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Wall Street Responds To China's QE: Beijing Finds Lack Of Faith Disturbing
China warns "the outside world doesn't get it, we do," in a statement related to the "stealth QE" they unleashed yesterday, noting investorsd "do not realize that today's Chinese economy is moving towards "new normal" in the process," and "need to accept the volatility of economic data," during this transition. Crucially, PBOC adviser Chen Yulu clarifies what Western central banks simply cannot grasp: "Hoping for stimulus policies in the face of increased economic pressure is short-sighted and does no good to long-term economic development," warning investors should not expect "strong stimulus." Wall Street is less than exuberant about the liquidity injection, as the impact on real economy may be limited due to lenders' risk aversion.
China should stick to prudent monetary policy even as its economy faces “relatively large” downward pressure, Xinhua reports, citing PBOC adviser Chen Yulu.
- China should not cut interest rate as long as it can avoid it, Chen says
- China has plenty of fine-tuning tools to maintain M2 growth at about 13%
- China shouldn’t adopt “strong stimulus,” Chen says
- China has targeted RRR cut, open market operation tools
- Chen hopes China can introduce deposit insurance by year-end
Calls for stimulus policies including interest rate cuts following negative economic data suggest a lack of faith in China’s reform efforts, Xinhua News Agency said in an unsigned commentary in Chinese yday.
- Hoping for stimulus policies in face of increased economic pressure is short-sighted and does no good to long-term economic development: Xinhua
- China has enough tolerance and policy tools to deal with economic slowdown: Xinhua
And Wall Street, while happy it happened in the short-term, is less sanguine about the impact in the future... (via Bloomberg)
PBOC’s reported liquidity injection is aimed at addressing seasonal swings in cash availability, while impact on real economy may be limited as lenders turn risk-averse, analysts say.
Haitong Securities:
- Monetary easing is moving in the “wrong direction”; quantitative easing so far this year has yet to bring down borrowing costs
- PBOC should still lower interest rates to spur investment and consumption
UBS:
- PBOC is likely preempting a seasonal surge in demand for cash, especially since recent increase in FX inflows has been poor despite record trade surpluses; may also aim to buffer negative impact from recent CBRC rule on deposit deviation
- Liquidity provided to five big commercial banks that are less constrained by loan-deposit ratios would make it easier to increase credit supply across the board
- Interest rate on standing lending facility likely in 3.5%-4% range
- Liquidity injection may have little impact on continued property downturn, excessive industrial capacity and weak business outlook
Barclays:
- Targeted easing measures since June provide PBOC more flexibility and control in managing monetary conditions and offering short-term liquidity, but impact on real economy and targeted sectors is limited
- Measures may not arrest growth moderation; still sees rate cut inevitable in coming quarters, likely 4Q 2014-1Q 2015
China Merchants Bank:
- Given rising risk-aversion among lenders, liquidity injection may not motivate them to lend
- SLF may be authorities’ last attempt to test new policy measure instead of easing via conventional tools; if it fails to achieve expected results, they may introduce more broad-based easing
- Rate cut would be a more effective tool; will also provide more stable environment for reform
Citic:
- Move avoids being too aggressive in easing while funding support may come from likely jump in fiscal spending in December when SLF expires
- Tenor of SLF means money more likely to be invested in bonds rather than off-balance-sheet lending
- Rate cut may not be good option; limited rate tool means cut to current benchmark rate may trigger outflow of liquidity from banking sector
Guosen Securities:
- Move may be aimed at providing liquidity before end-Sept. IPOs and likely seasonal cash squeeze; use of SLF instead of reverse repos shows PBOC wants to avoid sending a “too-loose” signal in its monetary stance
- Putting cash into big lenders’ pockets is a way of pushing commercial banks not to hoard cash; big banks are likely to buy more long-end bonds to help push down funding costs
Nomura:
- Size of injection equivalent to broad-based RRR cut of 50 bps, and this is the first time PBOC has used SLF since Feb.
BofA:
- “A slew” of other easing and stimulus measures may be announced in coming weeks, likely including lowering mortgage rates and easing the loan-to-deposit ratio
- Chances of universal RRR cut or rate reduction have shrunk, especially given a Xinhua article saying that calls for a rate cut suggest a lack of trust in reforms
- If news of injection confirmed, bonds may rally and swap curve will go down, especially front end
- While this injection is bigger than the SLF conducted in the first quarter of 340b yuan, considering upcoming IPOs and the national holiday, the immediate liquidity impact may not be as big as it seems
Credit Agricole CIB:
- Targeted measures may be capping rates, and impact is likely to be seen more at front end of swaps, while any reaction on tenors beyond two-year may not be sustained
- CNY repo-IRS curve is likely to steepen across 1-2 year or 1-3 year segments
* * *
As Chen concludes:
"Strong regulatory reform + clever" policy model is becoming the new normal in China's economy to maintain the development of "stabilizers" to achieve China's promised steady growth, pro-reform, structural adjustment, benefit people's livelihood.
* * *
It appears Iron Ore prices are not buying the exuberance...
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Says the pot to the kettle.
I AM YOUR QE FATHER
Nooooo! That's impossible! I don't believe you!
Ya know, it's been a while since I had that "I feel like I'm taking crazy pills" reaction to a story, but this one did it for me.
Can't have no deflationary iron ore prices.
Need a good war to boost demand for it.
Yeah, that'll be a lot better.
Communist officials are just as corrupt and greedy as banks, so maybe China's reaction is just part of the charade. Otherwise, how is a group of thieving greedy thugs surprised that another group of thieving greedy thugs is doing things that make them mo money?
It goes much deeper than that. The Chinese oligarchy has a direct line to the U.S. Treasury and Fed. They are working with American oligarchs to insure that the world works for Chinese wages, period.
I laugh when I hear idiots say, "but the Yaun is pegged to the dollar"...
stupid fucks.
QE will never work and is bad for reforms so that's why we do it, and that's also why you westerners are stupid for doing it?
Did Google translate drop the ball on this one, or is this guy just retarded?
I mean if you need a reason for why China's economy is going to take a big fat dump, just look who is running the show, Mr "chin" almost makes yellen look sane by comparison.
"I AM YOUR QE FATHER"
If Yellen plays Princess Lay-me in this movie, I'm asking for a refund.
I feel a disturbance in the farce.....
Um, speaking of faith, Florida schools are now stuck distributing 'Satanic activity books':
http://tinyurl.com/kmqemyh
Their government, which is interested in furthering the future of their country, is charge of their banks; our banks are in charge of our government, which is not interested in furthering the interests of our country? Did I get it, or not ?
It all works great......until it doesn't.
<Faith and belief you can believe in.>
The west should take a lesson, as the Chinese do not make these statements lightly. The Chinese view things long-term, unlike the west who are trying to hold things together for another quarter. Market dominance is moving to the east.
right, and the yuan is "pegged" to the dollar...
good luck with that. It would appear that greed and tyranny is similar the world over. My contrarian view is that the Chinese do not want the transparency that would come along with holding the world's reserve currency.
Or as pointed out in an article yesterday about the hot money that flowed after China's last QE in July.
I love the people who proclaim without doubt that we are in a recovery, but major economies are cutting interest rates (ZIRP & NIRP), QE's all over the major economies, jawboning in the new normal. Even tapering people celebrated it, but why would we celebrate that we needed it in the first place and why are people cheering when we are still printing money... Which obviously means something is still wrong.
"Having a problem with your droid?"
"No, no problem. Why?"
"You know my people could fix that for you."
"No, no thanks, Lando. Chewwie can handle it."
30+ years ago even...
Everyone is doing it, so it must be ok.
I look just like that guy, WB! Well, I have the same eyebrows, anyway.
Kung Fu theatre - every Saturday afternoon back in the 80's. Used to be my favorite...
Yes, and quite similarly, that prick will NEVER be forgotten.
"Many bubbles reduce your net worth.
Many pricks snatch your Viagra"
Ok, let me explain this again, how the current system works:
- Commercial banks like your corner bank branch creates 97% of reserves by monetizing real output of the economy, both goods and services
- Federal Reserve (central bank) creates ONLY EXCESS RESERVES to meet funding shortfall between commercial banks.
So, if Bank of America needs $20 billion to cover shortfall to other banks, then Fed provides it by buying bonds from BAC
Which means that $4 trillion printed by the Fed are simply funding shortfall Primary Dealers had due to losses of derivatives and still ongoing.
Fed simply is covering derivative losses. This has got nothing and absolutely nothing to do with the real economy or economic expansion.
Same with chinese central bank. They are simply monetizing pyramid schemes in china which are properties of politburo and communist elite.
Nothing else.
UNDERSTOOD?
Summary:
- Fed (or any central bank) creates excess reserves to monetize losses of banks
- Commercial banks create most of reserves by monetizing the real economy
UNDERSTOOD?
Monetize this motherfucker...
Such "let them eat cake" monetary experiments have been performed before, this time will end no differently.
Well, except there will be no Guillotines. Or are you expecting otherwise? ;-)
Yes, there will be guillotines.
Saudis already saying they are cutting oil output.
In reality, Saudis ultimately decide monetary policy along with Pentagon, their defenders.
that's so late 1700's... ..try to be more innovative.
Exponential equations are a real bitch, especially when it comes to the calories that are required to simply maintain a high standard of living, let along grow that standard of living or spread "democracy" around the world.
Yeah but that ain't exactly targeting the 'right' group is it?
Chaos is funny like that. And chaos is what you get when essential supply lines break. However, I have most certainly been keeping a list of the local leadership over the last 20 years. This is where my tribe and I will start. I suggest you do the same.
Ah, okay, tracking... The ramifications of the coming dislocation will be substantial, but the people you believe caused this will not be party to any windfall and will be right back inline with the general populace. That kind of fall is significantly more painful than what you could (illegally) mete out on your own. I've got my tub of popcorn and beer at the ready as we are approaching the climactic ending; should be quite entertaining.
Again, my point was more to the fact that no man is an island and a dependable tribe is it's own sort of capital. Capital is what builds real wealth, not fiat paper.
Yes, entertaining indeed, but is there not real value in entertainment as well?
Hollywood certainly would be evidence to that...
shots on heads will be fired, if not unwound.
I really thought bank lobby would surrender just with "suicides"
They didn't.
Well.................guillotines, as you say
I prefer nice public hangings because you can easily build a gallows that can handle 10 at a time and make it a team event. ;-)
Easy Peasy; aka Scam Sham!
ekm1
How much more than 4 trillion will be needed? We did not rid the system of all these lousy derivatives, but by keeping interest rates near zero the past 5 years, I think they did not all blow-up at the same time. Do the derivatives expire after a certain date, hence no losses materialize? Did new ones get created that still will fail once we get a normalization of interests rates (if that will ever be allowed to happen)?
I am not knowledgeable in these matters and interested to hear your explanation.
There are $1.4 QUADRILLION right now.
Even after netting out, it'd be absolutely impossible to cover them without a warld war 3.
There will be elimination of insolvent oligarchs who own financial assets, not real assets in order to extinguish $10 trillion or more.
INEVITABLE
Otherwise, world totally abandons USD and it's misery and wars
In other words, there are real trade balances that need to be resolved. Paper bullshit cannot be used to settle such things.
bullets
accurate to some degree only.
CHINA HAS GOLD IN ITS VAULT, WEST has ZERO! NOTHING, VOID, EMPTY, NIL.
WSHF people will ask why should I believe in this FIAT? China, Russia and the BRICS will say, boom open our vaults. Here is why, all that yellow shit and we will now demoninate all circulated fiat to as a claim to a certain amount of GOLD/SILVER.
US will try this (fake deep storage gold/silver) and within a week, no one can redeem shit. GAME OVER!
It is ironic that communism is known for propaganda and now gives the only resemblance of truth.
Queen finds lack of faith in her subjects disturbing:
Twitter Suggests Scotland Is Going SoloKaro Moilanen, a visiting academic at the university, has dissected more than 1 million tweets in the past month. The "yes" campaign has generated more than 782,000 missives, compared with 341,000 for those backing the "no" movement. Both camps saw a dive in activity yesterday, though those backing the Scottish nationalists were still twice as active as the unionists:
There are two potential conclusions. Firstly, as I wrote on Sept. 15, the framing of the referendum question -- "Should Scotland be an independent country?" -- skews toward people's psychological bias to accentuate the positive rather than the negative. Tweeting happy "yes" thoughts comes more naturally to us than typing glum "no" opinions. According to Moilanen:
Secondly, the eligibility of 16- and 17-year olds living in Scotland may skew the Twitter analysis, since the young are more likely to be using social media than their elders.
Still, that distortion may also be important to the vote. The most recent opinion polls show the "no" campaign leading with about 52 percent, compared with 48 percent for the "yes" group when undecided voters are excluded. That makes the vote too close to call given the margins of error involved and the inherent imprecision of opinion polling. So the excitement of those young Twitter users, voting for the first time, may just determine the fates of both Scotland and the U.K.
http://www.bloombergview.com/articles/2014-09-17/twitter-suggests-scotla...
I wish the PBOC would have their press conference already - opening the gold vaults to show their 13,000 tons or whatever it is... C'mon December Harvey Organ...
And how well have the economies that have taken the advise of the SO CALLED BANKS/EXPERTS????
ALL FARKED! IN A HOLE WITH DEBT.
Have to be a moron to believe what these banks advise. THEY DON'T GIVE A SHIT AS LONG AS THEY GET THEIR FEES AND THEIR DEBT!
Ah. This is what I like to see. Central banks and others squabbling with each other. This shit show should accerarate now.
BOA, UBS, Barclays are all BANKRUPT if they were not allowed to mark-to-fantasy! Citic is a clown player and Nomura isn't any better off thant he US banks.
Now, WHO'S advise do I heed???????????????????
The guys that runs their business(s) into the ground?
Xinhua: Still Not Time For Rate Cuts; Don't Quench Thirst With Poison
People's Daily: Rate Cuts Not The Opposite of Reform
the banking lobby and people willing to shill for banks are loud in every country, aren't they?
Oh it's not a 'lack of faith' by western banks, it's only a deliberate and concerted effort to try to 'advise' China to do something bad for its own health.
as if anyone still needs to be told "advice from [insert bank name] is bad for your health".
go communists!!!! show us how it's done!!!!!
It appears that Chen has been reading Galbraith's new book the End of Normal.
Especially in regard to :
Maybe they've been also reading Steve Keen.
Cannot print gold bars.
China production for BRICS only, soon.
There’s never been a better time in China then now to go long embezzlement and short trickle down to the peeples.
Hey, is that the same as going long insider-trading/statistics-in-advance on Wall Steet and shorting everybody else trading the American Markets?
China guys are focused on real economy but banks dont care about real economy they worry about keeping the spice flowing from which "we" all benefit - webeing the 0.1%. What the fuck is wrong with the chinese do we have do spell it out for them?