zerohedge.com / By Tyler Durden / August 21, 2012
As everyone awaits (or doubts) the next coordinated central planning bank action – whether Fed QE (Lockhart stymied?), ECB ‘bottomless pockets’ (Merkel’s back), or China RRR (reverse repos?) – the prices of things we need (as opposed to want) continue to rise. Nowhere is this more important than in China with its extremely high levels (and volatility) of deposit flows increasingly levered to re-inflationary actions by the PBoC. The critical aspect of the following analysis is that in the US, the stock market acts as an ‘inflation buffer’ for the rich’s excess disposable income; in China, this is not the case and given the greater than 3.4x leverage compared to the US, PBoC actions flow much more rapidly through the populace to the things they need – and right now more inflation is not what they need or want – which perhaps explains the reverse-repo ‘gradual’ tightening.
1) Chinese deposit volatility is massively high and extremely prone to ‘inverse’ window-dressing (as Bloomberg’s chart of the day pointed out yesterday) which makes the PBoC’s role as credit-monitor very hard. The chart below shows the outrageously obvious pump up in deposits (lower pane) as banks offer incentives to attract deposits and meet PBoC regulatory needs – only to let them flow back out and tighten their offers after…
No comments:
Post a Comment