intentional weakening is clearly aimed at trade - exports (and maintaining growth) as they transition through their reforms. The question is, what happens when the sure-thing carry-trade goes away?

BofA notes the puzzling divergence between Yuan fixings and short-term liquidity,

The turn of the Chinese New Year brought the People's Bank of China (PBoC) back into action - it not only restarted repo operations to withdraw liquidity, it actually did it at a much higher rate. The 7d reverse repo rate at which the PBoC injects liquidity is 75bp higher than a year ago, a move considered by the market as a 75bp rate hike over the last year. The new 14d repo (liquidity withdrawal) rate is set at 3.8%, 105bp higher than the rate when 28d repo was last conducted on 6 June 2013. Based on a simple framework, this move is equivalent to another 35bp rate hike (Rate corridor, Chinese style, 18 February 2014).

 

The puzzle is that both money and bond markets nearly totally ignored such an operation. The 7d repo rate is now fixed nearly 200bp lower since 10 February. Such a massive liquidity improvement in the face of the PBoC's liquidity withdrawal is puzzling, since by 10 February most of the cash used during Chinese New Year should have flowed back into the financial system already.

 

 

The FX market move also begs the question as to why liquidity improved over the last couple of weeks. Generally, the onshore repo rate rises as the RMB weakens against fixing; a normal development because FX outflow dries up liquidity. However, the move in February turned things upside down. Look at the sharp divergence between rates and FX

Which leaves 2 possible reasons for the divergence...

It is due to the seasonality of outflows, as this year could be made worse because the onshore rate was much higher before the Chinese New Year. As a result, banks might have borrowed more offshore, helping the RMB to appreciate. After the New Year, this flow reverses and pushes the RMB down. This explains why the CNY leads the CNH in spot selloff. It is also consistent with the large January FX purchase position of CNY466bn. The trouble with this explanation is that as the money flows out, the onshore rate should rise, not drop.

 

A more popular theory or suspicion puts the PBoC behind the move. As the PBoC buys more USD, it creates natural liquidity in the CNY, leading to much lower repo rates. This explanation is consistent with CNY leading the move, as CNY and CNH spots moved much more than forward, all suggesting a domestic investor-driven rather than foreign investor-driven endeavor. The trouble with this explanation is that the market will have difficulty proving it one way or the other without the central bank explicitly admitting it.

As SocGen notes, the latter makes more sense...

In just short seven days, the once unstoppable appreciation trend of the yuan is reversed. The USD/CNY spot has depreciated by 0.8% since 17 February and the USD/CNH has weakened by more than 1.1%. As for the causes, there is clear evidence of intervention from the People's Bank of China. We think that the recent yuan move is intended to discourage arbitrage inflows. If short-term capital inflows abate, the depreciation will probably halt.

Ending the inexorable carry trade...

The yuan appreciated by nearly 3% against the greenback and 7% against in nominal effective exchange rate terms in 2013. Over the same period, China's FX reserves added another $500bn, despite the repeated talk from officials that China has had enough reserves. These seemingly contradictory messages and signs, in our view, suggest that the PBoC never really wants too much yuan appreciation, especially if it is driven by short-term speculative capital inflows.

Which is crucial...

The yuan possesses the very two qualities of a carry trade currency: high onshore interest rates and a gradual but steady appreciation trend. The first quality is partly caused by the Fed's easing policy and partly by the PBoC's reluctance to ease domestic liquidity conditions out of concerns over debt risk. This condition is unlikely to weaken significantly in the near term. However, the PBoC is capable of altering the second condition and it seems that it is doing exactly so by reversing the appreciation trend and pushing up the volatility of the yuan.

If we are right about the reason behind the surprising deprecation of the yuan, what will follow next?

- Band-widening? Maybe, but as we have argued before, what matters is how the PBoC manages the currency. To make real difference, we think that the next step in yuan reform should be bolder: the PBoC should move from daily to weekly (or even monthly) setting of the reference rate, while at the same time widening the currency band.

 

- More depreciation? Probably not much more. Although the central bank does not like too much capital inflows, too much outflows will not be its choice either. The monthly FX position data are something to track for any change in the capital flow direction. A timelier indicator is the spread between CNH and CNY spot rate. If the offshore rate stays persistently weaker than the onshore one by a certain margin, that will be a sign of capital outflows. Then the PBoC will most likely choose to stabilise the yuan again.

The end-result is a concern:

Should the RMB weakening last a while longer, the cross border carry arbitrage flow which has been massive could reverse and lead to higher repo rates. Such a flattening force is a real threat, especially when the PBoC has shown no sign of lowering the repo rates in its operations.

But this certainly will not please the Japanese (trying to devalue and manufacture their own recovery) or any other beggar thy neighbor nation. Welcome to the Currency Wars China... (and we warned here, prepare for more carry unwind and a potential risk flare).

Potential asset deflation is a risk, as the carry trades diminish/unwind. Property prices are at risk – the collateral value for China’s financial systems. This is not a dire projection – it simply seeks to isolate the US QE as a key driver of China’s monetary policy and asset inflation, and highlights the magnitudes involved, and the transmission mechanism. Investors should not imbue stock-price movements and property price inflation in China with too much local flavor – this is mainly a US QE-driven story, in our view.

 

And lastly, as a bonus chart, we thought the correlation here was interesting...

 

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Tue, 02/25/2014 - 09:51 | 4474855 Max Damage
Max Damage's picture

101101000101010011101000 - Computer says Buy the fuck out of stocks whatever the news

Tue, 02/25/2014 - 09:56 | 4474873 GetZeeGold
GetZeeGold's picture

 

 

You're missing out.....right now!!!

Tue, 02/25/2014 - 10:03 | 4474899 dryam
dryam's picture

Bonus chart.......bitches!

Tue, 02/25/2014 - 10:11 | 4474915 Divided States ...
Divided States of America's picture

One by one, the correlations with the SPX is breaking apart even as it shoots higher....this is fuckin insane and only proves that the Central banks of the developed worldd are all manipulating their own stock markets to prevent a the wealth from instantly going into a vacuum.

Tue, 02/25/2014 - 10:20 | 4474947 fonzannoon
fonzannoon's picture

DS take a look at the 1 month chart of SPY/GLD. they are in lock step. it's fascinating. what do u make of that? It's crazy.

Tue, 02/25/2014 - 10:23 | 4474955 SWRichmond
SWRichmond's picture

Does anyone besides me see China's gold buying as evidence they intend to create more Yuan while preserving buying power?  Isn't this exactly what China should do if she wanted to expand the use of her currency as a trade currency?

Tue, 02/25/2014 - 10:30 | 4474978 HyBrasilian
HyBrasilian's picture

Fuck the 'currencies'... The only CURRENCY that matters is what somebody will accept in return for a barrel of oil... Follow THAT notion where it leads... [even if it leads to no currencies being accepted at all]...

Tue, 02/25/2014 - 10:38 | 4474984 SWRichmond
SWRichmond's picture

"Currency" and "money" are two very different things.

To me, what China is doing is fairly obvious.  They are pursuing trade agreements to settle directly and avoid USD.  "We are an alternative to USD.  You should trust our currency.  Our central banks is aggressively acquiring gold, which we intend to use as backing for our international trade currency, IN MARKED CONTRAST TO THOSE OTHER GUYS".  In this way they grow the use of Yuan as trade / settlement currency, building volume in trade based on Yuan, getting the world accustomed to buying and selling Yuan, trading desks at international banks, etc. 

"When the value of our currency gets too high we will depreciate it enough to keep it plentiful enough for trade use.  We keep acquiring gold backing as the quantity of our currency grows along with its use."

Tue, 02/25/2014 - 10:43 | 4475032 HyBrasilian
HyBrasilian's picture

Yes ~ I agree... "Currency & Money' are two different things...

~~~

Which is why it's pointless to try and read any GOLD tea leaves out of currency fluctuations [debasement or otherwise]...

 

Now ~ If you forget about gold for a minute [which, under this this analogy is simply the 'buyer of only resort' for a barrel of oil], and focus only on the currency thing, then you'd have to wonder WHY any nation would ever really want a strong currency... All it does is reduce your export markets...

Sure ~ the US benefitted from 'petro-dollars' for many years [which, in the end, allowed it to sell worthless debt abroad & keep a ponzi alive for two extra generations]... But that PARADIGM is over now [& probably can't be repeated]...

 

 

Tue, 02/25/2014 - 10:58 | 4475086 fonestar
fonestar's picture

BITCOIN!!!!

Tue, 02/25/2014 - 11:02 | 4475109 HyBrasilian
HyBrasilian's picture

Last time I checked ~ China wasn't buying it's oil in BTC

Tue, 02/25/2014 - 11:17 | 4475198 RaiZH
RaiZH's picture

"WHY any nation would ever really want a strong currency"

A nation of mindless consumption?  


Also a noobie question: When do you think the yuan being used as the new trade currency backed by gold, is likely to be announced? After a global financial meltdown? And does that instantly mean China's debts are no more. 

Thanks. 

 

Tue, 02/25/2014 - 11:35 | 4475319 HyBrasilian
HyBrasilian's picture

Frankly ~ The evidence that China is buying gold is completely anecdotal [with regards to trying to apply that logic into any kind of DESIRE to introduce a World Currency backed by gold]...

 

But that's just my opinion [others prefer to be stuck in a box of 'linearity']... I stated above, a 'WORLD RESERVE CURRENCY' is an outdated modality... I'd argue a more FEUDAL outcome will result ~ Not 'Global'...

Tue, 02/25/2014 - 10:56 | 4475073 Johnny Cocknballs
Johnny Cocknballs's picture

yep.

Tue, 02/25/2014 - 11:13 | 4475171 flysofree
flysofree's picture

Trading currency requires host country to be net importer and global consumer, this is not what China is doing. China appears to want to have it both ways; that's support of their export industries by weakening yuan, offset by supposedly large gold purchases which are really miscue in size to GDP and global trade.

I am not aware of any country with currency reserve status in the past where its wealthiest citizens were running away like Chinese tycoons are, some 60% of its wealthiest former citizens have relocated.

In my opinion, those who lobby for China's supposed ascension to reach global reserve currency status are just gold pumpers.

Tue, 02/25/2014 - 10:30 | 4474980 Divided States ...
Divided States of America's picture

fonz, i have always had a thought in the back of my minds for the last couple of years (and might have commented on that too on ZH) that the final countdown to the apocalyptic end will be preceded by a final leg up of food commodities (necessities), gold (real hard assets) and stocks (worthless paper much like fiat but must be propped up to prevent this vacuum of wealth) all shooting up together right before the collapse. This is actually happening right now. and may eventually lead to a period of hyperinflation....which at that point,  most people's lives (except the 1%) get eroded and society breaks down leading to a break in the correlation of 1 between food/gold and stocks except this time stocks will finally nosedive all the while food/gold keeps soaring.

Tue, 02/25/2014 - 10:32 | 4474986 HyBrasilian
HyBrasilian's picture

don't forget 'ENERGY'

Tue, 02/25/2014 - 10:43 | 4475024 fonzannoon
fonzannoon's picture

Good stuff, and Hybrasilian is right about energy. Gold is leading other commodities higher. it's really strange and really interesting to see. I'm real curious to see if we are setting up for a smash down, or if this is the beginning of a strange turn in the soap opera.

Tue, 02/25/2014 - 10:51 | 4475052 Divided States ...
Divided States of America's picture

Yeah I forgot about energy, thx HyB for correcting me...its definitely between Food and Gold in terms of importance (as well as firearms)....actually WTI has been climbing up lately as well as Nat Gas though it could be more related to weather and speculation than anything else for NG.

Yeah the soap opera is turning weird...its like watching the father and his son-in-law having an affair or a soap opera where all the people are fat and ugly...just dont make any fuckin sense.

Tue, 02/25/2014 - 11:13 | 4475173 HyBrasilian
HyBrasilian's picture

@fonz/DS

 

Gold & silver prices aren't the things that keep me awake at night... What worries me most are the things that will become 'rationed' [or outright 'scarce' in terms of being able to obtain them]...

Of course, gasoline is high on that list [& although there are 'WAYS' to function around the problem... THERE IS NO SUBSTITUTE...

Same for many 'exotic' food items... Those that have become accustomed to 'diversity' in their diets ought to:

1.  Learn how to cook [a lot of their FAVORITE different things]

2. Stock up on the ingredients [with good shelf life] of things needed for those dishes... [Things like olive oil & other cooking oils come to mind]...

Tue, 02/25/2014 - 11:26 | 4475269 Divided States ...
Divided States of America's picture

Yup, I concur.

Water will be rationed....Canada has a ton of freshwater...as does Russia...more than what the population need... USA dont have the supply for the population.

Just look at Africa as proof.

Canada will have to help USA voluntarily or involuntarily, dont matter...but with the conservative leader Stephen Harper's hobnobbing and cocksucking of Israel...Canada will just follow the US like a lapdog if anything bad happens.

 

Tue, 02/25/2014 - 11:41 | 4475345 HyBrasilian
HyBrasilian's picture

Yeah ~ Water as well...

~~~

The concept of 'water rationing' doesn't bode well for the US [despite the fact that it has enjoyed rich farmland for the past century]...

- California is up s***'s creek [in terms of drought, levee malfunctions, & population growth

- The Ogallala Aquifer [which supplies most of the midwest with its agricultural water] is being drained at an alarming rate... It'll be long past my lifetime ~ but the American midwest is on a path to become 'Saharafied'

Tue, 02/25/2014 - 10:53 | 4475061 HungryPorkChop
HungryPorkChop's picture

One item which must happen before China would attempt to back their currency with gold is the derivatives need to go away.  It would be impossible to back a currency with something like gold when there is 50 or 100 pieces of paper for each 1 oz of real phyzzzz. 

Tue, 02/25/2014 - 10:38 | 4475009 NoDebt
NoDebt's picture

I don't know what to make of it myself, Fonz.

I think I'm just going to quote lines from Harold Ramis movies on ZH all day today in honor of Harold's passing instead of trying to figure out this complicated financial stuff.

"Hey, honey, how'd you like to make fourteen bucks the hard way?"  (Rodney Dangerfield from Caddyshack)

Tue, 02/25/2014 - 10:29 | 4474974 forwardho
forwardho's picture

Too true, but it is what they see happening if they don't take this fukn insane path that really ups the pucker factor for me.

 

Tue, 02/25/2014 - 10:03 | 4474900 Pool Shark
Pool Shark's picture

 

 

Begun, the Currency Wars have...

 

Tue, 02/25/2014 - 10:33 | 4474991 THX 1178
THX 1178's picture

They've been going on for 5 years now.

Tue, 02/25/2014 - 10:02 | 4474896 forwardho
forwardho's picture

I received a Majic 8 ball for christmas, it's a custom job.

No matter how you shake it, it comes up BUY!

Thanks for the chuckle.

Tue, 02/25/2014 - 12:52 | 4475719 Dubaibanker
Dubaibanker's picture

Quick...someone please tell these people who have poured in USD 222bn or CNY 1.36 trillion into China's currency since Aug 2012 when it was first allowed that they are all fools.

http://news.xinhuanet.com/english/china/2014-02/19/c_133127980.htm

While the French Govt is busy preparing some interesting charts suggesting foreigners are falling over each other to buy CNY and creating more liquidity and depth and buying yuan deposits.

https://www.tresor.economie.gouv.fr/File/396212

While both Nigeria and Zimbabwe are setting a trend by buying the yuan from Africa so why shouldnt we?

http://wallstcheatsheet.com/stocks/the-chinese-yuans-importance-is-growi...

And, China's currency is the ONLY currency in the world, aside perhaps from the volatile GBP and EUR that has appreciated 10.89% from Feb 25 2009 until today Feb 25, 2014 at 6.1059, when it was 6.8289 on Feb 23, 2009.

And China keeps opening up to allow both inflows and outflows to create a stable system.

http://www.globaltimes.cn/content/843332.shtml#.UwyzInnZf1p

Just today allowed borrowed money from abroad to enter China.

http://www.china-briefing.com/news/2014/02/25/shanghai-free-trade-zone-allows-offshore-rmb-borrowing.html

First individual to remit overseas without any questions: http://www.theasset.com/article/26112.html#axzz2uLZbAFsg

Sweeping money in corporate accounts has started from onshore to outside China: http://www.ecns.cn/business/2014/02-21/101910.shtml

http://www.thecorporatetreasurer.com/News/373214,shanghai-ftz-alive-with-new-cash-programmes.aspx

Foreign countries keep begging China to allow them to accept yuan deposits and settlement in their own countries, but only Australia, HK, Singapore, HK and Taiwan have thus far been allowed.

http://www.theaustralian.com.au/business/economics/asx-boc-in-yuan-payment-venture/story-e6frg926-1226828788978#mm-premium

Daily movements in the price of ANYTHING are just a reflection of the changes occuring in demand and supply or interest rates or trade or whatever else that impacts a currency, it does not mean, that things are going to fall apart.

Stay away from Chinese currency at your own risk, IMHO. It shall continue its rise regardless and notwithstanding the impact on exports which are reducing as a percentage of GDP. China peaked at 39% of its GDP as percentage of exports in 2006 and last year in 2013 was only 27% of its GDP which means while maintaining a 7.7% growth in GDP, their domestic consumption is rising even more rapidly giving further strength to its currency. 

http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS

This is what the US Congress and various trade representatives look at: https://www.fas.org/sgp/crs/row/RL33534.pdf

Inspite of the RISE in yuan over the last 5-10 years, their exports keep RISING as well, which should ideally be reducing with an expensive currency.

https://www.fas.org/sgp/crs/row/RL33534.pdf

Tue, 02/25/2014 - 17:06 | 4477211 ptolemy_newit
ptolemy_newit's picture

Quick...someone please tell these people who have poured in USD 222bn or CNY 1.36 trillion into China's currency since Aug 2012 when it was first allowed that they are all fools.

OK as fast as I can!

“While the French Govt is busy preparing some interesting charts suggesting foreigners are falling over each other to buy CNY and creating more liquidity and depth and buying yuan deposits.”

The French are behind/late to see the trend switch

“While both Nigeria and Zimbabwe are setting a trend by buying the yuan from Africa so why shouldnt we?”

Why should they pay middle skimming bankers for every trade, it’s not about reserve currency desires.

“And, China's currency is the ONLY currency in the world, aside perhaps from the volatile GBP and EUR that has appreciated 10.89% from Feb 25 2009 until today Feb 25, 2014 at 6.1059, when it was 6.8289 on Feb 23, 2009.”

That was the result of a weaker dollar and escalating WTO friction.

“And China keeps opening up to allow both inflows and outflows to create a stable system.”

This is to increase GDP!  The cost of having export offices that ONLY can trade outside of the country was inefficient.

“Just today allowed borrowed money from abroad to enter China.”

 “First individual to remit overseas without any questions:”

”Foreign countries keep begging China to allow them to accept yuan deposits and settlement in their own countries, but only Australia, HK, Singapore, HK and Taiwan have thus far been allowed. ”

China travel, shopping and the new landing visa’s for Chinese in 38 countries.

 

”Daily movements in the price of ANYTHING are just a reflection of the changes occuring in demand and supply or interest rates or trade or whatever else that impacts a currency, it does not mean, that things are going to fall apart.

Stay away from Chinese currency at your own risk, IMHO. It shall continue its rise regardless and notwithstanding the impact on exports which are reducing as a percentage of GDP. China peaked at 39% of its GDP as percentage of exports in 2006 and last year in 2013 was only 27% of its GDP which means while maintaining a 7.7% growth in GDP, their domestic consumption is rising even more rapidly giving further strength to its currency. ”

The World Bank is not telling you the truth!  All the central banks of the world are fighting deflation and will LOOSE!  There will be a reset of debt worldwide.

Inspite of the RISE in yuan over the last 5-10 years, their exports keep RISING as well, which should ideally be reducing with an expensive currency.

Your forgetting that the low value textiles production will move to other Asean, African countries as the Yuan appreciated in the past.  The move to higher end complex products can NOT grow with the current state of quality.  If it`s not cheap it better be good.

 

The Yuan has finished apppreciating for the next 5 years, the outflows will continue.

Tue, 02/25/2014 - 09:55 | 4474870 Josephine29
Josephine29's picture

Yes I was reading some analysis about the decline in the Yuan yesterday. But also something rotten is going on in the Copper and Iron Ore Markets in China. And yes the shadow banks are at the bottom of it.

http://www.mindfulmoney.co.uk/wp/shaun-richards/chinas-shadow-banking-se...

 

What could go wrong?

Tue, 02/25/2014 - 10:06 | 4474906 Pool Shark
Pool Shark's picture

 

 

Whatever the Chinese CB is doing, it appears to be working:

http://timiacono.com/index.php/2014/02/24/all-the-home-prices-in-china/

Is it possible the Central Bank of China can do what the fed never could?

 

Tue, 02/25/2014 - 10:12 | 4474919 sessinpo
sessinpo's picture

If you tell me you are joking, you'll get a thumbs up

Tue, 02/25/2014 - 10:28 | 4474971 Skin666
Skin666's picture

Central planning has never worked, and will never work...

 

It's a waiting game is all...

Tue, 02/25/2014 - 10:18 | 4474877 Johnny Cocknballs
Johnny Cocknballs's picture

gotta keep their crap cheap enough for walmart employees to buy.

I wonder how much gold they will buy next month....

-----

OT

The geopolitics of the Ukrainian conflict: back to basics
Tue, 02/25/2014 - 09:58 | 4474879 semperfi
semperfi's picture

"there is clear evidence that the PBOC is intervening"

so yer tellin me that pegging CNY to USD is not "intervening" ??

Tue, 02/25/2014 - 09:59 | 4474885 youngman
youngman's picture

But how can they become the new world currency if they keep dropping the value of it...isnt that the USAs job...

Tue, 02/25/2014 - 10:02 | 4474888 Dr. Engali
Dr. Engali's picture

Currency wars lead to trade wars which lead to hot wars. Your move Yellen.

Tue, 02/25/2014 - 10:10 | 4474914 HyBrasilian
HyBrasilian's picture

Bring on the cheese!

Tue, 02/25/2014 - 10:25 | 4474961 adr
adr's picture

You actually need to have trade to have a trade war. Last time I checked nobody is buying anything anywhere.

Tue, 02/25/2014 - 10:03 | 4474897 Cognitive Dissonance
Cognitive Dissonance's picture

Elevator Operator to heads of Central Banks at G-20 conference.

"Going Down?"

Central Bank heads (in unison). "Yes!

Tue, 02/25/2014 - 14:12 | 4476356 RaceToTheBottom
RaceToTheBottom's picture

Race to the bottom is presently the only Race in town

Tue, 02/25/2014 - 10:05 | 4474905 yogibear
yogibear's picture

Eventually it gets ugly. Round-robin currency devaluation until someone's fiat turns into toilet paper.

Tue, 02/25/2014 - 10:18 | 4474939 HyBrasilian
HyBrasilian's picture

It's the cheese[steak] shuffle ~ HUH!

Tue, 02/25/2014 - 10:24 | 4474958 adr
adr's picture

Anything made for an intelligence level higher than retarded chimp flies over the heads of the millennial generation.

"Everybody cheesesteak, cheesesteak, cheesesteak. Cheesesteak, cheesesteak. Cheesesteak shuffle."

Yes that is a commercial to sell auto insurance. Where the fuck am I?

Tue, 02/25/2014 - 10:35 | 4475001 HyBrasilian
HyBrasilian's picture

  "Where the fuck am I?"

~~~

In a prison... Securely walled off from the metaphor...

Tue, 02/25/2014 - 10:57 | 4475083 HungryPorkChop
HungryPorkChop's picture

Long printer ink and double ply.

Tue, 02/25/2014 - 10:12 | 4474920 Orly
Orly's picture

Wow.

ZeroHedge right on top of the meltdown of China story.  Let others review the history books later.  We have a front-row seat and get to watch it in real time.

Outstanding work.  I greatly appreciate it.

:D

Tue, 02/25/2014 - 10:20 | 4474948 Johnny Cocknballs
Johnny Cocknballs's picture

hold that thought, Sparky.

Tue, 02/25/2014 - 10:12 | 4474921 sudzee
sudzee's picture

Lower Yuan to take the steam out of lower Yen.

Tue, 02/25/2014 - 10:20 | 4474945 konputa
konputa's picture

sudzee nailed it. My thoughts exactly.

Tue, 02/25/2014 - 10:13 | 4474923 Apostate2
Apostate2's picture

Just wait until the Fed raises rates. 

Tue, 02/25/2014 - 10:13 | 4474924 The Final Straw
The Final Straw's picture

Eat more dog (and cat)!

Tue, 02/25/2014 - 10:30 | 4474946 El Hosel
El Hosel's picture

Viva $Gas Vegas

http://finviz.com/futures_charts.ashx?t=NG&p=d1

Trading Range $4.60 to $6.40, daily non-stop roundtrips flights.

Tue, 02/25/2014 - 10:25 | 4474960 dontgoforit
dontgoforit's picture

let 'em eat cat-cakes

Tue, 02/25/2014 - 10:19 | 4474942 adr
adr's picture

All I know is everything is getting more expensive and incomes are falling. So even 2% inflation becomes unbearable. After previous periods of high inflation incomes rose to cover the increased cost somewhat. Not this time. Since the multinationals control nearly the entire US economy, and most of the jobs aren't essential to the production of goods, US workers aren't relied on for profit. So there is no need for high pay and the corporations are hoarding the money that would have gone to workers.

The cost of food, energy, and taxes keeps rising taking a larger chunk out of people's pay. Ten years ago a young family could get by on a $35k job. Now just food and gas eats up the take home pay of a $35k a year job. Even making $60k a year barely nets you enough money to scrape by. In alot of places even $100k a year can only get you into a studio apartment.

Thanks to the central banks the new poverty line is what would have been considered an upper middle class salary a decade ago. I know a lot of people who made more money in 1985 than 2014. The manager of an outlet store I worked at in 1992 made $35k a year, the same job at the same store today pays $25k. That $35k job in 92 gave that guy a good living, $25k in 2014 puts you into absolute poverty.

Tue, 02/25/2014 - 10:27 | 4474968 dontgoforit
dontgoforit's picture

I am one of those who made more in 1985 than 2014 - and that's in gross $$, not inflation adjusted.  However, the dog died, the kids grew up, moved out and got married.  We're hanging on pretty good so far.  Retirement is only a few steps away.  We may head to Belize or Costa Rica.

Tue, 02/25/2014 - 10:46 | 4475037 buddybear
buddybear's picture

Median individual income in the U.S.A. is 26,000 and some change. Median household income is somewhere around 53,000. That means there are just as many making less than are making more. We are a lot closer to the edge than folks think. Many of us will struggle, but, we will be okay because we saw the handwriting on the wall and moved to a place where we could be more self sufficient. If you really believe the ship is sinking you need to get to your lifeboat now. Use your fiat now before it's too late. If the commentors on this site believe what they are saying they would be out of the casino and in their life boat. I am going to go turn the garden under and leave you with it this morning.

Bear

Tue, 02/25/2014 - 14:17 | 4476394 translator zero
translator zero's picture

Your numbers ring true, and are sad.

Except for "inflation." The headline price inflation the government likes circulating in corporate controlled media is complete fiction. The "C" in CPI stands for consumer, yet CPI neglects food, energy and eduction. CPI is about all that other consumer stuff.

Using the government's own methodolgy before it cooked CPI even worse puts price inflation at around 10% for the last 10 years. That explains why $35k 10 years ago is more (in real dollars) than $60k today.

http://www.shadowstats.com/alternate_data/inflation-charts

 

Tue, 02/25/2014 - 10:25 | 4474963 Seasmoke
Seasmoke's picture

Good as Gold. 

Tue, 02/25/2014 - 10:26 | 4474965 Dull Which
Dull Which's picture

If you have an hour, and can tolerate the annoying Robert Peston....

https://www.youtube.com/watch?v=YW3h4wv8_ko

 

Suggesting a happy ending is unlikely

Tue, 02/25/2014 - 10:39 | 4475014 IridiumRebel
IridiumRebel's picture

Obviously gold should shit the bed and tank....you know, cuz currencies are being urinated on by everyone on the planet.

Tue, 02/25/2014 - 10:43 | 4475031 sudzee
sudzee's picture

Lower yuan will bail out massive stockpile of inputs/related financing.

Tue, 02/25/2014 - 10:45 | 4475034 Sweet Chicken
Sweet Chicken's picture

Black Swan wrapped in a False Flag headed our way.

Tue, 02/25/2014 - 11:09 | 4475147 Iam Yue2
Iam Yue2's picture

Wang Tao, chief China economist at UBS.

"The shift away from the previous steady pace of appreciation could unwind 'hot money' inflows."

China's export performance is likely to fluctuate in the first quarter, Shen Danyang, spokesman of the Ministry of Commerce, told a news conference on Monday in Beijing.

"Because of seasonal factors, including the Lunar New Year festival, China's exports in the first quarter of this year will probably see some fluctuations, and we can't rule out the possibility that February trade figures will show an abnormal change from last year."

"However, we should be clear that the export surge doesn't necessarily indicate favorable times for Chinese exporters. A recent survey showed that many exporters, especially small and medium-sized enterprises, are generally having a hard time because of narrowing profits," Shen said.

Wan King, Senior Economist at Fukuall Bank said;

"It is clear that the Group think, and confirmation bias that saw the appreciation trend of the Yuan as being unstoppable, has come unstuck in no uncertain manner. This is the first shot in the new currency war, and it will only be a matter of time before South Korea and Taiwan are forced to retaliate."

Tue, 02/25/2014 - 20:36 | 4478177 Ancestor
Ancestor's picture

"All your reserves are belong to us"

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