China Considers Launching QE; Shanghai Stocks Soar

Tyler Durden's picture

Nearly two months ago we explained "How Beijing Is Responding To A Soaring Dollar, And Why QE In China Is Now Inevitable" in which we cited Cornerstone who reminded us "that from 2007 to late 2008, U.S. fed funds dropped 500 bp, and then the Fed still needed to do QE? The backdrop for China looks a bit similar. We had a credit bubble, they have a credit bubble. We had a housing bubble, they have a housing/investment bubble. Will China eventually have to go down the same path as the U.S., and the Eurozone? ... The PBoC will first cut rates to 0%, before contemplating QE."

To this we added that "once China, that final quasi-Western nation, proceeds to engage in outright monetization of its debt, then and only then will the terminal phase of the global currency wars start: a phase which will, because global economic growth and that all important lifeblood of a globalized economy - trade - at that point will be zero if not negatve, will see an unprecedented crescendo of money printing by absolutely everyone, before coordinated devaluations mutate into uncoordinated, and when central bank actions morph from "all for one" to "each man for himself."

We may not have long to wait because just hours ago, MarketNews first among the wire services hinted at what we suggested was the endgame.

  • *PBOC DISCUSSING DIRECT PURCHASES OF LOCAL GOVT BONDS: MNI
  • *PBOC IS DISCUSSING UNCONVENTIONAL POLICIES: MNI

Bloomberg adds more, citing MNI as saying that the Chinese central bank discussing "adopting unconventional policies to rebuild its balance sheet and reinvigorate economy, including making direct purchases of local government bonds from market."

Of just as we predicted.

MNI continues that "although wide range of possibilities tabled about how PBOC operations could change, common thread of discussion involves need to expand balance sheet to ensure supply of liquidity meets economy’s demands, report says."

In other words, China is about to engage in the biggest QE of them all, and drown the world with exported deflation as the global supply glut which we explained yesterday, hits unprecedented levels and ultimately leads to the biggest inventory dumping phase in global history which central bankers will have no choice but to offset with Friedman's infamous "helicopter drop" of money, finally leading to the terminal phase for fiat currencies.

MNI continues:

PBOC discussed quantitative easing, which would tie in with aim of having local governments sell CNY1t in bonds this year to lower interest costs, mitigating systemic risk and boosting economies at local level.

 

PBOC could buy assets directly from the banks, freeing them up to purchase local government bonds, or buy local government bonds directly from the market, according to sources who have been briefed on discussions.

 

Unlike reserve-requirement cuts, which involve funding already in PBOC accounts, these operations would expand bank’s balance sheet, helping it to counter impact of sustained capital outflows.

Because apparently $22 trillion in global central bank assets is not enough to show the world's Keynesians, who are now eager to push the world to war just to avoid being proven wrong, that QE does not work.

To be sure others promptly jumped on the report: according to Shanghai Pudong Development Bank, the "possibility exists for PBOC to adopt unconventional policy such as bond purchases as onshore commercial banks may have limited appetite for such notes."

Move will help fund infrastructure projects more smoothly at a time when growth is slowing, Shanghai-based senior analyst Cao Yang says, adding that the Yuan will continue to be stabilized as authorities keen to promote currency internationalization

And while no decision has been made and China is clearly unsure if this is the correct policy...

  • PBOC ECONOMIST SAYS NO NEED FOR STRONG STIMULUS: PEOPLE'S DAILY

... the market has already made up its mind, with the Yuan falling 0.14%, set for biggest drop since March 23, to 6.2036 per dollar, while the Shanghai Composite was up 3% in overnight trading, rising above 4,500 for the first time since the last financial crisis, and up 40% since we first predicted in the beginning of March precisely what the Chinese endgame is.

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Smegley Wanxalot's picture

Seems the elementary-school-educated and the banana merchants have not only taken over the Chinese stock market, but the PBOC as well.

Manthong's picture

Hey, I have a great new business idea now that my Mount Everest Snow Cannon company is launched.

“Lead Impregnated Wing Suits- R- US ”.

They are dead certain to be hits in a variety of markets.

I just need an Angel or the right  launch organization to get this off the ground.

Any ideas out there to help with this lofty ambition?

 

I might be able to merge it with my Tokyo 2020 potassium iodide marketing effort or maybe with my Chinese colloidal cadmium IPO endeavor.

Haus-Targaryen's picture

<-- Stack

<-- Print FIAT 

<-- ???

<-- ???

<<-- PROFIT!!!!!!!!!!!!!!???? 

Hype Alert's picture

This is only happening because we didn't print more to begin with.  Print print print print!

VinceFostersGhost's picture

 

 

If everyone does QE at the same time, is that bad?

 

How do you know what is real, and what is fake money?

GMadScientist's picture

Supply-side Chicago Fascists?

GMadScientist's picture

a) definitely bad (it makes the QE even more pointless than it already is, for all involved)

b) once you've started monetizing bond purchases, it's ALL fake money

MonetaryApostate's picture

This is a classic case of....  MONKEY SEE MONKEY DO....

Madness, will it ever stop?

WernerHeisenberg's picture

No, yeshiva educated debt merchants.  The bagel Ferengi were behind Mao from the start, also Pol Pot.  The PBOC is a vassal of the BIS, same as all the others.  There are no white knight state actors to save us.  We have to become the heroes we have been waiting for.

Gordon Freeman's picture

Don't dishonor the word hero by trying to apply it to yourself, loser...

Random's picture

Is your uncalled for insult a roundabout way to "get back" on the original poster for implying that China is subservient to the chosenites? Hero is in the eye of the beholder anyways, see McCain or Yitzak Shamir.

toys for tits's picture

China will finally enter the race to the bottom, but unlike other western nations they'll be using a portion of that new debt to accumulate gold.

MonetaryApostate's picture

This only further solidifies my position on Worldwide Bank Bail-Ins & Cashless Societies are indeed their ultimate agenda...

http://galeinnes.blogspot.com/2014/06/worldwide-bank-bail-ins-coming-soo...

JRev's picture

This has always been the case, despite the constant barrage of "East Rising" articles from ZH and the like. Just read the policy papers.

Xhou Ziaochuan: Reform the International Monetary System
http://www.bis.org/review/r090402c.pdf

And about all that Chinese gold...
http://www.chathamhouse.org/sites/files/chathamhouse/field/field_documen...

QE is a global(ist) currency consolidation program. Detonate, collectivize, collateralize, control. Nor is this China's first appearance at the printing bonanza, or has everyone already forgotten M1-M3? As you're now bearing witness to, ALL Central Banks are in on the game. Or did you actually think the PBOC's membership in the IMF and BIS was insignificant? 

atomp's picture

page not found on the chathamhouse link

JRev's picture

Let's try this again..
http://bit.ly/1z6Rhk7 

If that doesn't work, copy-paste the link manually or search for it, the title of the paper is "Adding Gold to the Valuation of the SDR." Very interesting read forecasting exactly how the "Great Reset" will play out if the PBOC and BIS get their way.

COSMOS's picture

With the USA printing like crazy not much the rest of the world can do.  Until they kick the dollar to the sidelines as a reserve currency.

VinceFostersGhost's picture

 

 

No worries. The US still has deep storage gold.

 

Really deep.

MonetaryApostate's picture

So deep that, they haven't even dug it up yet.... (It must be on the other side of the world... yeah that's it!  ATTACK!)

tarsubil's picture

Is this shit show ever going to end?

MonetaryApostate's picture

Of course, at some point the masses will eventually realize (Maybe when Debt reaches 500 Quadrillion dollars?) that cash is indeed trash. (Worthless)

OldPhart's picture

Sum Ting Wong?

It's the playbook; it was written by psychopaths masquerading as five year olds.

Illya Kuryakin's picture

But but the chicoms have more gold than anyone so the yuan will never ever be worthless fiat like the USD and they will still take over the world someday.

NihilistZero's picture

That "worthless fiat" is still backed by the largest military in the world, its nation whose bordered by oceans and allies. And then there's that whole Nuclear Weapons thing...

That a nation that is even more systemically rotten and corrupt than the USA is on an inexorable march to global hegemony is a specious claim at best...

q99x2's picture

Step right up. Every banana vendor is a winner. Hey wait a minute, if everyone does it then everyone loses. Better stock up on the nanas.

neidermeyer's picture

You cannot win if you do not play... Who knew central bankers took their cues from Carnival Barkers...

Klemens's picture
Klemens (not verified) Apr 27, 2015 3:29 AM

EURO is losing against Burundian Franc!

http://www.xe.com/currencycharts/?from=EUR&to=BIF&view=1Y

MUST SEE CHART!   LOL, LOL, LOL,

Burundi:     https://en.wikipedia.org/wiki/Burundi
waterwitch's picture

That does it! Long BIF!

MonetaryApostate's picture

The correlations between the USD & the GBP will help you see where we are financially, the recessions of 2000 & 2008 & now 2015 are all noticeable...

(You can even see how the economy hasn't improved by looking at this chart...)

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&...

(Stranger than fiction?)

Baby Eating Dingo22's picture

This is great news!!

The Dollar Store will be cannibalizing itself trying to dump its expensive inventory of crap before it is forced to change its name to the 89 Cent store, then the 79 Cents stors, the the 69 Cent store...

Evemtually they'll be paying people to haul away boxes of irradiated tuna and lead-laden Babbie dolls

Stormtrooper's picture

Maybe we will see the return of the Five and Dime store along with penny candy.

Sages wife's picture

Mojo's and nigger babies. Ooooooo...I'll pay for that.

GMadScientist's picture

Only to be bought up by a vitamin water-hawking consortium and renamed "The Fiddy Cent Sto".

Baby Eating Dingo22's picture

WTWTWTWtF!!

Check out their chart

Up 600% this month

http://www.aastocks.com/en/LTP/RTChart.aspx?symbol=01027

Is Sunny Umbrella Chinese code for Iwatch?

 

Company Profile

http://www.jcumbrella.com/Item/list.asp?id=1519

Fujian Jicheng Group Introduction

Group Profile
Fujian Jicheng Umbrella Group was founded in 1994 which is a large-scale enterprise group specializing in designing, researching, producing and selling of sunny umbrella and green plastic umbrella. It is the NO.1 green plastic umbrella manufacturer in China and even the largest in Asia that has two producing bases at famous Chinese hometown—Jinjiang. They are Jinjiang Jicheng Qinggong Co.Ltd located at Chinese umbrella city --Dongshi town and Jinjiang Jicheng Umbrella Co.ltd located at Yonghe town.
The bellwether of sunny umbrella industry and the leader of national green plastic standard-setting
  The group’s brand “Jicheng” is the Chinese well-known trademark in domestic sunny umbrella industry. As the bellwether of sunny umbrella industry and leading enterprise, the group is one of the standing director unit of Chinese umbrella-maker special committee. The group is not only the vice chairman of Fujian Light Industry Association who involved in drawing up a number of sunny umbrella’s standards, but also is the main enterprise of drafting Chinese plastic umbrella industry’s standards (plastic umbrella’s national standard QB-T 4152-2010). The company is mainly engaged in researching, producing and selling fashion, high-quality sunny umbrella. It also provides service for specialization and devotes to helping customers and partners from home and abroad to achieve excellence with it’s advantages, such as technology, brand, scale, talent, capital and so on.
The green plastic umbrella-maker with the most complete products and comprehensive supporting
  The main business of the group is producing and selling all kinds of sunny umbrellas. The company is a green plastic umbrella’s producing base who has the most complete variety and specification products and comprehensive supporting in Chinese umbrella industry. The main products are: green plastic umbrella, nylon umbrella, women’s fashion sunny umbrella, colorful children umbrella, plastic cloth and various kinds of accessories of sunny umbrella. The enterprise has and grasps the integration of production’s advanced producing equipment and process about producing green plastic umbrella. The complete production line is made of POE plastic particles, composed of cast film production and  umbrella rib which is the NO.1 in the industry. Company’s complete products and comprehensive supporting facilities can meet customers all kinds of needs about sunny umbrella products, accessories and services. Company pursues perfect product’s quality and strictly implement national testing standards in the production process. The company has passed not only ISO9001 quality system certification and product certification but also ISO14001 environmental management system certification. At the same time, the company has gotten the “AA class enterprise” honor of People’s Republic of China Customs and enjoy the treatment of “speedy customs clearance”.

thegazzman's picture

trading at a p/e of 130 and they sell umbrellas HOLY FUCK IS THIS REAL LIFE HOW CAN I SHORT THIS?!!?!!?

xcehn's picture

"Through early morning fog I see
visions of the things to be
the pains that are withheld for me
I realize and I can see..."
http://www.lyricsbox.com/mash-lyrics-suicide-is-painless-kdv9zd1.html

"Ok, so we get the picture, all the nations on the Pacific rim side of the Globe are now locked into a monumental mortal martial arts fiat food fight for the ages. As world GDP continues to falter, the gloves will come off, plates will start to fly, and eventually the zero sum situation will end up in crazed Kamikaze currency raids battling for each others industrial export capacity. The trouble with all of this, of course, is that for the overall world economy it's nothing short of committing Hari Kari....

Finally, and most importantly, it will create a massive deflationary wave, which is the last thing the largest debtor Nation in the history of the planet needs. In fact, this is the Fed's worst nightmare. Not only does it increase the real cost of our massive external sovereign debt loads, but also, the subsequent strong dollar deflation will further depress the velocity of money which already sits at historic lows. And therein lies the rub. How is the Fed going to achieve its wet dream of 2% inflation that it deems so crucial to generating the escape velocity essential for self sustaining economic growth?

I'm afraid, my friends, until we pry the printing press from their cold dead hands, the only answer the FED has in store for us will be more of the same. Can you say QE 4.0?

Welcome to the Keynesian circle jerk end game. Picture a dog chasing its own tail until it finally drops from exhaustion, let's call our dog "Fido Fed".

Les jeux sont fait, let the games begin. Got Gold?"

http://www.zerohedge.com/news/2014-11-15/desperate-suicide-competitive-d...

PaperMoneyEcon's picture

QE is debt cancellation - and China certainly needs some of that.

Watch this Macro Watch video if you want to understand how QE Cancels Government Debt:

https://www.youtube.com/watch?v=q9IsuKHjHzQ

Batman11's picture

Pre-1930s - a world drowning in debt - Europe from the first world war and the US from Wall Street leveraging up the US stock market to crash in 1929

Pre-2010 - a world drowning in debt 

1930s/2010s - currency wars

1940s/? - global war

At least we are not repeating our mistakes!

 

Practical Cogitator's picture
First, as Tyler points out today in an essay about supply gluts, almost all of the so-called 'science' of economics is about shortages.  Very little deals with severe surplus situations, aka excess supply.  To my knowledge, only Karl Marx ever really explored the broader concept and various ramifications of 'excess supply' in very much depth, concluding that in the war between labor and capital, capital would eventually dominate and that would create loads of excess supply but with hardly anyone to sell to.  That's the moment, said Marx, when capitalism impales itself on its own greed-based petard.  I'm not endorsing Mr. Marx, just summarizing his position on one specific issue.     These days, the world is grossly over-supplied with no real relief anywhere in sight.  In fact, the growth in demand is decelerating; all the while excess supply is accelerating.  Rock bottom levels of falling commodity prices are screaming this excess supply/demand shortage. Huge inventories in everything from cotton to oil to finished goods to Caterpillar equipment to luxury cars to McDonald’s hamburgers are everywhere all around the world [Ukraine, Yemen, Iraq, Afghanistan, Libya, Syria, Sudan excepted, of course - hmmm, what's the common-denominator there?].     So what happens when supply grossly exceeds demand?  Prices drop. Deflation.  Sure enough, that's beginning to peek through the smokescreens of Quantitative-Easing-Zero-Interest-Rate-Policy-fed stock and bond market asset bubbles and all the government-programs running at inflated prices [ObamaCare and War]. The lion’s share of 'deflation' will spring when all the debt defaults begin, of course, but that tsunami will unleash a torrent of goods and services deflation as economies everywhere implode, 1930’s styled, in a self-reinforcing deflationary depression.   Second, there are only three outcomes for debt:  1) it can be repaid, or 2) it can be recast, or 3) it can default.  There are no other options. That's it.  So functionally, in its essence anyway what is Quantitative Easing?    
QE is being practiced in Japan and Europe now big-time, to the combined tune of roughly USD $150 Billion/month.  Add to that the Fed's $4.5 Trillion to its balance sheet with 3 Quantitative Easing programs, and the trillions of speculative investment debt leverage that ZIRP has enabled.  Uncle 'owes' $18 Trillion in sovereign debt.  The Fed 'owns' roughly $2+ Trillion of that debt on its balance sheet, and last year the Fed rebated $94 Billion back to the Treasury that it received [from the Treasury] in interest on those Treasury Bonds.     In other words, the debt-monetization effects of QE made $2+ Trillion of Uncle Sam’s $18 Trillion in US sovereign debts effectively disappear.  Uncle 'owes' with his right hand [US Treasury] and 'owns' with his left hand [Federal Reserve]. The clever equivalent to a very sneaky default, eh?  Draghi and Kuroda both obviously think so.  And, apparently, soon the PBoC's Xiaochuan.   Who picked up the tab for this effective default? Anyone holding US dollars saw their 'purchasing power' decline prorata by the $2 Trillion electronically 'printed' from thin air by the Fed.  So Americans were very cleverly 'robbed' of $2 Trillion - and not one in 10,000 even realizes they have been fleeced!  There were no headlines in the NYT's or the WSJ and no specials on NPR or PBS.   The 'inflation' the Fed has engineered every year these past 60 years prior to 2008 also had the effect of 'defaulting' on a portion of Uncle's sovereign debt, basically by rendering repayment with debased US dollars much cheaper.  QE has essentially taken the place of 'inflation' as Uncle's sovereign debt default-choice.     Both 'inflation' and 'Quantitative Easing' are forms of 'Financial Repression' in that the Plebes pick up nearly the entire tab.  These days the bottom 80% of the population owns barely 7% of the wealth, so it's obvious Uncle Sam’s Financial Repression is milking the Plebes dry - and contributing toward a real life proof of Karl Marx’s excess supply thesis.   Third, while QE and the Fed's Zero Interest Rate Policy [ZIRP] may be clever ways of defaulting on Uncle's debt, they are both exacerbating the 'excess supply' issue that is strangling all the various economies of the world.  For example, I noticed last week that a number of American oil fracking companies floated billions moar in new bonds. That would not be at all possible in a free-market - where no one would toss hard-earned money at bankrupt companies.  But with the Fed’s ZIRP feeding speculative financial leverage and some portion of $150 Billion/month in QE from Japan and Europe flooding the US bond markets in search of yield - ever moar debt is being layered over basically bankrupt fracking companies.  So they continue expanding their oil production with borrowed funds in a desperate attempt to stay afloat financially.  Moar excess supply, moar deflation, moar QE, moar ZIRP, moar excess supply, moar deflation – round-and-round-we-all-go.     The Fed, ECB, BoE, BoJ and the PBoC are all stoking the deflation monster they all claim to be battling, in other words.  Joseph Schumpeter 'creative destruction' is not being allowed to clear out all the crony capitalist dead wood that has accumulated since the Central Bankers took over the world in 2008 with ZIRP and QE.  And so the situation grows worse by the day.     But the Central Bankers cannot give up on ZIRP and QE, for the simple reason that contagious defaults on the $199 TRILLION of debt the world is sitting atop will begin to accelerate, which will engender ever moar defaults, which will feed a deflationary-depression that will make the 1930's Depression look like child's play.    Since the 2008 credit collapse started that ball rolling, the world has added an extra $57 TRILLION to the base of $142 TRILLION in total debt outstanding at the end of 2007.  Imagine how much of the $142 Trillion would have defaulted had not the Central Bank fed $57 Trillion into the mix for cheap refinancing at near zero rates!  
But eventually, the Debt Piper must be paid.  That’s when the entire fractionally-reserved Ponzi-debt banking system freezes, a bit like a car's motor seizes up when those last few drops of oil burn away. That'll happen about as quickly as that 7.9 Earthquake that struck Nepal on Saturday.
Batman11's picture

The first dead wood the capitalist system identified in 2008 were Wall Street's investment banks.

The world would be a safer place without them.

 

Dubaibanker's picture

That's very true.

Can you imagine...if we just let all the banks die...or remove them from the stock markets...who the hell will buy the stocks?

Crickets..we will hear crickets....

LawsofPhysics's picture

Unfortunately, with over 7 billion people and growing, there is no excess supply of consumable calories or essential commodities. If there was, everyone in the world would enjoy a high standard of living. Your post is pure propaganda. FAIL.

adr's picture

You can have excess supply in a finite world if nobody can afford to consume anything.

It really is a simple concept to grasp.

Only 1% of the available jobs pay enough to live a lifestyle that was considered middle class fifteen years ago. Try living almost anywhere on $55k a year supporting a family of four. Your income puts you above any government support and living expenses takes up almost every cent you earn after taxes. Essentially you are poor, yet by income level you are supposed to be far above average. Your consumption can only come through increased debt. Debt that can not be repaid.

LawsofPhysics's picture

"Your consumption can only come through increased debt."  --  LOL!!!  So, if you create debt, things like oil and other natural resources just magically appear?

LMFAO!!!!!

You are a first class fool. 

Surplus of what?  Be specific,  I see a surplus of plastic crap and paper promises...

Both of which have no real value.

You are tied to a man-made construct that is not sustainable moron.  Allow me to simplify, do you really think that just because a person cannot afford things like food, water, and shelter that they are simply going to stop consuming those essentials?

LOL!!!  Again, another first class stupid fucking sheep.

MonetaryApostate's picture

It's funny how the Ultra Wealthy leverage "Our Needs" as a measure of how hard we must work to meet those needs....

As the world's consumption increases, so does it's debt to the wealthy, and so at some point they must reset it all...

pob's picture

Global BTFD 

lakecity55's picture

These central banks are all like pirate ships trying to raid the same trading outpost at the same time.

Which is worse - bankers or terrorists's picture

PBOC: "We had to destroy our country in order to save it".