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China Joins Global Easing Party By Cutting The Lending And Deposit Rates By 25 bps
Update: 9:00 am has come and gone... and no global bailout unlike November 30, 2011. Not a good sign for those expect a central-bank D-Day.
While minutes ago the Bank of England followed in the ECB's footsteps, it was the China central bank that stole England's thunder, announcing an unexpected rate cut moments before 7 am, and thus finally joining the global easing party: this was the first Chinese interest rate cut since 2008. As a reminder, hours before the global central bank intervention on November 30, China announced its first (50 bps) reserve requirement cut since 2008. Is today's PBOC move, which is the first cut of deposit and 1 year lending rates also since 2008, a harbinger of something much bigger to come any second now?
From the PBOC:
The People's Bank of China decided to cut financial institutions RMB benchmark deposit and lending interest rates since June 8, 2012. One-year benchmark deposit rate cut of 0.25 percentage points, year benchmark lending interest rate cut by 0.25 percentage points; other deposit and lending interest rates and individual housing provident fund deposit and lending rates be adjusted accordingly.
Since the same day: (1) the upper limit of the floating range of interest rates on deposits of financial institutions was adjusted to 1.1 times the benchmark interest rate; (2) loans from financial institutions interest rate floating range of the lower limit was adjusted to 0.8 times the benchmark interest rate.
And from Bloomberg:
China Cuts Interest Rates for First Time Since 2008
China cut interest rates for the first time since 2008, stepping up efforts to combat a deepening economic slowdown as Europe’s worsening debt crisis threatens global growth.
The benchmark one-year lending rate will drop to 6.31 percent from 6.56 percent effective tomorrow, the People’s Bank of China said on its website today. The one-year deposit rate will fall to 3.25 percent from 3.5 percent. Banks can also offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent.
European stocks and U.S. index futures extended gains as China’s move fanned optimism that policy makers around the world will do more to bolster growth. The announcement, two days before China is due to report inflation, investment and output figures, may signal that the economy is weaker than the government expected.
“This will be the beginning of a rate cut cycle and there will be at least one more reduction this year,” said Shen Jianguang, a Hong Kong-based economist with Mizuho Securities Asia Ltd. “The data to be released over the weekend must be very weak and inflation must have eased sharply.”
The MSCI All-Country World Index added 0.8 percent at 7:30 a.m. in New York. The Stoxx Europe 600 Index jumped 1.2 percent, extending yesterday’s biggest rally in six months, while the Standard & Poor’s 500 Index futures advanced 0.7 percent.
Slower Growth
The central bank last reduced benchmark interest rates in late 2008, when the government unveiled a 4 trillion yuan ($586 billion at the time) stimulus package to counter the effects of the global financial crisis. Interest rates have been unchanged since an increase in July 2011.
Industrial output in China, the world’s biggest producer of steel and cement, probably rose 9.8 percent last month from a year earlier, close to the slowest pace in three years, according to the median estimate in a Bloomberg News survey of 27 economists ahead of a National Bureau of Statistics report due June 9.
Inflation may have moderated to 3.2 percent in May from a year earlier after a 3.4 percent rate in April, a separate survey showed, the fourth month consumer prices have risen by less than the government’s 2012 target of 4 percent.
Today’s move signals policy makers are concerned that the cost of borrowing is crimping companies’ spending and holding back expansion in the world’s second-biggest economy. Three bank officials told Bloomberg News last month that the nation’s biggest banks may fall short of loan targets for the first time in at least seven years as demand for credit wanes.
Slowdown Worsening
The PBOC cut banks’ reserve requirements in November for the first time in three years, and again in February and May, to spur lending.
China’s manufacturing expanded at the slowest pace in six months in May, a government report showed on June 1, adding to signs the nation’s slowdown is worsening. A separate purchasing managers’ index from HSBC Holdings Plc and Markit Economics pointed to a seventh straight contraction, the longest stretch since the global financial crisis.
Premier Wen Jiabao and the State Council, or Cabinet, pledged last month to place greater emphasis on stabilizing growth after data showed April industrial production, new loans and exports all increased less than economists forecast. The data prompted banks including Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. to cut their economic-growth estimates.
Slowdown Worsening
The PBOC cut banks’ reserve requirements in November for the first time in three years, and again in February and May, to spur lending.
China’s manufacturing expanded at the slowest pace in six months in May, a government report showed on June 1, adding to signs the nation’s slowdown is worsening. A separate purchasing managers’ index from HSBC Holdings Plc and Markit Economics pointed to a seventh straight contraction, the longest stretch since the global financial crisis.
Premier Wen Jiabao and the State Council, or Cabinet, pledged last month to place greater emphasis on stabilizing growth after data showed April industrial production, new loans and exports all increased less than economists forecast. The data prompted banks including Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. to cut their economic-growth estimates.
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QE to infinity, bitchez.
Now watch how fast the price of oil kills the latest QE party.
Same story every time...
The boys from Brazil are sending in Barry's campaign contribution check as we speak.....cause it's just freakin crazy to pump that stuff out of the back yard.
And stay tuned for whether or not the price of pork kills the communist party.
Playing the Yids game, never thought the Chinese would be this stupid.
?
Edit: Oh and FUCK YOU BERNANKE!
Want to see a crony?
http://media.nzherald.co.nz/webcontent/image/jpg/201223/bernankeNewSmileAP_460x230.jpgThe first couple hundred billion in reserves were a clue.
So they are easing to buy more gold and silver! Makes sense! Whereas Bernanke is easing to buy more worthless paper! Like Bonds.... Game over! China wins, they GET IT!
The Fed has 8,400 ounces of gold.
That's TONS, not ounces... approximately 8400 UNSUBSTANTIATED TONS.
Yep. opps.
I'll believe it when I see it.
The people who get to use the newly printed money first are the ones who benefit the most. It's the sheeple that get screwed. Of course China knows this, they are a big currency manipulator, right Timmay?
More reason for Chinese savers to buy GOLD.Nothing else gives a return ... cause you sure don't want to buy one of the empty condos growing across the land, or put your money in a Chinese bank (stuffed full of NPLs)
Can someone please explain this to me as I claim total ignorance here. China cuts interest rates. I watch gold in USD go from 1613 (approx) to 1625. Why would gold rise in USD? Would gold not rise in Remninbi and fall in USD as the USD strengthens?
You're trying to cling to the premise that any of it is legit. Accept that it's all bogus and you'll be better in the head.
+1 as usual.
Meanwhile what's the half-life of this recycled policy? Weeks or days?
Lol...I mean, cry.
+1
Coordinated global effort to prevent the cardboard ponzi box from crumbling.
"... All the restaurants are Taco Bell now." - Demolition Man
are you trying to make a correlation between the "market" and common sense?
Fonz - I get your point, but on a gut level it kind of makes sense - interest rates (globally) falling - global rush towards gold - price of gold goes up...
But if TPTB had chosen that moment for a raid, then some pseudo analyst would have made the well-structured argument you put forward to explain why things had gone the other way!
China cuts interest rates > more disposable Chinese capital to buy gold > Everyone rushes to buy gold before the Chinese get it all and send the price up > price goes up anyway
Thanks for the responses. I guess I am insane to try to connect the dots. I will now wait to see if when Ben farts at 10am if it is loud or smelly to see where gold goes from here.
Make sure you bring your binoculars!
They say it's always loud AND smelly.
That's why they're all smiling. They love the smell of corruption.
http://media.nzherald.co.nz/webcontent/image/jpg/201223/bernankeNewSmileAP_460x230.jpghttp://implode-explode.com/viewnews/2012-06-06_TheendoftheconinChinaAndy...
“Engage people with what they expect; it is what they are able to discern and confirms their projections. It settles them into predictable patterns of response, occupying their minds while you wait for the extraordinary moment — that which they cannot anticipate.”
sun tzu
familiar?
(to the herded)
It means Central Bankers may be trying to keep the shadow economy going, while ignoring how the shadow economy is underming the REAL economy.
From the least qualified person here (making it easy to offer an opinion):
The market is not always rational - there are too many variables at play at any moment and changing simultaneously and there is a lag in response to each or the response has been anticipated. There is no making sense of it in the short-term really - there are only shifting probabilities. Which is why I believe "traders" resort to "technical" analysis and consensus - essentially abandoning all reason in the short term. Only in moments of extreme stress to the system is reality revealed however briefly. Perfect ponzi game.
This is why the market craves constant stimulus, good or bad doesnt matter - without volatility it would die of entropy death.
IMHO
So where is my pension fund gonna get its 8% YOY returns now eh? Oh... wait
You need to think about working from home with one of those hotties.
From gold, guns, ammo, silver, water, and non-perishable food stuffs?
Oh, alcohol and pot might give good returns in the future also :-)
Why would China need to cut rates? I mean they say that they are doing so well. Can't be that they are lying now could it? Definitely need to ask for gold when they order more soybeans. Awesome.
Can't be. If there is one thing in this world that is absolute, the Chinese have impeccable integrity and honesty. You can take THAT to the Chinese bank of your choice.
and the ES...EXPLODES higher.
This is so f'ing ridiculous.
At least I'll have something to tell my grand-children from my debt prison cell.
china in on the world ponzi scheme, they are learning the how to play the game with advisors from jpm and gs.
Their advisor is better than GS and JPM.
Sun Tzu...bitchez.
+1
“To know your Enemy, you must become your Enemy.”
sun tzu
Walt Kelly said something similar.
So did PT Barnum
china in on the world ponzi scheme, they are learning the how to play the game with advisors from jpm and gs.
Dont need much of advisors, its simple: Earn easy dollars and convert to hard and productive assets while waiting for the inevitable. Same as preppers but on a national scale.
Hey that sounds familiar... issue a bunch of worthless paper and IOUs to buy up petroleum / guns / bullets / nukes / forward bases / other stuff that gives us power to take all the gold you're buying.
And people say the MIC doesn't know what they're doing.
God save the equities valuations!
God save the equities valuations!
Chuck the Finese.
or maybe it means the FED can hold off like the BOE?
BOJ (a few days ago): no easing/qe
ECB (two days ago): no easing/qe
BOE (today): no easing/qe
Tyler over-dramatizing: There is no current Global Easing/QE Party
There may be one later....or not....?
Gold seems to say yes...
So how much will Ben buy? 1 trillion? 2 trillion? It's going to have to be big in order to not disappoint the heroin junkies.
looks like FAZ loses again!
Once the Bernanke is done fluffing Congress with his dovish earnestness, I am laying into the shorts heavy.
There you go, using logic again.
Fuck these fuckers. I have long since taken my ball and gone home.
This low rate of interest is not simply the Chinese government reaction to the slowdown of its economy. In a centrally planned economy, this is a red light of danger.
China needs to maintain an 8% growth rate to keep their people busy and prevent them from thinking about overthrowing the government. They are going to end up being the biggest bubble. Ever. Why do you think they are buying all that gold?
We're doing to China now what we did to Japan in the '90s. The funny part is we telegraph these punches from a mile away and the chin is still firmly in the trajectory when the punch arrives. China is mesmerized... and screwed.
http://www.rt.com/news/line/2012-06-07/#id32210
US patience with Pakistan ‘reaching limits’ – PanettaDefense Secretary Leon Panetta said on Thursday US officials are “reaching the limits” of their patience with Pakistan and urged the country to do more to root out the Al Qaeda-linked Haqqani terrorist network.
Mein Fuhrer! I WALK!
I think we better start worrying about the World's patience with the US. At some point in the near future, when we have reverted to a 3rd world country (in reality and on paper), payback is going to be a bitch.
Oh yeah... "you and what army". I'd love to see the result of any country stupid enough to try and stop us. Americans themselves continually underestimate just how powerful the USA is. Like China is going to do anything to us... call me when they have a navy that can take on six carrier groups. Panetta has their balls in a vise and they know it.
Hell, one example alone... I think Nucor recycles more steel than most countries produce straight up. And the quality is awesome. I wouldn't use Chinese steel to make paper clips let alone anything military grade. Good lord, we have missile cruisers that can take out satellites for cryin' out loud. Operation Burnt Frost, anyone? Remember that? The Chinese came out crowing about some new faux military tech they dreamed up to look tough and in response we popped a satellite out of the sky with an Arleigh Burk cruiser just to show those clowns who was boss.
George Carlin's routine hit the nail on the head... anyone that trys to horn in on the US' "running the world" action is gonna get popped. That's our fuckin' job!
While you're puffing your chest out playing internet tough guy proclaiming military superiority, our country is rotting from within. Why would anyone attack us when all they have to do is show a little patience and wait for our ponzi scheme economy to collapse all on its own? Trillion dollar weapons systems are worth little if you can't buy your spare parts from China anymore or put deisel in your tanks because no one wants our dollars. I'm sure there were plenty of Romans that thought they were invincible, right up until the barbarians showed up at their gates...
Hahaha... So much for the "superpower."
What Panetta is really saying is Pakistan should stop retaliating to its drone strikes. Covert tit for tat and it will be getting messy at some point.
The war against the banksters and their prodigies would be fought in AfPak.
Pakistan hasn't seen a hundredth of what we're truly capable of. We'd glass their country over and paint lines so India would have free parking if it ever came to that.
Hell, we even held back in WW2. Patton was right, we could have assimilated Germany and shoved the Soviets east into the Pacific if we truly wanted to. Everyone plays the whiny bitch game because they know we're the huge hulking big brother that always holds back. Fight USA, lose, USA rebuilds country better than it was before, Profit.
Pakistan hasn't seen a hundredth of what we're truly capable of.
Capable of what? "Nuking back to stone age" or perhaps shooting the women and children, while the men are away like with Native Americans (Red Indians)?
Soviets were much more brutal than Americans can ever be and were not held back by negative PR. How did their misadventures end? What happened to them?
P.S. First rule of war: Never underestimate your enemy or over estimate your own capabilities.
Hot new IPO. Read all about it.
http://www.mcsweeneys.net/articles/prospectus-for-silicon-valleys-next-hot-tech-ipo-where-nothing-could-possibly-go-wrong
Adjusted Consolidated Assumed Income - LOL.
Long PNZI on the momo trade.
Confucius say: Man who go to discount barber get cut rate.
Great News. Yesterday we had a rumor of a rumor that the fed was thinking of launching a rumor about QE3, now China jumps on the bandwagon with a rate cut form of easing. The bad times are over and all our problems are solved. We're saved! I'm going to go out and buy a new car, TV, a wheel barrow full of Greek bonds, 10,000 shares of facebook, and 3 houses, all on credit. (Isn't this the reaction we're all supposed to have at this wonderful news?)
You forgot to get some US treasury bonds''....Gold is in a bubble and you'll need the "safe" haven of the bonds to hedge against your facebook stock.
Oh btw,I have some Chinese condos on sale if you're interested
Thanks for reminding me on treasuries. Wouldn't want to miss out on those awesome yields.
As far as the Chinese condos, I'll buy them only if they are in one of those empty Chinese cities I keep hearing about. I really hate neighors, and value my privacy, so what better way to protect this than living in a city by myself?
You now know the moves of the game. Markets can't tolerate a dip, central banks will rescue. Failed economic policies, central banks will rescue. Sputtering GDP, central banks will rescue.
Countries having debt problems, central banks will rescue.
Capitalism pre 2008 is gone.
This decision wasn't reached overnight last night.
This decision was reached over the past weekend. We're just now "officially" being notified, after the Big Boys made their money in this latest turnaround in the markets. Which began, by the way, overnight Sunday/Monday.
It's a game, and it's all rigged.
Well spoken.
Decide on a game plan.
Notify all club members what the timing of the plan is.
Setup the media coverage.
Launch the plan and watch the muppets trying to figure out what's going on.
Now I know why the markets were way up yesterday. Are all the trading details public record? There should be a program that analyzes who is doing what on a realtime basis.
Inflation it shall be.
Welcome to the party pal!
Swiedem and France sov yields spike up.
Our initial jobless claims dropped but continuing claims rose.
YEECH!
http://confoundedinterest.wordpress.com/2012/06/07/china-cuts-rate-u-s-jobless-claims-fall-continuing-claims-rise/
A bad case of global central bank activism.
While they talk about addressing domestic economic slow down, we know that this is another attempt of government proping up the stock market. Eventually, the short term optimism instilled in the stock market will wear off. However, the next Chinese government will have more mess to clean up. Thanks a lot, Chairsatan of China.
"Fuck you, Bernanke" - China CB
Annnd speculators spiked the price of oil on the whiff that someone might drive to the store.
Who was expecting a bailout? Not the markets
Nobody questions that the CB of China was officially off work and probably at the bar when this spectacular rate decision was announced? I know, I know. Just stating the obvious. They are so corrupt and manipulating. Shit must be really bad for them.
BDI is collapsing in June?
A rate cut cheapens the Rimimbi which is in essence the equivelant of flooding the markets with more fiat currency providing a boost to the price of Gold in Dollar terms but given JPMorgans huge short positions in the COMEX and London exchanges as the Gold price rises in Dollar terms JPMorgan has to unwind its positions. This will provide a huge blow to JPMorgan. This a move to break the hold that JPMorgan and other big TBTF banks have on the western gold exchanges. This is move by China to break the gold cartels' strangle hold. They want to break the Gold price supression team. China knows that a price increase in Gold shares will create an increase in demand for the physical gold which is not in the vaults. Can anyone say DEFAULT?????