One thing I always warned about was a China gold puke. Gold bulls did not realize the bubble mentality in China. House flippers and stock chasers gave up on these markets after the stock market burst and the government cracked down on lending. They turned to gold and subsequently helped push it to a record high in September 2011. That peak in gold happened only months after the Chinese real estate market was hampered by the Chinese government.
Back in late 2010, Liu Jun Luo was looking for a gold crash, stock market crash in China and major U.S. dollar rally. Now he is getting it.
China stock market will collapse, gold will implode to $500 中国股市的崩盘和黄金暴跌到500美元
He compares China's historical collapses, when great wealth was concentrated and squandered by the Emperors. He notes that at $1900, the market value of gold was $11 trillion, but the paper gold market, mining shares, derivatives, GDP of gold producing nations and related CDS were worth $15 trillion. Thus from a leveraged position, taking down the price of gold can have a huge impact. The U.S. will earn trillions against China's trillions in losses. The real crash has yet to even begin, he expects gold will collapse to $500 in what I can only assume is a major deflationary collapse in China.
China's "money panic" is the central bank's fear of a dollar rally 中国“钱慌”是中国央行对美元将暴涨的恐惧
Those believing the market explanation for China's money panic are self-deluding fools. At present, China's deposit reserve ratio has reached 20% , China's banking sector loan to deposit ratio is 75%. Our deposit reserve ratio can be reduced to the 8% to 10% level. The European and American banking deposit ratio is 120% .
Therefore, a reduction of 5% in the deposit reserve ratio is equal to the release of four trillion yuan money supply. And by raising the upper limit of the banking sector's loan-deposit ratio, the central bank can release a few trillion yuan in money supply.
In theory, China's central bank has more than ten trillion it can immediately put into the market. But why has China's central bank has deliberately created this "money panic?" Does China's central bank not understand the seriousness of the rate of decline in China's economy and the out of control rise in currency transaction costs?
In the last month I have been reminding everyone on Sina Weibo— "the rate of decline of China's economy will far exceed everyone's worst expectations and people will flee China's stock market like rats escaping a sinking ship."
2012 end of the year I published a book , "Surviving the Great Depression - 2013 error for the central bank pays the bill " speaks very clearly - the Chinese Economy in 2013 is faced with the disastrous causes of a Great Depression:
(A) the Bank of Japan to launch devaluation of the yen exchange rate;
(Two) the U.S. government began a neutral fiscal austerity;
(Three) In the face of rapid economic decline and the rapid rise in interest rates, China's central bank takes the policy of indifference.
From 2010 onwards, when the Dollar Index was 74, China's central bank made the strategic decision that the dollar would devalue over the long-term. Therefore, China's central bank began selling dollars and buying the euro, the yen and commodity currencies to diversify China's foreign exchange reserves.
However, beginning in 2013 , China's central bank suddenly found the U.S. economy has been gradually recovering. The euro zone economy has continued into a disastrous predicament. Meanwhile, the Bank of Japan launched a policy of devaluation of the yen.
Between July and October, the Chinese central bank will manufacture China's disastrous stock market crash. The hidden past strategic errors of judgment will now come to light, exposing China's bad debts.
From 2010 onwards, China's central bank took 3 trillion in foreign reserves and converted 2 trillion into non-US currencies, this is the root of the future Chinese economic disaster. roots. In all of human history, there is no central bank that committed such a stupid, catastrophic mistake.
The real farce is that China's central bank in the coming months will reverse its past dumping of dollars; it will turn into a frenzy of dollar buying. Including a rapid nationalization of domestic U.S. dollar savings.
Markets Live: Thursday, 24th July, 2014 - Live markets commentary from FT.com Continue reading: Markets Live: Thursday, 24th July, 2014