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China Begins Monetary Easing, Lowers Reserve Ratio By 50 bps: Gold, Crude, Futures Spike

Tyler Durden's picture


It appears that China has already forgotten its close encounter with inflation as recent as a few months ago leading to assorted riots, and is instead far more concerned with the collapsing housing market. As a result it just announced a 50 bps reserve ratio cut, well in advance of when most commentators thought it would happen, on what is now the start of a monetary policy loosening cycle. The kneejerk reaction is for futures to surge and gold to spike, and crude to pass $100, even as the EURUSD was once again drifting lower overnight. And while this is beyond bullish for commodities, we doubt equities will remain bid unless Europe mysteriously fixes itself overnight too. Which won't happen. More from Reuters: "China's central bank cut the reserve requirement ratio for its banks on Wednesday for the first time in nearly three years to ease credit strains and shore up activity in the world's second-largest economy." Naturally, this ties Bernanke's hand even more as Chinese inflation will now be stoked internally in addition to importing any excess inflation to be generated by the Chairman, likely leading to an even faster spike in global inflation the next time we get US-based quantiative easing. Look for Chinese-based purchases of gold to surge.

and as shown by Bloomberg:

More from Reuters:

The 50-basis-point cut in the reserve ratio showed China's monetary policy has swung into easing mode as economic growth slows while inflation eases.


The cut lowers the reserve ratio for China's biggest banks to 20 percent from record highs, and frees up funds that could lubricate lending to cash-deprived small firms.


The new ratio is effective December 5, the central bank said in a short statement on its website.


The central bank last cut the reserve ratio in December 2008, when China's economic growth floundered on the global financial crisis.

We expect many more analyses to come on the matter shortly.


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Wed, 11/30/2011 - 07:52 | 1929154 Irish66
Irish66's picture

Hard landing

Wed, 11/30/2011 - 07:56 | 1929164 Oh regional Indian
Oh regional Indian's picture

Hah! A clear sign that in this new reality, you don't control debt, debt controls you. Yes, even China is in deep debt shit. I mean, look at the US, a covert Planned economy, total mess.

Now imagine an openly planned economy! India is a bad mix of both. Yik....



Wed, 11/30/2011 - 09:57 | 1929578 bigun
bigun's picture

chanos just wet his pants


Wed, 11/30/2011 - 07:54 | 1929159 BW
BW's picture


Wed, 11/30/2011 - 07:57 | 1929170 Oh regional Indian
Oh regional Indian's picture

More like de/bi/in/stag-flation


Wed, 11/30/2011 - 08:00 | 1929180 BW
BW's picture

Currency debasement.

Wed, 11/30/2011 - 08:01 | 1929183 Minoan
Minoan's picture

One solution.The Austrian school of ...whatever.

Wed, 11/30/2011 - 07:55 | 1929160 KlausK
KlausK's picture

What did you expect? They *invented* paper.

Wed, 11/30/2011 - 07:56 | 1929163 HD
HD's picture

...and fireworks. BOOM!

Wed, 11/30/2011 - 08:07 | 1929189 Belarusian Bull
Belarusian Bull's picture

And paper money, btw.

Wed, 11/30/2011 - 08:15 | 1929206 wandstrasse
wandstrasse's picture

Marc'o'Polo was deeply impressed and shocked as he saw Chinese money printing...

Wed, 11/30/2011 - 07:55 | 1929161 ZippyBananaPants
ZippyBananaPants's picture


Wed, 11/30/2011 - 07:55 | 1929162 PaperBear
PaperBear's picture

Game on.

Wed, 11/30/2011 - 07:56 | 1929165 jcaz
jcaz's picture

LOL-  gee, think China is in panic mode for some reason? 

Oh no- they're just trying to "help out" the world with this move.......


Wed, 11/30/2011 - 07:57 | 1929166 Matt1973
Matt1973's picture

I'm not standing in the way of central bank juice

Wed, 11/30/2011 - 07:57 | 1929169 Aductor
Aductor's picture

This has of course nothing to do with China PMI being released within 24 hours.

Wed, 11/30/2011 - 07:57 | 1929171 slaughterer
slaughterer's picture

The question of the day: Now that the PBOC unexpectedly started it, how long will this monetary loosening party continue?    There are clearly dates within the next two weeks, where this party can continue, and continue.  

Wed, 11/30/2011 - 08:16 | 1929208 rguptatx
rguptatx's picture

From Seeking Alpha: Given the horrid investment performance of the BRICs, SocGen's professional bear Albert Edwards suggests the acronym ought to stand for Bloody Ridiculous Investment Concept. YTD: Brazil EWZ -28%, Russia -23%, India INDY -32%, China FXI -20%. Could China's move to easing turn things around?

Wed, 11/30/2011 - 07:58 | 1929174 pmcgoohan
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The Chinese economic data tomorrow is clearly dire.

But ES cant get enough of that moral hazard.

Wed, 11/30/2011 - 07:59 | 1929175 PaperBear
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I now understand why gold/silver was being whacked hard the hours before this announcement.

Wed, 11/30/2011 - 07:59 | 1929178 pepperspray
pepperspray's picture

Coffee's fault

Wed, 11/30/2011 - 07:59 | 1929179 ZippyBananaPants
ZippyBananaPants's picture

Really? From 20.5% to 20.0%.

They really don't bother putting that in a headline. Since it was under 18% less than 18 months ago.

Wed, 11/30/2011 - 08:00 | 1929181 westboundnup
westboundnup's picture

Amazing how the policies of a authoritarian state-controlled country and CB mirror those of the US and the Fed.

Wed, 11/30/2011 - 08:00 | 1929182 No Mas
No Mas's picture

China has forgeotten?  ZH has forgotten its endless calls for the end of time.  You guys are becoming good for nothing but a laugh.

Listen, China will do what it needs to do to maintain growth and as bad a taste as it is for the ZH Sheeple, it will succeed.  And Europe is no different.  You guys are perpetual shorts and gold bugs of the highest order and as such you're just sheep on the railroad tracks of life.  Standing between the rails, nibbling on the short stuff and unaware of whats headed your way. 

And sheeps and trains don't mix.  So, please, for those who are casual readers here, do not let the bleating of the ZH Sheeple lure you onto the rail of collapse.  That light ahead that is coming your way?  It is the locomotive of economic and equity growth.  Don't let the fools around here get you run over!

Yet another great day for economic news around the world!  Things are looking better so come on ZH Sheeple; get out, get a woman/woman (whichever you prefer) and get a life :)

Wed, 11/30/2011 - 08:07 | 1929188 Aductor
Aductor's picture

Is that you Altucher?

Wed, 11/30/2011 - 08:08 | 1929190 Irish66
Irish66's picture

That was some hopium interview dow 20,000

Wed, 11/30/2011 - 08:28 | 1929228 Savyindallas
Savyindallas's picture

It may be Altucher;s evil twin-or gay lover. He sure does sound klike Altucher.

Wed, 11/30/2011 - 08:09 | 1929193 Belarusian Bull
Belarusian Bull's picture

MillionDollarBonus! We missed you so much! Welcome back.

Wed, 11/30/2011 - 08:13 | 1929199 jcaz
jcaz's picture

Magnificent post, No Mas-  as ES booms up to all of 1205, you're surely a hero on Wall Street today......

"great news around the world"-  oh yes, when FBOC has to cut rates, it's certainly good news.....


Wed, 11/30/2011 - 08:17 | 1929210 EscapeKey
EscapeKey's picture

If there's one thing we need, it's more leverage in the banking system situated in the world economy with the biggest housing bubble ever recorded.

Yeah, as No Mas points out; "it's nothing". Nothing to morons, who failed school, that is, and are now sitting ducks in the global ponzi economics scheme will currently live in.

Wed, 11/30/2011 - 08:15 | 1929205 LongSoupLine
LongSoupLine's picture

wow, I've seen  some troll diarrhea-like rambling in my time, but this one's a keeper.

No Mas needs the mental equiv of!

Wed, 11/30/2011 - 08:19 | 1929212 Global Hunter
Global Hunter's picture

I have a woman and I know for a fact I couldn't handle a woman/woman.

Wed, 11/30/2011 - 08:17 | 1929209 Sandy15
Sandy15's picture

Troll alert!!!  I don't believe we are sheeple when ZH points out the 1.7 Trillion dollars in the last 6 months the Fed put into the banks.  88 billion in just the last week.  7.7 Trillion in the last 2 1/2 years.  (NOTE for the troll:  That is half of our total 15 Trillion national debt we can't pay off.  Where did the FED get this money?)  Maybe you should quit living in the rainbow and clouds lala land the progressives have you in......  You will crash hard if you are not prepared.

Wed, 11/30/2011 - 08:56 | 1929270 quacker
quacker's picture

Things are looking better for who? Where do you Joseph Goebbels types come from?

It's really quite stunning. We don't have a single net job in over a decade. Never happened before. Even the 1930's and 1970's saw millions of new jobs. And you seem to think printing paper is the answer. The answer for who? 



Wed, 11/30/2011 - 09:27 | 1929395 Implicit simplicit
Implicit simplicit's picture

Just as Duran was not really prepared for the famous "No Mas" fight against Leonard, delussionist who propagate a hopium scenario against all evidence will be nailed hard when your stops are hit after this pseudo rally expires and conttinues on its trend downward. This rally will create a great shorting opportunity.

Wed, 11/30/2011 - 08:09 | 1929191 usikpa
usikpa's picture

Common. This is JUST the RRR! A year ago when it was being raised in steps, the market would just shrug it off.

If anything, this indicates how severe the state of affairs is with the mandarins

Wed, 11/30/2011 - 08:09 | 1929194 slaughterer
slaughterer's picture

He called us "ZH Sheeple" again, and advises we "get out, get a woman/woman"  You are assuming that a.) we do not play this game both long/short, b) we do not have a sexual partner, c.) we do not have a life, ie. are dead.   These assumptions are incorrect, my friend.  

Wed, 11/30/2011 - 08:19 | 1929214 EscapeKey
EscapeKey's picture

Well, it's my take that when you don't really have an argument, you have to point out irrelevant issues, and make derogative statements. No Mas fits the bill on both counts.

Wed, 11/30/2011 - 08:11 | 1929197 Tic tock
Tic tock's picture

This is relatively unimportant, except to Chinese investment at the margin. If anything, it signals a a more appropriate yuan in the medium term

Wed, 11/30/2011 - 08:14 | 1929200 RobotTrader
RobotTrader's picture

You could see this coming a mile away


TPTB waited until CDS spreads went parabolic before pulling the rug out.

Just like they did to the silver bulls as the price was approaching $50

Looks like the bears are about to get hammered

Now watch the bear trades on credit unwind with lightening speed

Could be a real shocker, with so many guys pre-positioned on the wrong side, expecting Europe and/or China to fold.

Wed, 11/30/2011 - 08:20 | 1929216 jcaz
jcaz's picture

..... Or, could be a real laugher for guys like you sitting in their mom's basement, paper-trading the long side.......

Wed, 11/30/2011 - 08:20 | 1929217 EscapeKey
EscapeKey's picture

Yep, it's outright fraud and manipulation, alright. But somehow it seems as if you're ok with that?

You think this will carry on forever?

Wed, 11/30/2011 - 08:21 | 1929221 LongSoupLine
LongSoupLine's picture

lol...yet another robo "rear-view mirror" moment.

"...could see this coming a mile away"  ...oh brother...

Please go back to troll school...'cause you've got to be an embarrassment to even the bad trolls in your clan.

Wed, 11/30/2011 - 08:21 | 1929202 sbenard
sbenard's picture

Since when is cutting reserve requirements a good thing? It's a sign of despeeration! This is only going to amplify the bad loans and imbalances on China's state-run economic books. This is going to guarantee a worse hard landing once even more bad loans begin to show up. This is a short-term heroin fix that is going to lead to a massive withdrawal down the road. This is akin to China building even MORE ghost cities! It is a clear sign of desperation!

Wed, 11/30/2011 - 08:15 | 1929204 PaperBear
PaperBear's picture

Is this good for $1,800/oz gold and $35/oz silver by the end the week ?

Wed, 11/30/2011 - 08:18 | 1929211 lemosbrasil
lemosbrasil's picture

Where is Wally ?

Wally is at 9.650-9.850 to Dow Jones and 1.010-1.040 to SP500 !

See here where is Wally !! :

Wed, 11/30/2011 - 08:33 | 1929215 Monedas
Monedas's picture

1913 to 2013 ! We have Ponzied a clueless world for 100 years ! We´ve had a nice ride ! We´ve lived well and orchestrated Pax Americana with funny money ! Alas,The collapse is at hand ! Could it be Uncle Sam has some tricks to come through the collapse of the Socialist filth world.......on top and ready to lead the return to hard money ? We are in pretty bad shape due to our own Socialist crap experimentation........but; don't underestimate the utter ruinous condition of most of the world ! We have a robust Hoarding Industry ? We still have food ! We have enough oil and gas and coal to grow our own food ! Egypt and Zimbabwe and many, many others aren't so fortunate ! Bush's War on Terror is starting to produce satisfying results even with the inept Barack and Hillary at the helm ! We can exit Iraq now that the Arab Spring dominoes are starting to fall.....Syria, Iran even Pakistan are next ! Teflon America ! The shit don't stick ! Wonderchild China is our invention....and they have serious problems ! Hoard and hang tough ! WE are too big to fail ! Monedas 2011 Comedy Jihad We're Fucked But The World Is Super Fucked ! Hey Drifter....not to late to enlist in the Israeli Defense Forces and atone your soul !

Wed, 11/30/2011 - 08:21 | 1929220 TradingJoe
TradingJoe's picture

Stop yelling at each other and start making money! You will need every fxxxing penny of it, soon!

Wed, 11/30/2011 - 08:22 | 1929222 Squishi
Squishi's picture


Euro Crisis

Japan Ponzi


Syria mayhem - Iran War

Inflation Vs. Deflation

Ben Bernanke

Wed, 11/30/2011 - 08:39 | 1929245 CreativeDestructor
CreativeDestructor's picture

accelerated crash landing... if anything reaches any already desperate borrowers it gets taken down and FXed/transferred out to swizerland (which somebody told them is safe) pronto! all new loans go straight into bad loans, sell any bounce for the love of god!

btw... if you do have any clue i.e. are not Pavlov's dog, tightenning in initial stages is positive for riskies, tightening in late stage is negative, loosening in early stage (ahem) is negative, loosening in late stage is positive. 

good fukin'luck

Wed, 11/30/2011 - 08:39 | 1929247 Nemo01
Nemo01's picture

There is clearly some misunderstanding here. People tend to forget that 3xR is a FX sterilazation tool - not a stimulus tool. 

Wed, 11/30/2011 - 08:40 | 1929251 non_anon
non_anon's picture

sick man of asia

Wed, 11/30/2011 - 08:43 | 1929254 CreativeDestructor
CreativeDestructor's picture

of course it is a sterilization tool (ahem), and action is because capital is going out of china, but how do you want to tell that to rally monkey on tv and bank strategy prose sections?!

Wed, 11/30/2011 - 09:00 | 1929282 fonzanoon
fonzanoon's picture

What gold spike? It's flat...actually it's down.

Wed, 11/30/2011 - 10:42 | 1929847 Bicycle Repairman
Bicycle Repairman's picture

Refresh your screen.

Wed, 11/30/2011 - 09:02 | 1929286 bnbdnb
bnbdnb's picture

WTF just happened? EUR spike 100 pips in 20 seconds?

Wed, 11/30/2011 - 09:17 | 1929355 Monedas
Monedas's picture

Yee of little Faith ! Got spike ? Fuck spike ! Got dry powder ? Still ??????? Monedas 2011 Comedy Jihad Spike My Fuck ! Shut up and hoard !

Wed, 11/30/2011 - 09:33 | 1929430 Georgesblog
Georgesblog's picture

This illustrates the point that war is a commercial action. With increasing U. S, activity in Asia, China steps up to improve it's export position, competing with India. The housing market is only one of China's internal issues. Lowered production demand idled factories and contributed to civil unrest. Chinese people want a paycheck, just like everybody else.

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