Spot The China Liquidity Crisis

Tyler Durden's picture

Presented with little comment aside to ask, if everything's so hunky-dory over in China then why, on the first day in a while that the PBOC decides not to conduct repo operations (i.e. inject a bucketload of cheap money), does the 7-day repo rate (the cost of borrowing money) spike to 6-month highs? (Hint: it's a rhetorical question)



Simply put - you can kiss goodbye any hopes of China ceasing its exuberant credit creation... (especially now that the CCFD ponzi scheme has been exposed via Qingdao -and drastically reduced that channel). Reforms are all talk and the bubble will just grow bigger with fewer and fewer attractive outlets for that hot money (now that the US real estate transmission channel has been identified and likely closed)... cue real inflation.

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TheRideNeverEnds's picture

nice, this should be good enough to goose the market up another few percent this week.

RSDallas's picture

Sorry, but there will always be tulips. 

NoDebt's picture

"Simply put - you can kiss goodbye any hopes of China ceasing its exuberant credit creation..."

Whew!  I was a little worried there for a while.

logicalman's picture

The pressure in the balloon keeps rising.....

The financial world puts its fingers in its ears.


NoDebt's picture

As a side note, I'm not so sure the "US Real Estate transmission channel" has been closed.  Yes, it's been identified and the Chinese government clearly supported it.  But I don't recall any strong statements about it being closed by the government.  I remember them announcing it.  And I remember them quickly yanking those stories down.  But CLOSE?  No, I don't remember anyone saying anything definitive about closing them.

Sounds more like they were advertising their existance than launching into a shut-down posture.

logicalman's picture

Why would the Chinese government close this channel, when they and their families are mostly the ones using it??


NoDebt's picture

AND it's an important avenue for them to export the inflation such policies would otherwise create.

Multiple reasons for them to keep that channel open.  It serves many ends.  Which is why I suspect they WILL keep that channel open.

Amish Hacker's picture

Realtors in Vancouver will insist.

Dr. Engali's picture

Sorry, what was that you were saying? I couldn't hear you over all the chaos and distractions going on around the world.

Soul Glow's picture

That's just transitory noise.  Buy some Chinese made goods, pilgrim.

Soul Glow's picture

Everyone needs credit expansion of at leats what inflation is running plus whatever nominal gains in GDP is.  There is your growth expamsion.

buzzsaw99's picture

why, on the first day...

one day, that's longer than the fed qe taper will last. lulz

jonjon831983's picture

He who pops first gets the blame in the debt game?

jubber's picture

HANG SENG FUTURES UP 500 POINTS!!!!!!!!!!!!!!!!

IllusionOfChoice's picture

If they really do close the real estate loop hole, it may lead to more gold buying. We haven't seen an update to that graph in a while Tyler. I have a feeling it would lead to buying outside China though.

I'm seeing a teller window at the NY Fed, Bernake is standing behind it handing out gold bars to a line of Chinese citizens that flew in for the day thinking 'I always liked this part of the job better anyway'.


orangegeek's picture

this is getting better by the day


Europe is up near 1% - which is just excellent


Make things go higher uncle yellen, make them go higher

AdvancingTime's picture

A false economy does have risk. For years the people of China had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has flowed into shadow banking and drifted towards housing.

This has driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More on this subject in the article below.