Chinese bank market freeze

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There’s no mystery about why stocks and the dollar are getting pounded today but there is another bogey that is not helping. As I noted this morning, China is going through something of a credit crunch with the PBOC apparently engineering high short term debt costs to squeeze down credit growth. However, today it’s looking a little more chaotic with all short term rates shooting for the stars. 7 day repo for instance:

China_7day_repo

According to Patrick Chovanec:

Picture 3

The PBOC still has options. Looks like it should use them.

 

Comments

    • migtronixMEMBER

      All we need is for crude to jump above 100USD/bbl and KABOOM!

      Luckily at present looks like demand destruction is keep crude prices down

      • notsofastMEMBER

        Nothing like an oil price spike to bring a real estate bubble crashing down.

        And not just in China. But how about right here in Australia.

        Sure the oil demand side is looking a little suppressed but that ignores the potential for some unpleasant surprises on the supply side.

        One unpleasant surprise on the supply side could be the recent opening up or the difference between the secondary source production of Saudi Arabia 9367 tbpd for May 2013 and the directly reported oil production of Saudi Arabia 9657 tbpd in the OPEC June monthly oil market report, a 290 tbpd gap which is much larger than it has been in the past. For some reason this gap has not been picked up on in the MSM yet. Maybe the Manifa oilfield is proving a little harder to tap than expected which would not surprise me as the project would be a very difficult undertaking for any oil company.

        http://www.youtube.com/watch?v=jsr1-ulViO8
        This video should give you an idea of just how big this project is and to what lengths Saudi Arabia is now required to go to maintain existing oil production levels.

        The oil markets are expecting an additional 500 tbpd from this project by mid this year. If this extra production fails to materialise on schedule I suspect it would be a nasty surprise to the oil markets.

      • migtronixMEMBER

        Notsofast: Wow that video clip was incredible, and kind of stupifying at the same time. That project is immense, and they’re draining water from a desert aquifer to pump into a hole in the ocean – we really do need to get off oil this is just get ridiculous.
        But engineering involved is amazing!

    • It’ll probably turn out to be a blip, but…if this *is* China’s Lehman Bros. moment, and if this turns out to be the definitive inflection point in the global economy for the next half-decade, then I’ve gotta say that’s one heck of a confirmation for the power of the Pascoemeter.

    • reusachtigeMEMBER

      Nah, the Chinese system allows them to just fix this when they know it’s best to do so. It’s a superior system designed to avert crisis! (Very telling by the way, thanks for sharing)

  1. Why should the PBOC do anything?

    Perhaps someone should tell me if I’m wrong to think that delaying the Chinese Minsky moment through some kind of intervention is bad and letting this just go is best. This goes for all nations.

    If we keep intervening every time things get uncomfortable, are we likely to reach a golden age of prosperity and stability or, as I think, a crunch that is much larger than anything this could end up being and totally unstoppable.

    • migtronixMEMBER

      I’m not saying POBC should do anything but if they don’t Steel/Iron Ore crashes for certain. Once liquidity dries up all leveraged positions are out of the money and there will be a scramble for the exits.

      • notsofastMEMBER

        migtronix,

        I can’t see the price of iron ore crashing below $100 US a tonne, well not for a sustained period anyway. It now costs to much to produce from new sources. And the cheaper older ore bodies that could produce at lower cost are quickly getting mined out and need to be replaced by new more expensive new mines that not only have higher cash costs but have significant capital investments to repay.

      • migtronixMEMBER

        Notsofast: I didn’t say anything about the long run just long enough to call in loans and consolidate the sector

  2. How will this effect Chinese money going off-shore? Will the chinese save our poor real estate agents from going hungry?

  3. China does not care as long as others take its currency, so, its up to others* to decide… is USFRN are more palatable?

    skippy… currency is like truth… subject to libel et al… eh. Kiddy Fiddler of over there >>>> Lmao

  4. wasabinatorMEMBER

    Credit crunch in China = Massive slam for Aussie housing. Heck, housing in just about any major western country.

  5. This will not be reported in the MSM, but a decline in the AUD from 1.03 to 0.92 has already wiped almost 1/2 a trillion off Aussie household net worth i.e. residential real estate in only 6 weeks when measured in USD!