China: Devaluation Or Much, Much Worse

Authored by Jeffrey Snider via Alhambra Investment Partners,

When the Chinese yuan suddenly plummeted in mid-August 2015, the world looked on in stunned confusion. It didn’t make sense. The global economy was about to take off, they thought, and it wouldn’t be doing that without China’s vast anticipated contributions. Such a large move in such a short time frame for a major currency was another big “unexpected.”

To try and make sense of it, every explanation for it was offered from the textbook perspective. Why devalue at any given time? Exports, of course.

But the move also comes as China’s important export sector has weakened – and overall economic growth looks sluggish. Over the weekend, Chinese customs officials said July exports fell 8.3% compared with a year ago. A weaker currency helps China’s exporters sell their goods abroad.

That was the Wall Street Journal’s main point in their 5 Things To Know About China’s Currency Devaluation published on August 10, 2015. But like “rate hikes”, “devaluation” deserves the quotation marks. That’s not even close to what it was.

Imagine you are a Chinese bank that works with the Chinese corporate sector. For various economic and some non-economic reasons, companies in China require dollars on a continuous basis. In the simplest terms, in order to do nothing more than import goods means having dollars in order to pay for them (chart below).

In truth, there is far more going on (chart below, which takes account of the first).

As a Chinese bank, where do you get these dollars? Even if you are doing nothing more than relending them to China’s corporate sector, they must be obtained from global (offshore) dollar markets. Like all banks you borrow them as cheaply as possible meaning in the shortest terms. Thus, you are now “short” the dollar; really eurodollar:

The “short” is not really dollars so much as funding liabilities. It’s the same way as other global banks are “short” the same things; the “short” relates to the funding mismatch (maturity) between short-term interbank borrowing (globally) on the liability side supporting and maintaining longer duration loan or security assets. Once you create those “dollar” assets, you are on the hook for funding them, in “dollars”, until they are disposed of – voluntarily or not.

It leaves the internal Chinese system with a further process mismatch, whereby the central bank is synthetically long “dollars” while the private banks are synthetically short them. The PBOC still accumulates the vast majority of “reserves” given its role in regulating internal versus external liquidity.

China’s currency, yuan, or CNY, is allowed to float but only on a narrow daily basis. The central bank, the PBOC, sets the range for that daily float.

But between March 2015 and August 10, there was practically no movement in CNY at all. In my mind, there was absolutely no way you could even venture a guess about “devaluation” without first explaining those five months. I wrote in late July 2015:

Trading has been confined, except for very brief, intraday outbursts, to an increasingly narrow range. Given its behavior particularly as a full part of the reform agenda to that point, this amounts to what can only be hidden and inorganic factors. Whether that means PBOC intervention is unclear, though suggested by even TIC, but this is the most important and unexplained dynamic in the “dollar” world at present.

 

Perhaps the June TIC updates will help shed some light on what has been going on with China’s “dollar short”, but I doubt it. The nature and especially the scale of what might be happening in the money markets has global implications, and may (conjecture on my part) start to explain the reversal in the Chinese stock bubble and ultimately even relate to the “dollar’s” renewed disruption in July so far.

From the perspective of Chinese banks and their synthetic “dollar short”, what really happened becomes clear. The exchange value of the currency is determined by the availability of eurodollar resources (in all forms, especially FX), meaning how generous those supplying “dollars” will be at any given time.

If there is an overflowing supply of eurodollar funding available and good competition among firms aiming to transact in that supply, the terms of funding will generally be favorable to those seeking funds (basic economics). In plain vanilla arrangements, that would be something like a discount on the interest rate; instead of, say, LIBOR + 150 bps, you, as the Chinese bank, might be able to get LIBOR + 145 or even better as eurodollar firms (including and especially those located in Tokyo) desperately compete for your business.

In FX, it’s a little different but the same principle (and I am going to oversimply here). You could do a currency swap where the amount of dollars obtained today are equal to the spot exchange rate, but to sweeten the pot and close the deal one of the many competing global banks offers instead to close out the swap at the current exchange rate minus a discount.

If the exchange rate was 6.20, then on the other side you could close out (more likely rollover) at, say, 6.195. The direction of CNY is up.

But if eurodollar banks start to grow uneasy about Chinese banks, or even their own position in the eurodollar food chain, rather than being generous they are likely to become increasingly demanding. Now in order to fund, they might demand a premium on the back end. If you start at 6.20, then on rollover the close out might instead be 6.205. The direction of CNY is down.

And if you have fewer available options to rollover large existing “short” funding needs, you have no choice other than to pay what amounts to a penalty. CNY can go down much faster if competition for the supply of dollars dries up, too. Again, basic economics. If there are fewer firms willing to transact then the general direction of price will move in favor of those few – unless “somehow” Chinese banks who are more and more desperate find some alternate source of dollars.

This is where the PBOC’s synthetic long can come into it.

By offering “dollars” in place of some proportion of marginal funding supply, they can maintain the price of CNY even to the point of seemingly perfect stability. Doing so, however, would be incredibly expensive and inefficient to the point where if it didn’t work it would backfire (spectacularly). The point, from the central bank’s perspective, is to buy time so that whatever is causing heartburn out there among eurodollar banks can dissipate and they can get back to regular business at reasonable terms.

On the morning of August 10, however, the PBOC which had been offering significant dollar supply (likely not direct “selling UST’s, but more so borrowing on its own and redistributing using UST’s as collateral – which is why the big selling in China’s “reserves” didn’t happen until 2016 when instead of continuing the process they started to wind down these redistribution subsidies) suddenly pulled out of the market.

I wrote on August 11, 2015:

It may be that the PBOC intends to devalue as all the rest seem to claim, but in my view the yuan’s move is simply tied to the inability of the central bank to continue to artificially suppress financing volatility and disorder – they reached a moment of maximum pressure and decided, especially in light of yesterday’s very discouraging data, that it would be far too “expensive” or inefficiently stabilizing to continue. Thus, the yuan did as it had done in those prior two “dollar” versions and moved down against the rising “dollar.”

From the point of view of China’s banks now stranded, this PBOC decision left only two options neither of which were particularly appealing. It was a “least worst” kind of decision:

So if the PBOC was no longer able to supply sufficiently as pressure exceeded some grand threshold, assuming that is what kept the yuan suppressed those five months, they had only two choices at that point – let the fix drop significantly so that China’s banks could find their “dollars” at whatever price or face illiquidity to the point of default, “dollar” insolvency and all the rest of the nastiest consequences.

What else could they do? Again, basic economics. If eurodollar suppliers had been offering steady funding at a trickle and doing so reluctantly at that, what happens on the morning of August 10 when China’s banks abruptly shut out by the PBOC all come running for dollars at once? The price of CNY plummets as funding banks demand huge premiums where the counterparty “price” of the dollar skyrockets (squeeze), a reality fully acknowledged at official levels with the daily fix recognizing this “devaluation.”

It’s important to review all this because we are again doomed to repeat.

I don’t just mean “rising dollar” stuff, which is already bad enough in 2018, but even more frustrating is that CNY’s renewed flop is being once more cast as textbook devaluation; export stimulus to ward off Trump’s trade war. It’s like 2015 never happened. After falling last week, CNY is down big again today.

Like 2015, in 2018 we know that the PBOC and the rest of China’s various government authorities want nothing to do with CNY DOWN. On August 12, 2015, the PBOC issued a statement which read:

Looking at the international and domestic economic situation, currently there is no basis for a sustained depreciation trend for the yuan.

Yeah, they all lie when it suits them. There was every basis for CNY’s move, therefore a more honest declaration would have said, “a falling yuan is bad for everyone, so we hope that by admitting this isn’t us devaluing on purpose it’ll stop because we just spent a ton trying to make it stop and we couldn’t get it to.”

These things have internal consequences, too. The amount of dollars on the PBOC’s balance sheet, the synthetic long, directly affects the level of RMB bank reserves available to the domestic Chinese banking system. It’s simple central bank accounting.

Over the weekend, the PBOC announced a second cut to the RRR rate this year (2018). The central bank had offered a targeted 100 bps reduction in April tied to repayments in the MLF. This latest one, slated for July 5, will be for 50 bps.

This flies in the face of pretty much every conventional assumption about China. In monetary policy terms, the PBOC is supposedly “tightening” because China’s economy is about to take off (sounds a lot like three years ago). Reducing the RRR is contrary to that narrative. Doing it twice is emphatically so.

As noted last week, Chinese bank reserves are contracting again like they were during the middle of 2015. Unsurprisingly, at least from the non-textbook perspective, a lower RRR corresponds to this particular circumstance. A reduction in the required rate for reserves means that private banks don’t have to hold back as much of them, meaning they can use proportionally more for monetary and financial purposes.

And if the overall level of reserves were to decline, then the lower RRR would offset much or all of the contraction in the general balance in the RMB marketplace (in theory). But that raises the important question, why doesn’t the PBOC just keep expanding bank reserves rather than risk upsetting internal RMB conditions by introducing complications and uncertainties? The experience in 2015 demonstrated the dangers.

I’ve already explained the straightforward answer, but here I want to put it in these same terms of China’s “dollar short.” Throughout 2016, the PBOC did do just that. Chinese central bankers “printed” RMB, raising the asset level on their balance sheet so that the liability side could expand somewhat, too, leaving a larger remainder (bank reserves).

But the balance of forex assets was declining sharply at the same time, meaning that Chinese money was in danger of becoming more and more unbacked by anything other than its secretive framework and unpredictable often political intrusions. This sort of risk becomes embedded in the rate eurodollar banks will charge Chinese banks to borrow dollars.

It is not a static charge, either, as the premium demanded to compensate for uncertainty rises and falls with perceptions about uncertainties. If eurodollar banks are already uneasy, then adding to their unease by more and more uncovering RMB money can only further pressure CNY. On the other hand, reassuring them by maintaining a predictable and steady monetary base could, potentially, offset some of that risk premium.

To stop the uncovering necessarily requires an end to the RMB “printing.” That’s exactly what’s been done over the last few months, repeating what had been done during the worst of 2015.

And repeating also 2015, the RRR cuts are meant to try and offset any RMB illiquidity arising from purposefully fewer bank reserves.

Will it work?

A terribly convoluted plan developed along unclear lines carried out across several dimensions including both offshore and onshore money centers where contradictory behavior is often determined by the same thing at the same time and in which the vast majority of conventional commentary is perpetually confused as to what’s taking place, what could go wrong?

The very fact that this is what they are up to tells you quite a lot about how things may be going over there. But if you think actual devaluation, it’s impossible to determine.

There are a few different elements to it this time around, though, which are important to point out.

First, I don’t think it was the PBOC starting in April who dumped Chinese banks all at once onto eurodollar markets like August 2015. Rather, I would guess that it was the tap out from Hong Kong banks that then (at the margins) unloaded China’s funding demands onto the global money market.

Second, it doesn’t seem like the PBOC is willing to expend resources directly as it was in early 2015 (and throughout CNY’s prior fall). At least not yet. The direct expense of forex is, again, tantamount to buying time. It doesn’t seem as if monetary authorities are even bothering with that this time around, suggesting a more definitive exercise. In eurodollar terms, that would amount to a starkly different interpretation.

In 2015, they may have been trying to ride out the “rising dollar” hoping that it would straighten itself out (at least as far as the Asian “dollar” might have been concerned) if given enough time. Now? Batten down another hatch. That’s the RRR. 

CNY is falling again and one thing is certain. It isn’t devaluation.

Comments

SnottyBubbles Seasmoke Tue, 06/26/2018 - 13:38 Permalink

US gold reserve = 8,133 metric tons covering 75% of forex reserves ... nearly 3x the next largest holder Germany.

 

China gold reserve = 1,842 metric tons covering 2% of forex reserves

 

Where would gold have a relationship on these charts?

 

Over the past 30 years, the price of gold has increased by 335%. Over the same period, the Dow Jones Industrial Average (DJIA) has gained 1,255%. Gold investors left a 900% ROI foregone.

 

How does gold effect 21st economics? I don't get it. How could Spain under Charles V and Philip II go bankrupt 13 times while drowning in gold? I don't get it.

 

I've spent years with the question. I don't have an operational clue how gold effects the 21st-century economics? 

In reply to by Seasmoke

LawsofPhysics SnottyBubbles Tue, 06/26/2018 - 14:00 Permalink

So long as the status quo (reserve currency) doesn't change, physical gold remains largely irrelevant, consumable calories and reduced hydrocarbons matter!!!

That was the whole point of the petrodollar! Backed by a military that will kill you if you don't use the petrodollar...

Now, should the status quo change (doubtful in a fiat world)...

...then PMs once again become the preferred collateral for the new "fiat du jour"...

This has happened many times throughout history and sometimes it gets a lot longer and may or may not involve killing a lot of people...

is what it is...

In reply to by SnottyBubbles

LaugherNYC hestroy Tue, 06/26/2018 - 14:40 Permalink

WAIT! Did you just post without blaming this on the Joos?

Have you had your meds today???

 

This is an excellent analysis. But, it could be summed up in far less dynamically challenging terms:

China, for the first time in the Post-Nixon era, is looking straight down the barrel of a reinvigorated US fiscal and trade policy.

As such, its currency backed by nothing at all, and issued by a country with a long history of not just blaming the outside world (although in the Opium Wars they had an excellent point) but making it suffer through repatriation, asset seizure, etc, has become toxic to the rest of the world that sees a vastly overextended faux middle class that just had the rug pulled out from under it.

How the fuck are they going to repay their debts, which exploded by some $21 trillion in the past decade, if they can't just steal it from America?

As Bugs Bunny might have said, "You realize of course, that this means war."

Things happen at the right time and for a reason. Trump arrived on the scene just at the inflection point - the American people didn't even know why they needed someone so tacitly nuts to take the job. He had to be willing to fly in the face of every political meme and mistake of the past50 years. This trade war happened probably in the last 5 years of our history that it could have, and we would still have a chance to win it. China has been arming itself as fast as it can, with the obvious plan to seize all of east Asia as a protectorate, and hold the US at bay with new tech weapons and nukes. The Russians could side with them or not - they are not big enough financially to matter. China figured in 5-7 years they would be in a position militarily and economically to blockade Russian oil and trade and bring her to her knees, like a Monica Lewinskobitch, while giving the middle finger and some hypersonic anti-carrier missiles to the US. 

It was literally act now of forever hold your piece.

Trump has acted. It gets interesting from here.

 

 

In reply to by hestroy

wardaddy Tue, 06/26/2018 - 13:33 Permalink

Can anyone summarize this in three sentences for me please? besides we are screwed. I keep reading it over and over and I cant figure out what the bottom line is here in this article. Is the depreciation intentional or a by product of the chinese doing something else?

Buckaroo Banzai wardaddy Tue, 06/26/2018 - 13:42 Permalink

The Chinese are having trouble getting the dollars they need to stay in business out of the offshore dollar funding complex. Consequently they are resorting to increasingly desperate measures, like decreasing the RRR. A byproduct of these measures is a depreciating yuan, which is only making the problem worse, by driving up dollar borrowing costs--a negative feedback loop. This is a repeat of what happened in 2015-2016.

That's the message I got, at least.

In reply to by wardaddy

tac_for_tac wardaddy Tue, 06/26/2018 - 13:50 Permalink

the chinese stratagem is a cross-border intermediated rollover when the currency depreciates it colludes with obtaining or modeling a price on funding when thus the currency depreciates, wardaddy, versus the hovering hong kong yuan you get rollover of chinese yuan , earners of this transaction call it depreciation versus the fixed, the rebate from the funding holds an approximate valuation measure: example if you buy a house prop the valuation of the housing market so it goes that the inflation is the end game of swelling activity, once that is done occasionally the transaction is done early on denomination basis, which means faster since the government is helping facilitate the transaction, however if the transaction is not done so frequently, we see that the value of the yuan devaluates. It's a hybrid between additional drop of market confidence on the yuan and the ability to predict the amount of trade deficit, hence this teaches you that Easterners Asians have ways to total this everything into a proppingthe implied rate of return before calculating the real rate of return from the fx and trade transactions.

In reply to by wardaddy

Econogeek tac_for_tac Wed, 06/27/2018 - 09:52 Permalink

Great article, ZH.  Thanks.  Great comment, t4t, perfect.

I was looking at the CNY decline as deliberate in the face of US pressure.  Wrong, though I do think Trump's jawboning is part of the issue for Eurodollar lenders to Chinese banks.

Every time I think I've figured out a bit on China, it's always worse for them than I think. 

Their internal situation is mind-bogglingly difficult.  Maybe they're thinking twice about their reluctance to become a reserve currency.  It can be a useful privilege.

 

In reply to by tac_for_tac

LaugherNYC wardaddy Tue, 06/26/2018 - 14:53 Permalink

In geopolitical terms, this is my take on what has created this crisis, and what it means outside of dry finance. It's fine to analyze money flows, but policy and politics are what drive them. (posted above)

This is an excellent analysis. But, it could be summed up in far less dynamically challenging terms:

China, for the first time in the Post-Nixon era, is looking straight down the barrel of a reinvigorated US fiscal and trade policy.

As such, its currency backed by nothing at all, and issued by a country with a long history of not just blaming the outside world (although in the Opium Wars they had an excellent point) but making it suffer through repatriation, asset seizure, etc, has become toxic to the rest of the world that sees a vastly overextended faux middle class that just had the rug pulled out from under it.

How the fuck are they going to repay their debts, which exploded by some $21 trillion in the past decade, if they can't just steal it from America?

Devaluing the yuan, either actively or by inaction, will make Chinese good cheaper again, and theoretically drive trade rebalancing. However, tariffs and embargoes made that tactic ineffective. So, they are simply put FUCKED.

As Bugs Bunny might have said, "You realize of course, that this means war."

Things happen at the right time and for a reason. Trump arrived on the scene just at the inflection point - the American people didn't even know why they needed someone so tacitly nuts to take the job. He had to be willing to fly in the face of every political meme and mistake of the past50 years. This trade war happened probably in the last 5 years of our history that it could have, and we would still have a chance to win it. China has been arming itself as fast as it can, with the obvious plan to seize all of east Asia as a protectorate, and hold the US at bay with new tech weapons and nukes. The Russians could side with them or not - they are not big enough financially to matter. China figured in 5-7 years they would be in a position militarily and economically to blockade Russian oil and trade and bring her to her knees, like a Monica Lewinskobitch, while giving the middle finger and some hypersonic anti-carrier missiles to the US. 

It was literally act now of forever hold your piece.

Trump has acted. It gets interesting from here.

In reply to by wardaddy

LawsofPhysics Tue, 06/26/2018 - 13:36 Permalink

LOL!!!  Sure, sure...

I call bullshit. The Chinese invented fiat currency for fuck's sake. I don't trust "banks", especially considering that traditional banking is long dead and they all use "mark to fantasy" accounting...  ...sure as hell would not trust a Chinese bank.

"Full Faith and Credit"

same.

 

as.

 

ever.

 

was!!!

LawsofPhysics Tue, 06/26/2018 - 13:39 Permalink

"For various economic and some non-economic reasons, companies in China require dollars on a continuous basis." -- This is the fatal flaw in Jeff's logic. 

China is already exchanging Yuan with Russia, Iran, and Brazil...

...will only grow, not shrink.

Still won't matter as it is indeed a fiat planet.

I Claudius Tue, 06/26/2018 - 13:59 Permalink

So let me see if I understand this:  The China banking system, after experiencing the largest number of corporate bankruptcies in a twelve month period in history, having propped up real estate prices for the Chinese citizen to prevent a run on the system and having been manipulated by the government over the past number of decades - is a lot weaker than what some snot nosed 26 year old Harvard grad trading at Goldman Sachs has been telling us all this time?

While trying to monopolize 'rare earth' materials around the world while most of its people live in abject poverty, while trying to buy influence in African nations (please, go ahead) and who have developed an economy built on providing slave labor to the west so those same westerners will, in turn, bring their manufacturing and technology to the Chinese shores so they can ruin those companies by providing counterfeit product and reverse engineering the technology to bring it under their own control . . .

And now Trump jumps in, seeing their weakness, and squeezes their financial system even more by placing tariffs on their products and we begin to see an unraveling of their system? 

The emperor (China) has no clothes.  It won't take much more for western investors to flee out of fear.  Trump needs to keep tightening the screws.   

OpenThePodBayDoorHAL I Claudius Tue, 06/26/2018 - 16:38 Permalink

Problem for gold bugs is that they're also squeezing gold, because they know the Rooskies are buying and the Chinee love it too. 8,000 tons are there in Ft.Knox but it's owned by others, look at how the Treasury and the CBs account gold: actual metal and swaps with bullion banks are considered the same thing. IMF yelled about this again in 2014 but the response was "FU"

In reply to by I Claudius

Let it Go Tue, 06/26/2018 - 14:08 Permalink

Data coming out of China indicates the country's economy is starting to cool from a multi-year crackdown on riskier lending that is pushing up borrowing costs for companies and consumers. This is all occurring at a time when the amount of geopolitical upheaval going on between Washington and Beijing is extremely high and a slew of trade data from China has not been released on time. This has increased concern over the lack of transparency of future data releases and has caused suspicion to grow over Chinese intent and if they are hiding something. More on recent concerns over growth in China below.

 http://China Data Indicates Broad Slowing Of Economy.html

roddy6667 Tue, 06/26/2018 - 14:22 Permalink

All this chart porn and grim talk about the horror of China devaluing the yuan, is silly. It only matters to gnomes on Wall Street wearing  yarmulkes who make  a living buying and selling bets on currency. When I first came to China in 2009, a dollar bought about 8 RMB. Things were great. Business was booming, homes were being built, people were buying and moving in. People were enjoying prosperity by shopping and going to restaurants. Later the RMB dropped to 7. Financial analysts all over the world swooned and soiled their underwear, but the prosperous life continued in China. It fell to 6.2. OMFG! The end of China! Only in the Western financial press and the Doom & Gloom blogs. Life just got better and better in China.

Now the RMB is retracing, and is back to 6.55. ZH and other blogs are predicting Armageddon and worse. Such bullshit. With all this change in the value of the RMB, some things don't change in China. Every year the poor, the middle class, and the rich, are better off than last year and ten years ago. What is most important and stabilizing is that the middle class gets bigger every year. The infrastructure is strengthened and the quality of life improves. Life gets better, unlike the financial backsliding in America, where the middle class is shrinking and now has the buying power they did in 1967!

All this alarmist chart porn is just masturbation material for the Prophets of Doom who make a living trying to scare people.

 

ElTerco roddy6667 Tue, 06/26/2018 - 14:57 Permalink

So what will happen in 2019 when China plans to introduce the concept of annual property taxes on real estate? Are people in China prepared to take on the additional annual burden of fairly large negative cash flow? Will Chinese people dump some of their real estate once they realize they can no longer use it strictly as a store of wealth?

In reply to by roddy6667

roddy6667 ElTerco Tue, 06/26/2018 - 21:57 Permalink

It's all speculation. There have been cities in China that instituted a property tax to slow down speculation, but the tax was miniscule compared to american taxes. Don't go with the All Or Nothing thing. It's usually wrong.

Besides, there are hundreds of millions of people in China waiting for their turn to own a modern home with a Western bathroom and kitchen, central heat, A/C, etc. They haven't gone away.

In reply to by ElTerco

LaugherNYC roddy6667 Tue, 06/26/2018 - 15:03 Permalink

Get real, roddy. China's "prosperity" is built on an Everest of consumer debt that has absolutely no chance of being repaid without the Government going all in. The theory they are now adopting appears to be to have a dollar funding crisis, and allow the RMB to implode, making RMP denominated debt cheaper to repay over time. When the RMB has retraced back towards 8, expect massive liquidations of all dollar assets to swap into RMB, bringing fresh liquidity into the central bank to shore up failing consumer debt. The only problem is they only hold about 3-4% of their consumer debt mountain in dollars (~1.2 trillion) It's not going to be enough.

China look like it might be about to get a BearStearnsSubPrime sulphuricacid enema, a la 2008. Enjoy it, boys.

I'm over here with Donald, buying AMERICAN

In reply to by roddy6667

LaugherNYC I Claudius Tue, 06/26/2018 - 18:53 Permalink

Sorry. If I’d met you in Dec 2007, as I did a friend named Frank M., a former head of BS debt trading, I told him heshould sell 100% of his BS stock immediately, that they would be out of business by 2009. He called me an asshole. I explained why I felt this way - I had seen how utterly ignorant their mortgage credit people were, and how levered their balance sheet was when I met with their CMBS desk for a consulting client. It was a giant BOMB. I also told him Lehman would be next. Neither firm had a commercial bank parent like CSFB , MOrgan,  Citi, BofA, or a giant retail force and equity base like ML. To this day I don’t understand how Morgan Stanley got out the other side/

Didn’t see him until winter 2009, when he told me that he owed me $96 a share on his entire equity award position, which he sold after talking to the head of mortgages and reaslizing he was talking out his ass. You know the SMD who  got fired and cashed out before the crash, keeping all his money while he was the architect of the firm’s demise. Pretty sad irony, no?

The biggest irony will be if the sack of shit E Warren becomes President. Besides being a liar and an incompetent, she sold the American taxpayer out by not insisting on equity resets for all the shareholders-or at least the insider equity shareholders - before the debt bailouts of the banks. That was sheer pure thievery, and she knew it bc I told her how to do it right, and she totally ignored me.,

In reply to by I Claudius

roddy6667 LaugherNYC Tue, 06/26/2018 - 22:05 Permalink

You seem to think that finance in China works the same way as in America. It's totally different. For almost a decade I have listened to people like you ramble on about how China is about to collapse, but it never happens. Things just improve here while America devolves. The most important meeting of world leaders just had a meeting in out city last week, but Westerners didn't get it. No, it didn't involve North Korea or America or the G7 in Montreal. It was the SCO Summit. The heads of state of 18 countries, led by Xi and Putin, were planning the Belt and Road Initiative. These countries comprise half the world's population and are all on a contiguous land mass between China, Russia, and Europe. The idea is to develop that part of the world like China developed in the last 30 years. This would involve a massive market for consumer goods and oil and commodities, a kind of closed economy. America is not invited to the party. It can just wither on the vine like it has been for the last 50 years. 

In reply to by LaugherNYC

shortonoil roddy6667 Tue, 06/26/2018 - 15:56 Permalink

That Chinese life style of which you speak is called living on borrowed money that you will never be able to repay; which to you doesn't really matter because you never intended to in the first place. With China's oil fields now producing nothing more than a watery oil slick, and its coal mines producing nothing more than combustible mud, $70 oil that has to be paid in dollars, that you don't have, and can't get will make the value of the Yuan a little more critical than you have been led to believe. And, even if you trade in Russian rubles, or Iranian Rial it will still be priced in $s.

In reply to by roddy6667

shortonoil roddy6667 Tue, 06/26/2018 - 15:56 Permalink

That Chinese life style of which you speak is called living on borrowed money that you will never be able to repay; which to you doesn't really matter because you never intended to in the first place. With China's oil fields now producing nothing more than a watery oil slick, and its coal mines producing nothing more than combustible mud, $70 oil that has to be paid in dollars, that you don't have, and can't get will make the value of the Yuan a little more critical than you have been led to believe. And, even if you trade in Russian rubles, or Iranian Rial it will still be priced in $s.

In reply to by roddy6667

hanekhw Tue, 06/26/2018 - 14:36 Permalink

China just 'Yauna hold your hand' ...........and leave you there.

The officials of the Chinese Communist Party don't care about 'financial' risks they are more concerned about preserving and conserving their solid political capital.

snblitz Tue, 06/26/2018 - 14:40 Permalink

If I am in China and whittle a figure from a block of wood and sell it to an American I end up with dollars.

Where do all the funding needs come from?  And the endless complexities discussed by the author of the original post?