The Chinese Central Bank Just Pulled A Martin Shkreli
Something very dramatic happened overnight to currency traders who were short the offshore Yuan, or the CNH: they were crushed by the Chinese Central Bank. Specifically, as we reported last night, the overnight HIBOR, or deposit rate in the offshore currency, aka the cort of borrowing Yuan in Hong Kong went from almost nothing to... 66%!
Using very colorful terms, a Rabobank strategist told Bloomberg that "a 66% rate is murderous for others being swept up in this who are not speculating." Earlier in the day, a PBOC advisor warned that short selling the yuan "will not succeed," adding that "it is pure imagination that the Chinese yuan will act like a wild horse without any rein."
Indeed, the PBOC quickly "reined in" the wild horse, but what is most interesting is how it did that.
Think Martin Shkreli and Kalo Bios.
Recall how the worthless stock soared from almost nothing first to $10, then to $20 before finally peaking in the mid-$40s: the reason for that is that Martin Shrekli, since arrested, proceeded to buy ever more of the KBIO float, making shorting first prohibitively expensive, and ultimately, impossible when he owned virtually all of the float.
The PBOC did just that overnight when it made the cost of shorting the CNH so high that every short had no choice but to cover and run, leading to the biggest squeeze in the CNY in recent history, and a parity between the onshore and offshore currencies.
to patirty
Still confused? Here is Axiom's Gordon Johnson explaining what happened in more detail:
First... see this chart (i.e., 1 week HIBOR up a WHOOPING 200% overnight… WOW!!!):
What the Chinese government is doing is restricting access to the CNH market to bring the CNH back in line with the CNY.
How? Well, draining liquidity from the CNH market by selling dollars and buying CNH… then not providing any new CNH for the banks to lend (since the PBOC is the one who CREATES CNH, they can simply restrict the supply). On top of that, they are ordering commercial banks not to lend any of the remaining CNH they may have to short sellers.
Thus, as stated above, this has the side effect of making the currency totally unusable… so presumably they won’t allow this state of affairs to continue for long.
But their immediate priority was to bring the CNH back into line with CNY (I mean, their whole pitch for SDR inclusion was that the CNH would track the CNY, so even though the currency isn’t fully convertible, investors/central banks/whoever could own something that was the equivalent of owning the currency – before this recent experiment, THIS IS NOT THE CASE).
So, in our view, now they will oscillate back and forth between draining liquidity (when the CNH weakens vs. the CNY) and adding liquidity back (to make the market function).
They hope, I guess, that there’s some magical point they can find where the CNH doesn’t sell off but the market still functions? We are taking the “other side” of this bet.
How does it all end? Well, we know that despite Martin Shrekli's attempt to manipulate KBIO stock higher, the company - which had no fundamental value - went bankrupt just one month after Shrekli's manipulation. As for Shrekli, he is arrested pending charges of fraud, and could spend many years in prison.
As for China's attempt to repeat what Shkreli (and Volkswagen management before him) did, we doubt the ending will be any happier.
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I am really pissed that Santa didn't bring me my magical money printing machine, so that I could do this kind of shit from home...in my basement....
S/
Pulled a Shkreli, new drinking game?
We Shkreli'd some folks !
if short can murder long by whatever short takes, tell me why short can not be murdered by whatever long takes?
China is the Wall Street laboratory for finanical and monetary experiments.
And I thought they bought his Wu Tang Clan album, for an even higher price.
Jamie Dimon would never do anything like this. It's not a big enough scam
So did Soros get his PP spanked by China?
So, I'm not an expert on this type of thing, so maybe I'm off base here. But if I understand this correctly, China just exported USD to buy all the CNH / offshore Yuan and implemented controls to limit liquidty of Yuan outside of China. So the offshore Yuan is now held by China, defeating it's purpose as being the external currency. If that is correct, couldn't the Western central banks / US government just subsidize the shorts and force China keep doing this, bottling up the Yuan and making it irrelevant to the rest of the world and guaranteeing the USD remains the world reserve currency?
“Round up MMT theorists… TBTF and CB staff and execs… and feed them to crocodiles…”
So wrote “Element” at Reply, 11:58.
What a timid – and useless – suggestion.
Those who shout, “arrest them, kill them, all of them”, just don’t get it.
Nothing is accomplished by arresting them, or killing them.
What counts – the only thing that matters – is a redress that makes them accountable for ruined lives they have caused. This requires recovery of the booty they stole, and award it to those whose lives were ruined.
There is no other way to bring justice to those thousands of grievances that so many people complain about.
To expect criminal and useless classes to hang or drown themselves for what they have done is – what, shall we say, “dim-witted”?
On the other hand, if our cause is the imposition of tyranny, “kill them” is probably the best “correction” possible; for, it gives Judeo-Bolsheviks (JB’s) an acceptable excuse to impose martial law… and smear the cause of man. What else should we expect from JB’s? They have been destroying civilizations for at least 5,000 years. For them, using slow-witted dupes is another specialty they have developed to a high art form.
In other words, he who proposes executing government-protected assassins and thieves is doing the work of Judeo-Bolsheviks.
It doesn’t matter whether he is an unwitting dupe or a conscious counter-intelligence operative – the result is always the same: an excuse for more tyranny; some call it “martial law”.
It happens repeatedly: JB’s 1) lead slow-witted and angry peasants onto streets, block traffic (that is, violate rights of non-protesters); 2) incite peasants to more violence; 3) when police begin shooting, JB’s disappear; 4) peasants take bullets (Did I say, ‘slow-witted’?); and 5) martial law, or soldiers, follow.
No, if our cause is liberty, we don’t want to execute them – and we don’t want to arrest them.
There are at least five reasons.
One: we don’t want to become like them: that is, execution without due process.
Two: it would put them out of their misery too quickly; it is more pleasing to prolong it as long as possible.
Three: instead of “slitting their throats”, we should recover the booty they took and return it to those from whom it was wrongly taken: for example, taxes wrongly imposed or collected (one); the neglect and abuse of children compelled by such taxes (two); among many others. There are tens of trillions floating around the world (three) in various forms – bank accounts, stocks, bonds, real property – available for recovery.
Four: it would be a pleasure to watch JB’s and their useful idiots scatter as cornered rats as we make them accountable for what they did – and are doing.
Five: it would lay the foundation for an unprecedented experiment in liberty; for, none other attempted to make tyrants accountable – only to escape them.
We will be the first in this regard; for, we have resources available to us that no one else in prior ages had: a) a heavily armed population (altho greatly hobbled by medication, see this for cure,) b) instant communication, and c) lessons of prior ages to guide us.
Unfortunately, while most Americans are aware of resources a) and b), hardly any are aware of the last… or how to cure a medicated lethargy.
And without this last resource, all will be for naught, actually worse… much worse; for, how can you play the game if you don’t know the rules (law and procedures of redress)?
It all comes to one question: “Will we strive for redress… or leave the task for our children?”
Chinese copycats are trounced by cabal puppetmasters of the world economy
Your problem is this :
urs is not a reserve currency.