"Quantitative Tightening" is a myth

(But that doesn't mean we don't have a problem).

Deutsche Bank has frightened everyone by warning that if China sold substantial quantities of US Treasuries (USTs) to support the yuan, this would amount to a substantial tightening of US monetary policy.

The reason why China accumulated USTs in the first place was because of its trade surplus:

The excess of exports over import sucked dollars into China, where the People’s Bank of China (PBoC) exchanged them for domestic currency (yuan). The PBoC therefore acquired large amounts of dollars, which it stored in the form of USTs. By doing so, it took USTs out of circulation and returned to the world economy the dollars that had been sucked into China. This can be regarded as a form of dollar quantitative easing (QE). Therefore, Deutsche Bank argues, if PBoC sells its USTs, this amounts to undoing QE.

But it’s not that simple.....

To read the rest of this Forbes post, click here.


  1. China gonna collapse until end of year IMO

  2. Great read as always Frances, but that report from DB still has some points, Izzy's favorite petrodollar argument one of them. Personally I think propensity for reserve accumulation will decline along with global trade volumes, especially from Asia - don't see anyone going beyond one year of import cover maximum.

  3. IEA 2015 coal trends publication.

    In 2014 total GLOBAL coal consumption declined by .9%
    the first such decline since 1999.
    Just to remind dear readers – even during the 2009 crash period coal consumption grew…….
    2014 contraction expressed in MTce
    OECD : – 30.1Mtce
    Non OECD : -18.9Mtce

    OECD coal consumption lowest since 1983.
    UK : -20%
    Lowest coal consumption since IEA records began in 1960.

    As for electricity production
    Renewable growth not surprisingly is not adding to OECD electricity growth.
    It is in dramatic reverse.
    Provisional data from the IEA point to a .9% fall in OECD consumption in 2014.

    All the signs point to a cutting apart of the global barbell economy.
    If this is not a long term structural disintegration of the global production /consumption system I don’t know what is…….

  4. Whatever about the monetary realm - the physical economies cannot adjust.
    Coal is the centerpiece of the albeit highly wasteful capitalistic production system with half of the worlds electricity output dependent on the stuff.
    EU energy policy makes adjustment impossible.
    Prepare for a catastrophic decline of world production as Europe cannot afford to buy Asian products and also cannot afford to engage in domestic production.

  5. Again I point to western efforts at Industrial sabotage and concentration camp labour / social dislocation policy.
    What we are witnessing is industrialization without distribution ,I essentially define distribution today as the giving away of surplus industrial goods for example abundant Irish housing which would dramatically reduce living costs.

    We currently live in the worst of all worlds.
    The satanic mill without a increase in energy density per person.
    We are certain to face massive social dislocation in the sole interests of maintaining concentration / freedom for the few.
    The reality of capitalism (it has always been divorced from the efficient runnings of the production /consumption system) is again becoming obvious to all.


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