The Yuan Is Dead, Long Live the Yuan

SCMP: People’s Bank of China official warns of ‘liquidity trap’ and calls for fiscal deficit of 3 to 5pc
An official of China’s central bank on Saturday called for an increase in the fiscal deficit along with better policy coordination as China appeared to be falling into a liquidity trap where money-pumping failed to spur corporate investment.

Sheng Songcheng, head of statistics and analysis at the People’s Bank of China, called for a proactive fiscal policy, including trimming corporate tax burdens, issuing more government debt and increasing the fiscal deficit making to make monetary policy more effective.

...“Despite loads of liquidity pumped to the market, enterprises would rather bank the money in current accounts in the absence of good investment options, which is in line with record low private investment data,” Sheng said, noting that monetary policy alone won’t be enough to bolster growth.

He said China is seemingly falling into a “liquidity trap” where companies prefer to hoard cash rather than invest it despite the large amount of liquidity in the market.
The problem across the world is deflation, depression and a solvency crisis. All the world's major governments and central bankers are trying to avoid paying for their mistakes. They have delayed the day of reckoning for 8 years and are now chasing their own tails, trying to solve the problems their actions are creating. The central banks lower interest rates in order to fight deflation and get lower interest rates. They create more money and get lower interest rates.

Either let asset prices collapse and deal with the fallout, or allow the currency to collapse. Those are the options short of a white swan that suddenly boost real GDP.

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