A Helpless China Tips Its Hand: A Market Crash "Poses Great Danger To Social Stability"

Tyler Durden's picture

While Greece has understandably been the focal news event over the weekend - after all it has been 5 years in the making -  let's not forget that in another massive move, one geared squarely to prevent a market collapse and to avoid even further panic, the Chinese central bank cut both its policy rate and the reserve rate in a dramatic push to calm down markets after a 10% crash in just two trading days.

Which, incidentally, shows that after the Fed, the BOE, the SNB, the BOJ and the ECB, the PBOC is the latest bank to have cornered itself in a world where it must inflate the bubble at all costs or face the dire consequences. What consequences? Nomura explains:

The policy easing should be viewed as a measure to contain the risk of a hard landing or systemic crisis rather than one to achieve faster growth. In this case, the stronger-than-expected monetary easing may help stem the decline in the equity market following a 10.6% drop over the past two trading days. The positive wealth effect of the equity market on consumption or aggregate demand is limited in China, but an equity market collapse would hurt millions of mid-class households and pose great danger to the economy and social stability.

And there you have it: just like all other central banks, the opportunity cost to markets returning to fair value is nothing short of social conflict (as admirably displayed with every passing day in the US) and even, perhaps, civil war.

Which means that unlike before, when the bursting of the bubble would merely lead to a few high flying 1%-ers literally flying from the top floor having lost everything, this time the gamble could not have been higher, and when the central banks finally lose control the outcome will be nothing short of war... just as Paul Tudor Jones, Kyle Bass and countless others have warned before.

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Supernova Born's picture

Middle Kingdom stuck in the middle with banksters.

CaptainAmerika's picture
CaptainAmerika (not verified) Supernova Born Jun 28, 2015 5:11 PM

We knew the world would not be the same. A few people laughed, a few people cried, most people were silent. I remembered the line from the Hindu scripture, the Bhagavad-Gita. Vishnu is trying to persuade the Prince that he should do his duty and to impress him takes on his multi-armed form and says, "Now, I am become Death, the destroyer of worlds." I suppose we all thought that one way or another.


Pinto Currency's picture



Here come the gold Yuan and gold Ruble ... ... and gold Riyal.

kaiserhoff's picture

Confucius say:  two billion nervous arm pits,

   help sales foah deoderent.

disabledvet's picture

Ben Bernanke's "Taper" has just driven every major Central Bank in the world into a Beggar Thy Neighbor Finalcial Pogrom.

Apparently they really do grow 'Em smart at MIT...

Buck Johnson's picture

And it was designed to put all of them in the same boat.  The problem is that now no one has a place to go and the boat is sinking.


The Delicate Genius's picture
The Delicate Genius (not verified) Supernova Born Jun 28, 2015 5:10 PM

One does not simply walk into Beijing. Its Black Gates are guarded by more than just Orcs. There is evil there that does not sleep, and the Great Eye is ever watchful. It is a barren wasteland, riddled with fire and ash and dust, the very air you breathe is a poisonous fume. Not with ten thousand men could you do this. It is folly.

NihilistZero's picture

In light of social disorder does a crackdown by Beijing signal the coming end of communist party control of the PRC as it currently stands?  I would think a retreat from the current liberalizations (by Communist standards) would alienate the majority of the populace including the many of the "nuveau riche" and further increase tensions with Hong Kong.  A "Chinese Spring" could lead to reunification with Taiwan and positive social change without war.  As a ZH'er who isn't all that excited about a Russia/PRC hegemony any more than he is for a US European one, a China continuing on the path to liberalization sounds good.  Usually such changes don't take place during times of economic tranquility.  Perhaps this challenge will be just the tonic needed for China to get to the next level with social reforms.

post turtle saver's picture

what they're really saying is, "if this happens then the people will not believe in the infallibility of the CCP anymore, and tanks will have to go to Tiananmen again..."

The Delicate Genius's picture
The Delicate Genius (not verified) Jun 28, 2015 5:08 PM

the BRICs ought to think seriously about fast tracking a shared currency.

No real sense backing it with the FRN still hanging around...

Carpenter1's picture

Greece, Germany, China...


Did you REALLY think it would go on forever?


Laughably, some did.

The Delicate Genius's picture
The Delicate Genius (not verified) Carpenter1 Jun 28, 2015 5:46 PM

I didn't say it would go on forever.

I said they ought to issue their own new shared currency *now*.

That's quite a different thing.

disabledvet's picture

Governor. Andrew Cuomo does come to mind...

dearth vader's picture

A shared WHAT?!! Like the euro, you mean?

The Delicate Genius's picture
The Delicate Genius (not verified) dearth vader Jun 28, 2015 5:51 PM


though not to replace their existing currencies.

something in addition to, as the fiat regimes enter terminal phase.

nobody ever said you couldn't use another fiat as a buffer.

Issue, announce plans to back with gold, only in exchange for a BRICs member currency. announce...start building a bold bank.

and dump all US treasuries in about a 2 week period.

Babaloo's picture

'cuz the Euro worked so well...

The Delicate Genius's picture
The Delicate Genius (not verified) Babaloo Jun 28, 2015 5:53 PM

the euro was fucked from the start because the IMF and ECB fudged and/or went along with fudged numbers designed to get small and shitty economies into the union while pensions and taxes and demographics were time bombs.

Dont ever confuse a specific for an axiom.

disabledvet's picture

This is just my OPINION but to me this comment is spot on because the REAL war is between the IMF and the ECB...with "Europa" sticking it to the dollar.

The IMF has now pulled the plug on the swap lines and lo and behold the "Euro Zone" can't even figure out how to open the Greek Stock Exchange "because there is so much liquidity in that thing it might blow the whole EU up!"

I mean seriously...the Queen of England goes to Berlin?

Give me a break.

"Greece" is the only country actually paying their bills in the entire EU.

I'm sure the mighty "European Army" will meet the threat of the Russian Bear they created when they told "the poor Americans" to follow their lead on a catastrophic sanctions regime.

Let's face it...the ghosts of World War II are alive and well.

FIAT CON's picture

Just think all of these troubles from a printing press where he who has the press prints for free and makes loans with interest applied!...

Phony worthless Fiat causing all the worlds problems.

Commodore64's picture

Is this an NWO ad?

ThePhysicist's picture

China: Sucks to be you.

Crash on comrades!

disabledvet's picture

So Communits really are bad Capitalists after all.


Go figure...

holdbuysell's picture

Umm, yeah, not buying it. It's all about saving an over-levered debt-based financial system which uses equities as collateral. If equitiies go down (deflation), the system goes into cardiac arrest. It's just that simple.

Same goes for around the world.

knukles's picture

Looks like "folks" are gonna be burning villages to save them

Y'all realize that over the weekend there was not a single piece of "good" news?  Not a one.  And a number of financial media pages ain't updating, yet.
Always the yets.

I have great empathy with CaptianAmerika and the Delicate Geniuses passages posted above.

Not a single piece of "good" news ... oh, plenty of propaganda and side shows, gay marriage (which should never have been a governmental issue in any case ... people wanna marry, it's their right and choice) and Confederate flags.  MOAR Unicorns and Tinsel.

God help us, for we have surely lost our own way.

firstdivision's picture

K-Hen is going to have a long day tomorrow.  We should have donuts and coffee delivered to his Chicago office.  

disabledvet's picture

(Hanging out at folk's place in the Hamptons when phone rings)"It's for you Dad...

kaiserhoff's picture

Aw, come on, knucks.

SCOTUS didn't say we have to marry a goat, a queer, or a nappy head.

That's just forward guidance for next year.

ThroxxOfVron's picture

"SCOTUS didn't say we have to marry a goat, a queer, or a nappy head. "


No, SCOTUS didn't say that we had to marry anyone, SCOTUS only said we have to pay for the health care of anyone who can't or won't pay for it themselves even if such person do incomprehensible, disagreeable, irresponsible and/or dangerous things with their own bodies.

-Kinda like being forced to take care of a spouse that has suddenly decided to engage in incomprehensible, disagreeable, irresponsible and/or dangerous activities with their own bodies.

The only relationship that you are forced into is one of shared responsiblity for the activities of other persons over which you have no right to exert any form of control or restraint whatsoever...

kaiserhoff's picture

Is it the onion or SCOTUS?

There seems to be no difference.

Stormtrooper's picture

Keep in mind that faggot marriages cannot result in any progeny and are therefore self extinguishing family lines.

disabledvet's picture

But the Governor of Nueva York just presided over a same sex marriage!

And he said he would marry me and my rabbit next week too!

Dragon HAwk's picture

Unfortunately Gay's keep breeding.. funny how they lie so easily to have kids

 ( just stating facts folks )

ThePhysicist's picture

Mohammed will be crapped from a man's ass.

dreadnaught's picture

thankfully thats what keeps your bloodline in check! LOL!

disabledvet's picture

Well...to Greece it is then!

A dollar a day here we come!

M.B. Drapier's picture

Hey, who remembers Yeltsin-era Russia's stock-market misadventures with privatised companies? I bet the Chinese authorities do.

Make_Mine_A_Double's picture

No coincidence in PBOC's timing - fly in the slipstream of ECB/ Greece meltdown.

Shrike99's picture

Me Chinese. Me play joke.

Me put QE in your Coke.

CHC's picture
CHC (not verified) Jun 28, 2015 5:35 PM

Well...well...well, looks like everyone around the world will be in for loads of fun on Monday when the markets open.  U.S. Dow futures are down 300 pts right now.  Fun - hang on!

B2u's picture

I am expecting quotes from the experts in Asia....Dr. Sum Ting Wong and Ho Li Fuk.

post turtle saver's picture

I'm expecting a mega shitload of articles and opinions laced with the phrases "dry powder" and "cash on the sidelines", myself...

biggestbrother's picture
Bull Bear Nice Pair's picture

The Chinese have $21 trillion deposits, as well as 80 percent plus home ownership, not to mention $4 trillion Forex reserve. The PBOC has a 4.85% interest rate to cut - no, the Chinese stock market will not crash anytime soon. In fact, it has no place to go but up - don't confuse long term trend with short-term fluctuations like the Zerohedge tends to sensationalize.

Babaloo's picture

Yeah, a 20% decline in a week and a half is perfectly normal.  No crash there.

The Delicate Genius's picture
The Delicate Genius (not verified) Babaloo Jun 28, 2015 5:55 PM

it is normal.

and its not a "crash"

and if China didn't do what it was doing - what would happen?

It would be helping the US to its own detriment - that's what.

Wait until you see what happens to us stocks and bonds by the end of the week...

God's picture

This guy "Bull Bear Nice Pair" has gone crazy.

You do NOT call ZH a .gov propaganda website!

Dragon HAwk's picture

unless of course the government is using ZH to collect posters ip addresses. which they probably are.