2019-10-21

China's Giant Ball of Money

Deep Throat: Repo-Acalypse Now....
5.) Most importantly, again for emphasis, the Global USD increase over the last two years was primarily attributable to domiciles outside the United States (88%), with only 12% of the USD increase attributable to US Cross-Border Bank Liabilities/Deposits. In other words, the Global inventory of "newly printed" USDs is rapidly being absorbed by foreign ownership.
Not from the same list:
7.) When we examine the M3 Chart above we also see that China (RED) is the outlier, more than doubling their domestic money supply when compared to the US, Europe and Japan. The PBOC has been able to accomplish this "say so" exchange rate since the RMB, again, like so many things Chinese, is a fake currency with a pegged value which has nothing to do with economic reality. The second largest economy in the world has a closed, inflated currency which nobody uses. Yup....that's a fantastic idea. As you historians might recall, the Reichsbank tried the same thing in 1920. But they didn't have computers/wires/SWIFT so it was easier to spot. The reason the Mark failed was that they actually tried to use this currency to pay their international bills (WWI Reparations) and the Allies caught on.
Where's the Money Lebowski?

After decades of $500 Billion (plus/minus) annual global trade surpluses you'd suspect that the Chinese must own not only a significant amount of US Dollar deposits scattered all over the world, but significant financial assets (Stocks, Bonds, Real Estate, etc.) as well, and you'd be correct. Over the last two decades the West has transferred roughly $11.266 Trillion (in Dollars, Euros, Yen, Sterling, etc.) as a result of these trade surpluses.

Through the miracle of compounding interest, we can estimate that the value of Western Assets (including the Chinese portion of the above described bank deposits) controlled and direct-able by Chinese Communist Party, members and agents is roughly $27.321 Trillion (give or take) if invested at the S&P Total Return as described in the table below. Again, we know this with certainty, since there are no material RMB deposits or RMB denominated financial assets in any non-Chinese Banking systems anywhere in the world. This $27.321 Trillion can move freely around the globe between US Dollars, Euros, Sterling, Yen, Hong Kong Dollars, Canadian & Aussie Dollars, Rupees, Pesos, etc. etc. etc., but it's never been converted to RMB.

This approximately $27.321 Trillion, Chinese money/assets is still lurking in the Western Financial System somewhere.

(Note: The figure could be much greater since the Chinese, as large depositors, have had unlimited access to excellent financial advisers, and leverage, provided gleefully by our friendly US Investment Bankers. The CPC has most likely beaten the S&P Returns with consistency)

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