"Policymakers responded to the financial crisis with easy monetary policy and low interest rates. The critics — including us — argued against 'solving a debt crisis with more debt.' Put differently, we said that QE was necessary, but not sufficient for a recovery. We are now coming to the moment of reckoning: central bankers look naked, and markets have nothing else to believe in."
Take your pick - here's three good reasons to engineer a "crash" that benefits the few at the expense of the many.
Here We Go Again: US Equities Surge Even As Chinese Stock Market Rollercoaster Tumbles To 8 Month LowSubmitted by Tyler Durden on 08/26/2015 08:16 -0400
It seemed like finally China's relentless and increasingly futile attempts to have a green stock close would work: interest rate cuts, liquidity injections, direct stock interventions, even threats on the Prime Minister's head, and just to make certain moments before the close news very deliberately broke that government funds are buying large financial stocks, especially state-owned banks, to support the index, in the latest clear signs of government support, the Shanghai Composite seemed on pace to end an unprecedented series of consecutive tumbles which have dragged the composite down nearly 1000 points, or 25% in one week, and then... red close, with the SHCOMP down 1.3% to 2927, and a stunned China watching in horror as the central bank and government lose control, and everything they throws at the biggest market bubble of 2015 does absolutely nothing.
Gold has a place in high-net worth individuals portfolios as an insurance policy against systemic risk in the banking system, says Carmignac fund manager Michael Hulme.
Following the most recent Chinese market rout, Deutsche's Jim Reid updates a chart he used back in early June comparing the Shanghai Composite recent performance with that of the NASDAQ back in 1999-2000.
- Global Stocks Struggle to Shrug Off China Fears (WSJ)
- Brief Respite Ends for European Stocks Amid Renewed Retreat (BBG)
- Stock futures rise after China injects $21.8 billion (Reuters)
- China turmoil needn't rattle BOJ, yen rise not a worry: Abe adviser (Reuters)
- Stock-Market Tumult Exposes Flaws in Modern Markets (WSJ)
- Dollar gains as stocks recover, lessens safe-haven bid for yen (Reuters)
"Given the size of foreign holdings of Asian equity and debt, should foreigners reduce their portfolio holdings by 2-3% over the course of a month, it would broadly offset the region’s current account surpluses, leaving their external balances in a shakier position. During the 'taper tantrum' period, foreigners sold markedly more than 3% of their portfolio holdings through June and July 2013, highlighting the risk that portfolio outflows could cause further Asian currency weakness."
China Devalues Yuan To Fresh 4-Year Lows, Arrests Top Securities Firm Exec As Stocks Slide Despite Rate CutsSubmitted by Tyler Durden on 08/25/2015 22:17 -0400
Update: Chinese Police arrested managing director Xu Gang of China's No.1 brokerage CITIC Securities
The Asia morning begins mixed in stock markets, The PBOC explains itself "this is not a shift in monetary policy," - except it is the first such set of measures since 2008, further deleveraging as China margin debt drops CNY1 Trillion from June peak to lowest since March, Regulators begin probing securities firms (and their malicious short sellers), Index futures trading fees will be raised and trading positions restricted. Stocks are limping only modestly higher (after the rate cuts) as Yuan is fixed at 6.4043 - the lowest since August 2011.
Although we've talked plenty about the impact of the yuan deval on Asia-Pac and LatAm, we haven’t yet mentioned India where yesterday, in the midst of the turmoil, central bank governor Raghuram Rajan sought to calm nervous markets by reassuring the world that India is not, for now anyway, in any danger thanks to ample FX reserves and a low CA.Be that as it may, economic realities are economic realities and a currency war is a currency war, which is why, we suppose, the Indian government’s chief economic advisor Arvind Subramanian thinks the country might just have to hit back.
... in the past two weeks alone China has sold a gargantuan $106 (and over) billion in US paper just as a result of the change in the currency regime!
The Fed could potentially go “nuclear” with a massive QE program if the markets fall far enough, but this would only accelerate the pace at which investors lose confidence in Central Banks’ abilities to rein in the carnage.
"Some Chinese agencies involved in economic affairs have begun to assume in their research that the yuan will weaken to 7 to the dollar by the end of the year, said people familiar with the matter. [Their] projections suggest a depreciation of more than 8 percent by Dec. 31 and about 20 percent by the end of 2016."
News That Matters
Because no discussion of global dollar pegs and entrenched FX regimes would be complete without mentioning the Hong Kong dollar...