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Goldman's Take On China's "Stealth QE"
From Goldman's Yu Song:
Domestic media (Sina) reported that the PBOC conducted RMB 500bn of Standing Lending Facility operations with the big 5 commercial banks (ICBC, BOC, BoCOM, CCB, ABC). The reports note that the duration is 3 months and the RMB 500 bn is evenly split among the banks. This amount is roughly the same as a 50 bps cut to RRR for the whole banking system on a static basis (though the impacts of RRR cuts tend to be larger because they have ongoing effects).
There is no official confirmation from the PBOC yet. Still, such an easing would be consistent with our expectation that (1) monetary policy will loosened amid the drastic slowdown in activity growth and falling inflation, and (2) full scale RRR and interest rate cuts are unlikely because they would be viewed as aggressive stimulus (see China: Sharp slowdown in activity in August, September 14, 2014).
We expect monetary conditions to loosen modestly, which will provide some much needed support for demand growth. Other policies may follow. Front-loading of fiscal expenditure is one possibility--a disproportionate share of fiscal outlays (close to 20%) occurs in the last month of the year-- and could reduce recurring criticism of the year-end rush to spend. The government may also step up pressures on government agencies and local authorities to maintain momentum on investment growth. However, we see no indication of these measures yet.
Given policymakers have shown a willingness to loosen in the face of weaker data, we believe growth will rebound in the coming months and the government will be able to reach the "around 7.5%" full year GDP growth target for 2014 (after positive effects of the expected GDP methodology adjustment to include R&D).
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It will rebound... for one quarter (helped no doubt because as Goldman also explained previously "China Will Revise Its GDP Definition Until Its Hits Government "Growth Targets"), then tumble once more as we explained yesterday in "Why China's Latest Mini-Stimulus Failed Again, In One Chart" thanks to the magic words: "Credit Impulse"
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cuz QE is so damn effective.
translation.....The PBOC took our advice
Yu Song is bullshit!
Mi Song es da truth
ps: fuck Goldman
The country that brought you the largest QE in the history of the world (China, not the US) finding it's tough to exit the liquidity trap.
The Fed will learn this, too, probably sometime next year as they raise interest rates and find, much to their chagrin, the whole fucking mess starts to slide off the table again.
Then next reserve currency?? Big deal 80 billion US$ split by 5 banks. 16 billion per bank. FED used to do that in a month. That should surly keep them solvent for another ..........., never mind they already need another 500 billion more.
One day, in the not so distant future, gold will call out all the printers
and take them out to the woodshed. That day will be the beginning of
a new world order of honest money. God help us survive the transition.
It's only $81B.....that ain't QE, folks. It's just small time printing of slush to paper over the worst loans
Listen. Let's not "IGNORE" the elephant in the room. "CANCER" is your Mercedes-Benz, 'merica. Your reward for being an obedient slave to your master. And now he want's "YOU" gone.
I thought cancer was our Jamie Dimon. But if you say it's our Mercedes Benz, well, I guess we're gonna drive that bitch all around town until the wheels fall off.
"Lord, won't you buy me a Mercedes Benz. My friends all drive Porsches, I must make amends."
Heh heh. I actually have no fucking idea what your comment even means. But thanks for the laugh.
Clearly the "tumor" is made of many cells and Jamie is one of them. But this cancer spread a long time ago and is systemic now.
Are you related to ORI Bangalore ?
The problem of throwing around the term Full Retard too easily is that when Full Retard arrives we do not stand in awe as we should.
come on people, China needs our help. Buy more iCrap.
iWillnot
i never paying £20 for a Iphone charging cable (without plug) ever again.
You think this is to help China?
hahahahahaha....... Good1.
QE, why does every nation on earth see this type of intervention into free markets as necessary? I assume it has to do with the political power of banks and their demands for stealth bailouts and garbage asset purchases. Really, how hard is banking, a monkey can play the spread between deposit interest and loan interest and be profitable. Plus they can create money and access ZIRP, YET they are always in over their heads. Too smart by half thos banker wankers. "Off with their bloody heads!" Henry VIII King of England and France.
There is also the angle of international hot money flows.
When everyone else is printing, if you don't print a little, all the hot money is going to come flooding to your shores, shoot up your inflation, drive up your RE prices, blow up your credit bubble, whilst their propaganda media point the finger and laugh at you for crashing your economy even though the real culprit is an overflow of western printed liquidity.
That's the simple view from China's side.
that said, I don't really buy this is really 'QE' per se yet, stealth or no stealth.
If it is carried out as stated: a temporary loan facility for the duration of 1-3 months that has to be paid back at the end of 1-3 months, then it's more temporary lube that will disappear after the job is done than permanent liquidity that will stay in the system forever.
Unless it is not paid back or rolled on at the end of each 1-3 months, then I'll accept it is stealth 'QE', but until they do that, atm this is just elbow grease to keep the cogs turning.
"full scale RRR and nterest rate cuts are unlikely becuase they would be viewed as aggresive stimulus"
WHO really thinks the PBOC gives a fuck as to whether their stimulus is viewed as aggressive?
Mainlining RMB500B isn't exactly passive.
I smell smoke...
As another poster noted, the PBOC does not have to work under the guise of a dual mandate. They can just say we are printing pretty much because we want to. Kind of refreshing.
Just think: There's reason to believe we have yet to even approach "Ludicrous Speed" on this sucker.
>Mainlining RMB500B isn't exactly passive<
It ain't nearly enough to fix stupid:-)
"Pissing in the well, throwing good money after bad, pulling on a loose thread, penny wise and pound foolish, throwing the baby out with the bath water, burning the roast to cook the pudding, cutting off your nose to spite your face..."
If I'd been able to give you more than one up vote I would have!
DavidC
Status Quo provisioning the castle keep
This is like playing a game of monopoly where each player has their own bank printing new money as needed. You are not a player however and have to buy your necesities from a few printed bills tossed your way. How this ends is pretty obvious.
Yeah, with price controls. Even the Monopoly guy knows that the prices are printed on the board and haven't changed in 80 years. So each player having their own bank would be very handy.
Go read the rules about how the situation is handled in the game if the Bank runs out of money. In fact, you could consider it a homework assignment of sorts.
F-it. I know nobody will so here's the rule:
"The Bank "never goes broke." If the Bank runs out of money, the Banker may issue as much as needed by writing on any ordinary paper."
Ring a bell? Remember, the game was invented in 1933.
KEEP THE SPEEDBALLLS COMING!
America will die in its sleeep.
"Goldman's take" always sounds like "the global terrorist's take" these days.