Opaque as usual, Jeffrey Snider’s most recent offering at RealClearMarkets describes a globe-spanning contest among central banks, political forces, and private reserves. Here’s a snippet:
They call it RénmÃnbi, the People’s Currency, a false notion because it is actually dollarized. And the People’s Bank, RénmÃn YÃnháng, is stuck on constant stimulus that never stimulates. The less dollars, the fewer the currency, the lower the economy. And because this dynamic had taken up the majority of the 2010’s, at the end of the decade it leaves China’s Communists to resurrect the terrifying prospect of RénmÃn Lingxiu – the People’s Leader.
The issue is not really about the PBOC nor the Fed, but why they are stuck in the same condition where neither can get its act together. It is what lies in between them, the private reserve system that was supposed to have been fixed long before now – but obviously is not. As the twenties dawn, we can only hope the People of either country wake up and demand more than QE’s and QT’s – while they can.
The PBOC and the Fed, China and the U. S., aren’t the only players in this contest. There’s also the European Central Bank and the various European governments. They’re even more exposed to China’s machinations than we are because their trade is that much greater. China needs the liquidity desparately. They can’t maintain the edifice they’ve constructed over the last 25 years without it.
The financial wizards remind me of nothing so much as another wizard—”I can’t come back! I don’t know how it works!”
Noticed that the RCM article had no comments either. Still digesting?
As you recall too that the wizard when the whirlwind first took him away from Kansas that he was petrified by fear.
The situation also reminds me of another supposed great financial wizard by the name of Necker, who when asked to rescue the finances of the French Monarchy came up with the brilliant idea of voluntary donations.