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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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Sun, 06/28/2015 - 18:07 | 6246482 Supernova Born
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Middle Kingdom stuck in the middle with banksters.

Sun, 06/28/2015 - 18:11 | 6246488 CaptainAmerika
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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.

http://www.philiacband.com/propaganda.html

Sun, 06/28/2015 - 18:14 | 6246502 Pinto Currency
Pinto Currency's picture

 

 

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

Sun, 06/28/2015 - 18:15 | 6246525 knukles
knukles's picture

Oh, the Chingsdong Put.

Sun, 06/28/2015 - 18:28 | 6246565 kaiserhoff
kaiserhoff's picture

Confucius say:  two billion nervous arm pits,

   help sales foah deoderent.

Sun, 06/28/2015 - 18:44 | 6246655 disabledvet
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...

Sun, 06/28/2015 - 23:44 | 6247781 Buck Johnson
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.

 

Sun, 06/28/2015 - 18:10 | 6246493 The Delicate Genius
The Delicate Genius's picture

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.

Sun, 06/28/2015 - 19:34 | 6246673 NihilistZero
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.

Sun, 06/28/2015 - 19:55 | 6246922 post turtle saver
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..."

Sun, 06/28/2015 - 18:08 | 6246487 The Delicate Genius
The Delicate Genius's picture

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

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

Sun, 06/28/2015 - 18:29 | 6246603 Carpenter1
Carpenter1's picture

Greece, Germany, China...

 

Did you REALLY think it would go on forever?

 

Laughably, some did.

Sun, 06/28/2015 - 18:46 | 6246667 The Delicate Genius
The Delicate Genius's picture

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.

Sun, 06/28/2015 - 18:46 | 6246669 disabledvet
disabledvet's picture

Governor. Andrew Cuomo does come to mind...

Sun, 06/28/2015 - 18:45 | 6246663 dearth vader
dearth vader's picture

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

Sun, 06/28/2015 - 18:51 | 6246683 The Delicate Genius
The Delicate Genius's picture

yep.

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.

Sun, 06/28/2015 - 18:48 | 6246674 Babaloo
Babaloo's picture

'cuz the Euro worked so well...

Sun, 06/28/2015 - 18:53 | 6246692 The Delicate Genius
The Delicate Genius's picture

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.

Sun, 06/28/2015 - 19:32 | 6246832 disabledvet
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.

Sun, 06/28/2015 - 18:13 | 6246515 FIAT CON
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.

Sun, 06/28/2015 - 18:15 | 6246527 Commodore64
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Is this an NWO ad?

Sun, 06/28/2015 - 18:19 | 6246541 ThePhysicist
ThePhysicist's picture

China: Sucks to be you.

Crash on comrades!

Sun, 06/28/2015 - 18:50 | 6246679 disabledvet
disabledvet's picture

So Communits really are bad Capitalists after all.

Hmmm.

Go figure...

Sun, 06/28/2015 - 18:20 | 6246546 holdbuysell
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.

Sun, 06/28/2015 - 18:21 | 6246549 holdbuysell
holdbuysell's picture

Dup deleted.

Sun, 06/28/2015 - 18:21 | 6246551 knukles
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.

Sun, 06/28/2015 - 18:27 | 6246587 firstdivision
firstdivision's picture

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

Sun, 06/28/2015 - 19:20 | 6246787 disabledvet
disabledvet's picture

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

Sun, 06/28/2015 - 18:32 | 6246591 kaiserhoff
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.

Sun, 06/28/2015 - 18:58 | 6246714 ThroxxOfVron
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...

Sun, 06/28/2015 - 19:20 | 6246789 kaiserhoff
kaiserhoff's picture

Is it the onion or SCOTUS?

There seems to be no difference.

Sun, 06/28/2015 - 19:26 | 6246810 Stormtrooper
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Keep in mind that faggot marriages cannot result in any progeny and are therefore self extinguishing family lines.

Sun, 06/28/2015 - 19:39 | 6246867 disabledvet
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!

Sun, 06/28/2015 - 20:04 | 6246955 Dragon HAwk
Dragon HAwk's picture

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

 ( just stating facts folks )

Sun, 06/28/2015 - 20:55 | 6247106 ThePhysicist
ThePhysicist's picture

Mohammed will be crapped from a man's ass.

Sun, 06/28/2015 - 23:00 | 6247648 dreadnaught
dreadnaught's picture

thankfully thats what keeps your bloodline in check! LOL!

Sun, 06/28/2015 - 19:35 | 6246849 disabledvet
disabledvet's picture

Well...to Greece it is then!

A dollar a day here we come!

Sun, 06/28/2015 - 18:22 | 6246557 M.B. Drapier
M.B. Drapier's picture

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

Sun, 06/28/2015 - 18:31 | 6246611 Make_Mine_A_Double
Make_Mine_A_Double's picture

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

Sun, 06/28/2015 - 18:42 | 6246649 MollyHacker
MollyHacker's picture

ECB/Greece disconnect

Sun, 06/28/2015 - 18:33 | 6246622 Shrike99
Shrike99's picture

Me Chinese. Me play joke.

Me put QE in your Coke.

Sun, 06/28/2015 - 18:35 | 6246629 CHC
CHC's picture

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!

Sun, 06/28/2015 - 18:44 | 6246659 B2u
B2u's picture

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

Sun, 06/28/2015 - 19:59 | 6246938 post turtle saver
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...

Mon, 06/29/2015 - 01:20 | 6247962 biggestbrother
biggestbrother's picture
I TOLD YOU I SOLD EVERYTHING LAST WEEK
Sun, 06/28/2015 - 18:42 | 6246648 Bull Bear Nice Pair
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.

Sun, 06/28/2015 - 18:46 | 6246664 Babaloo
Babaloo's picture

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

Sun, 06/28/2015 - 18:55 | 6246702 The Delicate Genius
The Delicate Genius's picture

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...

Sun, 06/28/2015 - 19:29 | 6246825 God
God's picture

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

You do NOT call ZH a .gov propaganda website!

Sun, 06/28/2015 - 20:08 | 6246968 Dragon HAwk
Dragon HAwk's picture

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

Sun, 06/28/2015 - 22:07 | 6247390 Babaloo
Babaloo's picture

The Shenzhen Composite Index has tripled in a year.  Tripled.  That would be like the  NASDAQ going to 15,000 by July 2016. Does that seem normal to you?  Thousands upon thousands of uneducated Chinese were opening brokerage accounts every day.  Again, normal? The Shenzhen Index has lost 600 points in 7 business days and I'm thinking tomorrow ain't gonna be a rally.

So yeah, this seems like crash material.  But you go ahead and buy it.  Keep us posted on how it works out.

Sun, 06/28/2015 - 18:59 | 6246717 Mayer Amschel R...
Mayer Amschel Rothschild's picture

70 million empty residential units empty across Chinese ghost cities. Tangentially: almost seems like someone expects huge population displacement from countryside to cities.

The occupied units are obviously bubblicious

Nothing to worry about.

Sun, 06/28/2015 - 19:23 | 6246798 disabledvet
disabledvet's picture

Those aren't ghost Cities...

Those are GOAT CITIES!

Long Goats!

Sun, 06/28/2015 - 20:38 | 6247053 reader2010
reader2010's picture

The result is the same - making the elite richer. But which approach is more rational?  Wasting trillions on killing people around the world? Or building empty apartments?

Mon, 06/29/2015 - 01:28 | 6247969 Ginsengbull
Ginsengbull's picture

Killing only wastes money if the victims are in debt.

 

Chinese people don't have very much debt.

Mon, 06/29/2015 - 01:18 | 6247960 biggestbrother
biggestbrother's picture

The fact that the Chinese GOVERNMENT has deposits does not help the poor plebs who invested in the market. The GOVERNMENT will either have to compensate them or stand by for revolution. 

 

And those crappy houses they all own wont last. 

 

Corruption equals massive capital misallocation and market failure. 

CANT WORK. 

Corrupt countries dont prosper for long. 

Sun, 06/28/2015 - 18:48 | 6246675 RMolineaux
RMolineaux's picture

The Chinese are inveterate gamblers.  They know how to win and they know how to lose.  These measures by the Peoples Bank of China are not intended to bail out the gamblers in the stock markets, but rather to ameliorate the secondary effects of the market crash on the availability of credit, investment decisions, etc.

Sun, 06/28/2015 - 18:52 | 6246688 ISEEIT
ISEEIT's picture

Of course it will be war.

War is what 'government' does once they (inevitably) fuck up everything else.

Always.

Every fucking time.

Is "climate change" the greatest threat to humanity?

 

Lol...Of fucking course not.

 

The political left and its insatiable fetish to control others is WAR AGAINST HUMANITY.

 

And they are 'winning'.

Sun, 06/28/2015 - 19:13 | 6246765 orangegeek
orangegeek's picture

LMFAO!!!!

 

GET ME SOME ORVILLE REDENBACHER, PRONTO!!!!

Sun, 06/28/2015 - 19:33 | 6246833 MFL8240
MFL8240's picture

The planned destruction of the global economy looks like it is taking perfect form.  

Sun, 06/28/2015 - 19:39 | 6246864 q99x2
q99x2's picture

"A" great danger. "poses A great danger" You heathen bastards. Or poses great dangers if you prefer.

Sun, 06/28/2015 - 20:57 | 6247110 CHC
CHC's picture

A "crash" is not allowed under current party rules - therefore - party on!

Sun, 06/28/2015 - 23:52 | 6247802 lasvegaspersona
lasvegaspersona's picture

China had better be sure it's citizens are familiar with the concept of inflation if they are going to make them all 'rich' with the stock market.

I'm sure the Chinese people will survive. After all they are 'risk takers'.....like the people of Iceland.

We go crazy in groups and come to our senses one by one.....

Mon, 06/29/2015 - 01:15 | 6247958 biggestbrother
biggestbrother's picture

They hope to be able to refi companies on the backs of ignorant serfs

THey rose to power on the factory toil of ignorant serfs

they will fight the next war with ignorant serfs

 

Just fill em up with Han supremict propaganda and watch them work to the benefit of the gangster class. 

Mon, 06/29/2015 - 02:41 | 6248064 polo007
polo007's picture

According to Macquarie Research:

http://personal.crocodoc.com/lHeFs3w

China drama & Greek farce

Are Central Banks at the end of the road?

Greek and Chinese dramas question role of Central Banks…

- The latest developments in China and the Eurozone inevitably invite the question whether Central Banks are coming to the end of the road. Given the limited impact of their policies on real economies with stimulus largely being confined within walls of financial assets, has the time of reckoning finally arrived?

- As discussed in the past (here & here), the only sustainable LT outcomes for the over-leveraged and over-supplied global economy are either: (a) allowing the deflationary cycle to go through, thus eliminating global excess capacity in service and merchandise economies; (b) elimination of excess debt via some form of hyperinflation and/or co-ordinated debt cancellation; or (c) banning capital markets via nationalization. Given that neither of these alternatives is attractive, involving pain for either borrowers or savers; intergenerational transfers or courting sharply lower ROIC, CBs would rather kick the can down the road in the hope that a solution would be eventually found.

…and should CBs place monetary policies in neutral gear?

- PBoC’s half-hearted attempts last week to slow the pace of appreciation of the equity market have inevitably and predictably resulted in severe correction. The double-barrel reduction in interest rates and RRR on Saturday is a belated realization that it is courting a significant economic backlash. As discussed here, we do not believe that China’s de-leveraging is either possible or desirable. Having reached leverage of ~3:1, any debate about the evils or virtue of debt has passed a long time ago, and the only viable choice from now on is to continue leveraging, though perhaps at a somewhat slower and safer pace.

- In order to continue leveraging, PBoC has to make sure that: (a) there is no sharp correction in any of the key asset prices; (b) at least some asset prices are appreciating; and (c) there is no further contraction in nominal GDP. This requires a combination of exceptionally stimulative monetary and fiscal policies as well as trust that a country is not yet in a liquidity trap and that it is capable responding to stimulus in safeguarding nominal GDP. The game is no longer about reaching 7% real GDP growth but avoiding zero nominal GDP.

- The same dynamics are playing out in Europe. The battle is between politicians who have not yet grasped that deleveraging is no longer feasible, and the ECB, which is fully onboard. Whether Greece is allowed to exit does not alter the basic argument that the numbers do not work, unless leveraging continues.

China is at very early stages of stimulus

- We maintain that China is at an early stage of significant (probably the largest globally) stimulative action. We expect that over the next two years, RRRs would be reduced to historic levels (i.e. 5-6%); interest rates would be lowered to zero and fiscal spending would become much more aggressive (including multiple banking re-capitalizations). The only question is whether China would send a massive inflationary pulse through global economy or would aim for more moderate impact. Initially, the PBoC would be aiming for moderate outcomes, ensuring support for asset prices but avoiding more disruptive action. However as we progress into 2016-17, more drastic actions might be needed. In the meantime, we remain O/W MSCI China, as equities remain the least systemic asset class that can be leveraged, at least for now.

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