Money is Fleeing China
From Zarathustra at Macrobusiness:
Sina reports that the big 4 bank’s (ICBC, China Construction Bank, Agricultural Bank of China, Bank of China) net new loans for May is bascially zero for the first two weeks. According to sources, two of the big 4 banks have had new loans of RMB10 billion and a few billion, while another banks have net new loans in negative territory This suggests that demand for credit is extremely weak, perhaps much weaker than anyone is yet contemplating.
The big 4 banks have also lost RMB200 billion of deposits, according to the report. One of these banks lost RMB90 billion of deposits alone…
Recently I have speculated that a debt deflation has begun in China. All of this new evidence supports that notion.
That giant sucking sound you hear is apparently lots of money leaving China and Club Med for safer digs. And with $8T American sitting on the side in liquidity, it ain’t in the US stock market. Global corporatism has given us global deflation. I wonder if Milton Friedman saw that coming:
Friedman was the main proponent of the monetarist school of economics. He maintained that there is a close and stable association between price inflation and the money supply, mainly that price inflation should be regulated with monetary deflation and price deflation with monetary inflation. He famously quipped that price deflation can be fought by “dropping money out of a helicopter.”
So, is QE3 on the horizon?
Thanks, I should’ve mentioned it. Not only is it on the way, the JPM mess apparently occurred because they mis-timed it. However, it should properly be referred to as QE4, because over a year of POMO’s into the stock market put over $700B in the US accounts of Euro banks. And then there’s the funding from us through the IMF. Chris Martenson said yesterday that if the Bernank operates as usual, the QE will be so late as to inflict unnecessary damage. Also, he believes we are approaching a point where QE is no longer effective. That moment is apparently the much dreaded event horizon.
Also, according to ZH commenters, the Fed can furnish ECB short term liquidity while Yurp blows up through the IMF. The trick is to use that as an excuse for a stock market correction to entice volume back into the market by Buying The Fucking Dip. Those primary dealers want that $8.1T worse than a sixteen year old boy wants a piece of pussy and without QE, they need it.
The problem is, just like the MBS market, none of the underlying problems have been fixed, so it’ll have to be a really big dip with cherries on top.
I wonder if this matter is directly connected to Chinese official: it’s us or America ?
Thank God, I thought this was another article about the supremacy of the Renminbi. I don’t get too excited when the Chicomms do a bit of saber rattling. After all, I suspect they need Australia as much as Australia needs them.