Deep Fried Black Swan Lands As China Admits It Has A Food Inflation Problem, Releases Corn, Rice From Reserves

Deep Fried Black Swan Lands As China Admits It Has A Food Inflation Problem, Releases Corn, Rice From Reserves (ZeroHedge, Aug 13, 2012):

Last week we wrote an article that to many was anathema: namely an explanation why everyone is deluding themselves in their expectation that the PBOC would ease, soft, hard, or just right landing notwithstanding. The reason? The threat that food inflation is about to read its ugly head which is “Why The Fate Of The Global Equity Rally May Rest In The Hands Of Soybeans.” This was merely a continuation of our observations from a month ago that as a result of the Black Swan being “deep fried” in 2012, that the threat of food inflation will keep key BRIC central banks in check for a long time. As of today the threat has become fact, because as China Daily reports “China will release corn and rice from state reserves to help tame inflation and reduce imports as the worst US drought in half a century pushes corn prices to global records, creating fears of a world food crisis…The release may prompt Chinese importers to cancel shipments in the near term and take some pressure off international corn prices, which set a new all-time high on Friday as the US government slashed its estimate of the size of the crop in the world’s top grain exporter.” Sure, as every other short-termist measure the world over, it may help with prices in the short-term, but will merely expose China, and thus everyone, to the threat of a much greater price spike in the future. Because just as the strategic petroleum reserve release did nothing to help gas prices, nor the short selling ban in the US and Europe did anything to help the underlying broken financial system, so this will merely force the local population to scramble and ration whatever food they can get asap, now that the government has admitted there is, indeed, a food inflationary problem.

Sure enough:

Bottom line – rationing is in full force, and given the continually declining state of the US corn crop, more will be needed,” said Christopher Narayanan, head of agricultural commodities research at Societe Generale.

Read moreDeep Fried Black Swan Lands As China Admits It Has A Food Inflation Problem, Releases Corn, Rice From Reserves

China’s Catastrophic Deleveraging Has Begun – The End Game Is Coming

China’s Catastrophic Deleveraging Has Begun (Business Insider, July 15, 2012):

1. The frustrated and aggressive central bank

If one wants to know how bad the health of China’s economy has gone, look no further than the PBOC’s composure, which seems rather frustrated and aggressive as of late. On 5th July, the central bank cut benchmark interest rates for the 2nd time in less than a month. This happened right after the fact that in December 2011, PBOC cut the reserve requirement ratio(RRR) by a 50 bp to 21%, it followed up with another 50 bp in February and another 50 bp in May to 20% currently.

Read moreChina’s Catastrophic Deleveraging Has Begun – The End Game Is Coming

Forget China’s Goal-Seeked GDP Tonight; This Is The Chart That Keeps The PBOC Up At Night

Forget China’s Goal-Seeked GDP Tonight; This Is The Chart That Keeps The PBOC Up At Night (ZeroHedge, July 12, 2012):

As we wait anxiously for the not-too-hot and not-too-cold but just right GDP data from China this evening, we thought it instructive to get some sense of the reality in China. From both the property bubble perspective (as Stratfor’s analysis of the record high prices paid just this week for Beijing property – by an SOE no less – and its massive ‘microcosm’ insight into the bubbliciousness of the PBOC’s attempts to stave off the inevitable ‘landing’); to the rather shocking insight that Diapason Commodities’ Sean Corrigan offers that ‘Hot Money Flows’ have left China at a rates exceeding that during the worst of the Lehman crisis; take a range of key indicators – from electricity usage, to Shanghai container throughput, to nationwide rail freight ton-miles, to steel output – and you will notice that none of these shows a rate of growth during the second quarter of more than 4% from 2011, and some are as low as 1%. Whatever fictive GDP number we are presented with this week, the message is clear: “Brace! Brace! Brace!”

Via Sean Corrigan of Diapason Commodities,

Indeed, there are clear signs that some of these dangers are beginning to be realised. Taking the difference between the reported size of China’s forex reserves and the sum of trade and FDI inflows (and making some best-guess reckoning of the effects of reval changes and interest gains), one gets an estimate of hot money movements being diffused across the porous barrier of capital controls – most famously via the metals L/C rehypothecation scam. Between March’09 and February of this year, such ‘unexplained’ flows amounted to no less than $560 billion – roughly two-fifths of China’s total reserve accumulation and a third of its coincident increase in M1.

The last four months of increasing angst about the state of the ‘landing’ have seen a dramatic reversal of these flows, to the point that the discrepancy in the books suggests that China may have lost no less than $128 billion – a flight which exceeds that suffered during the worst of the Lehman crisis.

Read moreForget China’s Goal-Seeked GDP Tonight; This Is The Chart That Keeps The PBOC Up At Night

U.S. Lets China Bypass Wall Street For Treasury Orders (‘People’s Bank Of China Buys U.S. Debt Using A Different Method Than Any Other Central Bank In The World’)

Exclusive: U.S. lets China bypass Wall Street for Treasury orders (Reuters, May 21, 2012):

China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury’s first-ever direct relationship with a foreign government, according to documents viewed by Reuters.

The relationship means the People’s Bank of China buys U.S. debt using a different method than any other central bank in the world.

The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.

Read moreU.S. Lets China Bypass Wall Street For Treasury Orders (‘People’s Bank Of China Buys U.S. Debt Using A Different Method Than Any Other Central Bank In The World’)

China Moves To Turn Yuan Into Fully Tradable Global Currency

Flashback:

Mike Krieger: This Is The Last Dance:

They refuse to allow the yuan to strengthen because they know that once they do that it will mark the real end of the dollar era. So instead they are spending like crazy on infrastructure ahead of them allowing the dollar to plunge.  Then the strong yuan will be employed to purchase all the commodities they need to utilize their infrastructure and the OECD gets priced out. To those that talk about yuan devaluation, you need to be specific.  Devaluation versus what?  Versus commodities generally along with other currencies?  I can buy that argument very easily.  Versus the dollar, highly doubtful.  Why? The latest data says China owns $877.5 billion in U.S. treasuries. All they have to do is start dumping and the dollar is finished as the Fed will be forced to print so many dollars it will make Mugabe blush.  People need to wake up.

(Mike Krieger, formerly a macro analyst at Bernstein, and currently running his own fund, KAM LP, summarizies the pretend reality we are all caught in now, knowing full well America is set on a crash course with reality at some point, yet sticking our collective heads in the sand, as the collapse will be some time in the “indefinite” future. In the meantime, banks will continue to boost US GDP by peddling “financial innovation” and restructuring advice to countries like Greece… and nothing else.)

Ready for the greatest financial collapse in world history?

This is the ‘Greatest Depression.


China moves on currency after growing US pressure (Telegraph, April 14, 2012):

China took a major step closer to turning its yuan into a fully tradable global currency today, by doubling the range by which it is allowed to rise or fall against the dollar.

The People’s Bank of China said that from Monday it will double the trading band, so that the yuan can fluctuate by 1pc every day from a mid-point, compared with its previous limit of 0.5pc.

The move demonstrates Beijing’s belief that the yuan is now stable enough to handle major structural reforms, despite slowing growth of the Chinese economy.

Analysts said the slowdown may have actually spurred Beijing to make the change, because the Chinese government knew it could introduce the larger band without causing a spike in the yuan’s value.

Read moreChina Moves To Turn Yuan Into Fully Tradable Global Currency

The REAL STORY Your Governments, MSM And The Central Banksters Completely Forgot To Tell You About: ‘The Race To Debase In All Its Glory’ (Chart)

The Race To Debase In All Its Glory (ZeroHedge, Feb. 19, 2012):

Lest anyone forget what the real story is, here is a reminder. Thank you neo-Keynesian economics for making a mockery of non-scientific notation.

Chinese Central Banker: ‘Gold Is The Only Safe Haven Left’

Chinese Central Banker Declares That ‘Gold Is The Only Safe Haven Left’ (Business Insider, Dec. 27, 2011):

China is making an even bigger move toward gold in reaction to money printing around the world (via @JamesGRickards).People’s Bank of China official Zhang Jianhua declared yesterday: No asset is safe now. The only choice to hedge risks is to hold hard currency – gold.

Zhang, the bank’s research director, recommended buying the dips: “The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation.”

China’s $3.2 trillion in foreign reserves are currently invested one-third in U.S. treasuries 20 percent in euro-denominated assets and only 1.8 percent in gold, according to China Daily. China has one of the world’s biggest gold reserves at 1,054 tons.

China Central Bank Finds Officials Stole More Than $120 Billions

China central bank finds officials stole billions (MarketWatch, June 17, 2011):

HONG KONG (MarketWatch) — Corrupt Chinese officials and employees of state-owned companies have absconded with about 800 billion yuan ($123.7 billion) of public money over 15 years through 2008, much of it making its way to the U.S., Canada, Australia and the Netherlands, according to Chinese news reports citing a central bank study.

The 67-page report, completed in 2008, was posted on the People’s Bank of China’s website this week, purportedly by mistake, and has since been taken down, although PDFs of the document are circulating in cyberspace.

In the report, which appears never to have been intended for public release, the PBOC estimated about 16,000 to 18,000 individuals have fled the country with ill-gotten funds over a 15-year period leading up to the report’s release, according to news-media accounts.

Read moreChina Central Bank Finds Officials Stole More Than $120 Billions

Secret Summit of Top Central Bankers in Australia

* World’s top bankers fly in
* To meet at secret location
* Trouble on the horizon

wall-street_003
The high-powered gathering coincides with a fresh meltdown on world sharemarkets (AP)

THE world’s top central bankers began arriving in Australia yesterday as renewed fears about the strength of the global economic recovery gripped world share markets.

Representatives from 24 central banks and monetary authorities including the US Federal Reserve and European Central Bank landed in Sydney to meet tomorrow at a secret location, the Herald Sun reports.

Organised by the Bank for International Settlements last year, the two-day talks are shrouded in secrecy with high-level security believed to have been invoked by law enforcement agencies.

Speculation that the chairman of the US Federal Reserve, Dr Ben Bernanke, would make an appearance could not be confirmed last night.

The event will be dominated by Asian delegations and is expected to include governors of the Peoples Bank of China, the Bank of Japan and the Reserve Bank of India.

The arrival of the high-powered gathering coincided with a fresh meltdown on world sharemarkets, sparked by renewed concerns about global growth and sovereign debt.

Fears countries including Greece, Portugal, Spain and Dubai could default on debt repayments combined with disappointing US jobs data to spook investors.

Read moreSecret Summit of Top Central Bankers in Australia

Chinese central banker Zhu Min: ‘The world does not have so much money to buy more US Treasuries.’

Here is what Zhu Min said exactly on the US dollar:

Chinese Central Banker Zhu Says Dollar Set to Weaken (Bloomberg):

“When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken,” Deputy Governor Zhu said at a forum in Beijing today.


China central banker says harder to buy U.S. Treasuries

us-dollar-to-weaken

BEIJING (Reuters) – It is getting harder for governments to buy U.S. Treasuries because the United States’ shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said on Thursday.

The comments by Zhu Min, deputy governor of the People’s Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of U.S. government bonds.

Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its $2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.

China’s State Administration of Foreign Exchange (SAFE) reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as Beijing seeks to diversify its investments.

In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.

He then addressed where demand for that debt would come from.

“The United States cannot force foreign governments to increase their holdings of Treasuries,” Zhu said, according to an audio recording of his remarks. “Double the holdings? It is definitely impossible.”

“The U.S. current account deficit is falling as residents’ savings increase, so its trade turnover is falling, which means the U.S. is supplying fewer dollars to the rest of the world,” he added.

“The world does not have so much money to buy more U.S. Treasuries.”

Read moreChinese central banker Zhu Min: ‘The world does not have so much money to buy more US Treasuries.’

China Slows Purchases of U.S. and Other Bonds

Related article: Treasuries Rise After Federal Reserve Buys Government Debt:
The U.S. needs to borrow $3.25 trillion this fiscal year, according to primary dealer Goldman Sachs Group Inc. President Barack Obama is asking Congress to approve a $3.55 trillion budget for 2010.

The Fed is creating pure inflation.

The USS Titanic is sinking.


HONG KONG – Reversing its role as the world’s fastest-growing buyer of United States Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released during the weekend by China’s central bank.

China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years, edging up $7.7 billion, compared with a record increase of $153.9 billion in the same quarter last year.

China has lent vast sums to the United States – roughly two-thirds of the central bank’s $1.95 trillion in foreign reserves are believed to be in American securities. But the Chinese government now finances a dwindling percentage of new American mortgages and government borrowing.

In the last two months, Premier Wen Jiabao and other Chinese officials have expressed growing nervousness about their country’s huge exposure to America’s financial well-being.

Read moreChina Slows Purchases of U.S. and Other Bonds

RBS May Join UBS, Li in Selling Bank of China Stock

In case the Bank of China wants to raise funds, will it start selling US Treasuries?


Pedestrians walk past a branch of Royal Bank of Scotland in London on Oct. 13, 2008. Photographer: Jason Alden/Bloomberg News

Jan. 8 (Bloomberg) — Royal Bank of Scotland Group Plc said it’s considering joining UBS AG and Hong Kong billionaire Li Ka- shing in selling Bank of China Ltd. shares as the end of a three-year lockup gives the U.K. lender a chance to raise funds.

RBS, the biggest bank to be controlled by the U.K. government after a 20 billion-pound ($30 billion) bailout, said it is “examining” its $2.8 billion Bank of China stake as part of a companywide review initiated last quarter. Bank of China, the country’s third-largest lender, fell 7.9 percent in Hong Kong after Li sold 2 billion shares in the Beijing-based company.

Read moreRBS May Join UBS, Li in Selling Bank of China Stock