Posts Tagged ‘global financial crisis’

Misguided Love Affair with China; China’s Massive Monetary Expansion and Crackup Boom

Misguided Love Affair with China; China’s Massive Monetary Expansion and Crackup Boom

Courtesy of Mish 

Earth with Ying and Yang symbols

China is pointing the finger at the US, complaining about "Out of Control" US dollar Printing by the Fed.

Dollar issuance by the United States is "out of control", leading to an inflation assault on China, the Chinese commerce minister said in comments reported on Tuesday.

"Because the United States’ issuance of dollars is out of control and international commodity prices are continuing to rise, China is being attacked by imported inflation. The uncertainties of this are causing firms big problems," Chen was quoted as saying by the official Xinhua news agency.

Chinese officials have criticised U.S. monetary policy as being too loose before, but rarely in such explicit language.

Decoupling Theories Renewed 

I will get to loose monetary policy in just a bit, but first consider More than decoupled, China is in league of its own

Two years on from the global financial crisis, the contrast with the rich world is striking. In the United States and Europe, growth is sluggish, a slump into outright deflation is a real risk and central banks look set to loosen policy further.

So the evidence is in: China is decoupled, influenced by, but ultimately independent from other major economies.

"The crisis was a test and China passed the test. Decoupling has become a much more solid thesis now than three years ago when we only talked about it hypothetically," said Qing Wang, Morgan Stanley’s chief economist for greater China.

Chinese Money Supply Numbers from People’s Bank of China

Money and Quasi Money Jan 2009 – 496135.31
Money and Quasi Money Sep 2010 – 696384.86

"Out Of Control" Monetary Expansion Irony

I am certainly not about to defend the Fed’s misguided policies, but the complaint from Chinese commerce minister that US monetary printing is "out of control" is the ultimate in "pot calling the kettle black" irony.

Over the past few weeks I have exchanged quite a few Emails regarding China with my friend "BC" who writes …

Total Chinese money supply is up over 4 times since ’03, a 17%/yr. rate at a doubling time of just 4 years; up 66% since Jan. ’08, a 19%/yr. rate at a doubling time of 43 months; and


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China Signals End to Currency Peg to Dollar

China Signals End to Currency Peg to Dollar

Courtesy of Bondsquawk

The Chinese Central Bank announced Saturday evening that it will proceed with exchange rate reform and allow a more flexible currency, signalling an end to the renminbi’s peg to the U.S. dollar according to an article from The New York Times.

The People’s Bank of China said that the Chinese economy was strengthening after the global financial crisis and that it was “desirable to proceed further with reform” of the currency, known as the renminbi or yuan. The announcement comes a week before world leaders gather in Canada for the Group of 20 and Group of 8 summit meetings. A growing number of countries have been calling for China to let the renminbi appreciate, including not just the United States and European nations, but India, Brazil and Singapore in recent weeks.

Details are vauge in the PBOC’s press release but more information may come this Monday as to the degree of appreciation. The New York Times added the following.

China’s announcement strongly echoed the central bank’s decision in July 2005, to begin allowing the renminbi to rise against the dollar. The renminbi then rose 21 percent over the next three years, until the central bank informally repegged the renminbi at 6.83 to the dollar in July 2008, as the international financial system and the global economy began deteriorating rapidly.

The central bank’s statement on Saturday, like the statement nearly five years earlier, said that the People’s Bank of China would set the value of the renminbi in relation to various currencies, and not just the dollar.

But in contrast with the 2005 announcement, the People’s Bank did not include any immediate appreciation of the renminbi. In 2005, the new currency policy was accompanied by a one-time, 2 percent rise in the currency against the dollar, followed by further, gradual appreciation against the dollar.

President Obama has sought a stronger renminbi as one of his central foreign policy goals. It would tend to make Chinese exports more expensive and less competitive in the American market, encouraging American consumers to buy more American goods instead.

For China, a stronger renminbi will increase the buying power of its consumers and could make gasoline and other imported commodities seem less expensive. Faced with spreading labor unrest, particularly in the auto industry, the Chinese government has


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Rahm Emanuel and Magnetar Capital: The Definition of Compromised

Rahm Emanuel and Magnetar Capital: The Definition of Compromised

By Yves Smith at Naked Capitalism 

Magnetar

1) A neutron star with an intense magnetic field, capable of emitting toxic radiation across galaxies
2) A hedge fund, the single market player most responsible for the severity of the 2008 financial crisis, through the toxic instruments it created

Rahm Emanuel

1) White House Chief of Staff
2) Politician selected by Magnetar’s CEO to be sole recipient of his political donations, 2006-2008

Strange as it may seem, nearly three years after the onset of the global financial crisis, its greatest, most destructive, and most profitable “it ought to have been a crime” has gone almost entirely unnoticed.

Most people believe that they understand the broad outlines of the financial crisis, and that a central element was an explosion in mortgages made to people who could not afford them.

But how did such destructive behavior occur on such a large scale? The conventional view is that the subprime mortgage blowup resulted from bank executives being short-sighted, greedy, or both.

But that simple story deters inquiry into how and why this disaster came to pass. Some recognize that the appetite for subprime mortgages seemed to come from investors. In fact, it resulted in a large degree from the way traders at certain large banks used subprime mortgages in a strategy to make their profits seem much larger than they actually were. The effect of this “negative basis trade” strategy was to overpay employees of those banks and consequently eviscerate the banks’ abilities to withstand future economic uncertainty.

The appetite for subprime mortgages was also inflated by people who were betting that the housing market would fail.

Moreover, the devastation wrought by this strategy remains virtually a secret. The fact that it has been almost invisible and appears to have been entirely legal, demonstrates a set of vexing problems. First, that investigations of the crisis have not delved deeply enough, and second, that the deregulation so keenly sought by the financial services industry has made activities legal that by any common-sense standard should be criminal.

But the sponsors of this toxic trade did bother to make sure they had a powerful friend. The head of the firm in question gave substantial amounts of money by political contribution standards to Rahm Emanuel’s PACs, and only his PACs, over the period when


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Wall Street’s Bailout Hustle

Wall Street’s Bailout Hustle

Goldman Sachs and other big banks aren’t just pocketing the trillions we gave them to rescue the economy – they’re re-creating the conditions for another crash

By MATT TAIBBI 

Matt Taibbi "wall street bailout hustle" Rolling StoneOn January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America’s pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman’s role in precipitating the global financial crisis.

The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn’t the right time for Goldman to be throwing its annual Roman bonus orgy.

 

Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."

Translation: We made a shitload of money last year because we’re so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.

Goldman wasn’t alone. The nation’s six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every…
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New home loans up 1,600pc in Shanghai

No bubble here.  You may need to register with scmp.com to read the entire articles. – Ilene

(Thank you, Terry)

New home loans up 1,600pc in Shanghai

Busy Shanghai street

Mainland banks in Shanghai’s red-hot housing market lent 99.58 billion yuan (HK$113.2 billion) in new mortgages last year, up dramatically from 5.8 billion yuan in 2008, as home seekers rushed to buy and prices hit new highs.

The banks lent 38.93 billion yuan to buyers of new residential properties and 60.65 billion yuan to buyers of second-hand homes, the Shanghai office of the People’s Bank of China said yesterday.

Lending soared more than 1,600 per cent compared with 2008, when the property market and overall economy were hit hard by the global financial crisis, the central bank said.

Full article here.>>

Beofre you start worrying, know this. (Classic Chinese oxymoronic title.)

No sign of bubble despite soaring home prices in Shanghai

Shanghai’s residential market shows no signs of a bubble despite a hefty price increase because demand remains strong, according to Jones Lang LaSalle.

Price increases "do not mean that the market has reached extreme valuations that typify a bubble", the real estate service firm said in a report yesterday. "Overall, the policy environment will evolve to keep prices from growing too quickly."..

Soaring home prices on the mainland have sparked asset bubble worries among the country’s top leaders, including Premier Wen Jiabao who promised to take action.

According to Shanghai Uwin Real Estate Information Services, average housing prices in the city jumped 65.3 per cent last month from a year earlier, hitting a record 20,187 yuan (HK$22,930) per square metre.

Shanghai Securities News reported earlier this month that the mainland would probably start imposing property tax in selective cities this year, a heavy-handed move to cool the red-hot housing market…

More here.>>

And rest assured, the non-bubble is going to be curbed.

Mainland to curb lending binge, says chief regulator

Mainland will slow its massive lending spree and step up monitoring of banks as it tries to prevent speculative bubbles in real estate and other assets while keeping the country’s economic recovery on track, a top regulator said on Wednesday.

Mainland’s banking system is healthy despite last year’s explosive growth in credit and regulators could manage the risks, said Liu Mingkang, chairman of the Chinese Banking Regulatory Commission…

After handing out some


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China new year, and one more vote for GDP-adjusted bonds

China new year, and one more vote for GDP-adjusted bonds

snaplineCourtesy of Michael Pettis of China Financial Markets

I just got back to Beijing three days ago and am still seriously jet-lagged, but I wanted to post a piece today anyway.  Last night I celebrated the new year at D22, where a group of very cool musicians (including the amazing Snapline, for one of their very few shows this year and perhaps one of their last ever) serenaded the passing of 2009.  What a great show.

I suppose it is traditional to dedicate the new-year piece to evaluating the “year that was”, or to make predictions for the coming year, but my only concession to this tradition will be to make the very (I think) obvious prediction that trade tensions are going to rise dramatically in 2010, and even more so in 2011 as interventions initiated in 2009 and 2010 come to fruition.  I am no expert on the subject of criminal law or the environment, and so have little to add beyond all that has already been said, but the huge amount of angry criticism China has received on the very visible subjects of the Copenhagen meeting and the execution of a British subject caught smuggling drugs will make it easier for tariffs and restrictions aimed at China to generate popular approval in Europe, North America and the developing world, especially since protectionists can easily add a “moral dimension” to their arguments.

I am not sure Chinese policymakers fully understand how vulnerable China is to trade war.  This is perhaps because the “success” of the stimulus package has convinced them that they are less vulnerable to external demand than they originally thought.  But this would be a serious misreading.  The stimulus package has postponed the effect of declining net foreign demand on Chinese unemployment, but has actually increased its vulnerability by increasing the future gap between what China produces and what it consumes.  China needs foreign demand to keep absorbing its excess capacity for several more years while it engineers the difficult transition to domestic consumption-led growth, but I don’t see either China taking the necessary steps to force the transition or foreigners looking very eager to help China through the process.

As if to confirm my pessimistic trade expectations, the US on Tuesday announced that it would impose tariffs on Chinese


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Zero Hedge

"The War Has Changed" - Leaked CDC Report Claims Delta Spreads As Easily As "Chickenpox"

Courtesy of ZeroHedge View original post here.

The CDC is clearly concerned that it's losing the PR war to convince Americans that they must mask up and get vaccinated. Because less than a week after declaring that it would revive its mask mandate, the CDC has just pulled a classic media trick: turning the fearmongering nob up to '11' by leaking an "internal report" that supports the official narrative (even making it look like the more moderate of two options) while laundering the source of the information by allowing a reputable news org to market the story as an "e...



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Phil's Favorites

What are stablecoins? A blockchain expert explains

 

What are stablecoins? A blockchain expert explains

Stablecoins promise more stability than other cryptocurrencies. DenBoma/iStock via Getty Images

Courtesy of Stephen McKeon, University of Oregon

Stablecoins are a type of cryptocurrency linked to an asset like the U.S. dollar that doesn’t change much in value.

The majority of the dozens of stablecoins that currently exist use the dollar as their benchm...



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Digital Currencies

What are stablecoins? A blockchain expert explains

 

What are stablecoins? A blockchain expert explains

Stablecoins promise more stability than other cryptocurrencies. DenBoma/iStock via Getty Images

Courtesy of Stephen McKeon, University of Oregon

Stablecoins are a type of cryptocurrency linked to an asset like the U.S. dollar that doesn’t change much in value.

The majority of the dozens of stablecoins that currently exist use the dollar as their benchm...



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Biotech/COVID-19

Here's why the CDC recommends wearing masks indoors even if you've been fully vaccinated against COVID-19

 

Here’s why the CDC recommends wearing masks indoors even if you’ve been fully vaccinated against COVID-19

Signs like this may become more common as localities consider CDC guidelines. Mario Tama/Getty Images

Courtesy of Peter Chin-Hong, University of California, San Francisco

Vaccinated people need to mask up again, according to the U.S. Centers for Disease Control and Prevention. On July 27, 2021, the CDC recom...



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Politics

Bipartisan infrastructure deal begins to address consequences of a warming planet: 3 essential reads

 

Bipartisan infrastructure deal begins to address consequences of a warming planet: 3 essential reads

A lot of coastal infrastructure wasn’t designed for the frequent flooding and crashing waves brought by rising seas. Jeffrey Greenberg/Universal Images Group via Getty Images

Courtesy of Bryan Keogh, The Conversation and Stacy Morford, The Conversation

...



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Chart School

Investing with Channels - Review

Courtesy of Read the Ticker

The US has a lot of debt, to sell more units of the debt to non US buyers the FED and Treasury must get the unit price of the debt down.



This video assumes a 'risk on' bullish bias into the Nov 2022 US mid terms. The bias assumes a US dollar trending down from it current high price of $93 on the DXY.






 


 




Chart 1 - US Dollar Channels




 

Click for popup. Clear your browser cache if image is not showing.


 



...



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Promotions

Free Webinar Wednesday: July 7, 1:00 pm EST

 

Don't miss Phil's Webinar on July 7 at 1:00 pm EST. It's FREE and open to all who wish to join.

Click here: 

https://attendee.gotowebinar.com/register/6552545459443187211

Join us to learn Phil's trading tactics and strategies in real-time!

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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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