Global Macro Trading Journal

[ralph00]

^^^ Demonstration of the folly of central planning.

For years, China has been in the midst of a massive credit boom. You would hope that the central bank would lean against those sorts of winds, but instead is more concerned with supressing the currency's value. This requires massive printing of yuan - feeding the credit boom even more, turning it into a ginormous credit bubble.

When boom turns to bust - as it always does - nobody's going to want to hold yuan, meaning the bank will have to turn to propping up the currency's value. This will mean tightening monetary policy while the economy contracts - feeding the collapse even more (until the pain becomes too great and the mandarins say 'fuck it' and let the yuan go, a la Bernank with QE part deux).

Instead of moderating the business cycle, misinformed bureaucrats feed it in both directions.

 

[Daal]

Quote from ralph00:

^^^ Demonstration of the folly of central planning.

For years, China has been in the midst of a massive credit boom. You would hope that the central bank would lean against those sorts of winds, but instead is more concerned with supressing the currency's value. This requires massive printing of yuan - feeding the credit boom even more, turning it into a ginormous credit bubble.

When boom turns to bust - as it always does - nobody's going to want to hold yuan, meaning the bank will have to turn to propping up the currency's value. This will mean tightening monetary policy while the economy contracts - feeding the collapse even more (until the pain becomes too great and the mandarins say 'fuck it' and let the yuan go, a la Bernank with QE part deux).

Instead of moderating the business cycle, misinformed bureaucrats feed it in both directions.

So shame on the Chinese Central bank for not loosening money in a downturn and shame on the Fed for doing so

 

[gmst]

Short term tactical trade call: Long AUDNZD at 1.27, Target: 1.28 and 1.285/1.29. Stop: 1.26

Rationale: NZD rating cut. Somehow I don't have much conviction on this one, but I have taken the trade.

 

[Kassz007]

Quote from Daal:

So shame on the Chinese Central bank for not loosening money in a downturn and shame on the Fed for doing so

Some are never pleased

 

[gmst]

Quote from gmst:

Short term tactical trade call: Long AUDNZD at 1.27, Target: 1.28 and 1.285/1.29. Stop: 1.26

Rationale: NZD rating cut. Somehow I don't have much conviction on this one, but I have taken the trade.

Somehow I do not feel comfortable with this position and am closing it for a scratch. It was my lowest conviction trade that I posted here.

 

[ralph00]

Quote from Daal:

So shame on the Chinese Central bank for not loosening money in a downturn and shame on the Fed for doing so

Well the Chinese haven't done anything yet.

I'd like to see these central planners just once admit it's the booms that cause the busts, and that their pro-cyclical activities contribute to it. Yes, the Chinese can control the value of the yuan, but by choosing that, they give up control over the supply of yuan - thus finding themselves printing the stuff by the billions even as they realize the need to tighten credit.

It's complete lunacy and not once do I see these guys (there or here) taking a step back, showing a little modesty, and admitting this truism. Instead they try to paper over their mistakes and have the hundreds of economists working under them push papers absolving them of any responsibility.

 

[Daal]

I'd just note that Soros is a big believer that tight monetary policy combined with loose fiscal policy is a recipe for a stronger currency. So to me, its not all clear that the Yuan would go down. Only if they go full QE or whatever I might join that camp

 

[ralph00]

Aussie house prices continue to fall

http://www.theaustralian.com.au/bus...-rp-data-rismark/story-fn9656lz-1226153751275

Price off 7.1% Y/Y in Perth despite the mining boom

 

[DrewLR]

Quote from Daal:

I'd just note that Soros is a big believer that tight monetary policy combined with loose fiscal policy is a recipe for a stronger currency. So to me, its not all clear that the Yuan would go down. Only if they go full QE or whatever I might join that camp

You are missing out the required high trade deficit from Soros' recipe for stronger currency. Currently China has quite a big trade surplus (although decreasing, -34% YoY)

 

[DrewLR]

Quote from Daal:

I'd just note that Soros is a big believer that tight monetary policy combined with loose fiscal policy is a recipe for a stronger currency. So to me, its not all clear that the Yuan would go down. Only if they go full QE or whatever I might join that camp

You are missing out the high trade deficit from Soros' recipe for a stronger currency. Currently China has a quite big trade surplus (although decreasing, -34% YoY)