Look Who Has all TheMoney

[Graham]

Who has the Money


After completing seven-day reverse repurchase agreement (repo) operations worth 58 Billion yuan (£5,8 Billion) and two-week reverse repo operations worth 115 billion yuan (£11,5 Million) on Thursday, the PBOC injected 379 Billion yuan (£37,9 Billion) of liquidity into the money market this week, marking an all-time weekly high.



£5,8 Billion
£11,5 Billion
£37,9 Billion

Total £55,2 Billion in a week, just like that.


Serious money in any ones book.

Gra.

 

[wobbly]

But it isn't real money - the govt have struck a deal with their own bank to sell bonds at a fixed return, then bought the bonds back at a lower price (so the bank makes a tax loss), then re-sold them to the bank again at a lower price again and higher agreed exit price, so the bank makes up the loss from first time around, which it has 'injected' into the market, and has the benefit of less tax, initially, but will re-pay some (not all) of the tax back on the higher exit deal.

They havent made a profit, these are just accountants tricks, and pretty much what got the global economy into this mess. China isnt worried because they have money coming in, but when that money dries up they will be left exposed to all these types of deal, exactly what happened to the rest of the world in 2006 onwards (the recession 'happened' in 2008, but started about 2 years earlier behind the scenes, but rolling credit meant it could be hidden - a la Lehman Brothers.)

We call it Quantitave Easing, and its not good.

If you've got shares in Santander - get rid, within 18 months they will be worthless, and keep any deposits down to the amount covered by the Govt guarantee scheme. They have issues far worse than they are declaring, and what they are declaring is pretty bad!

Barclays have a major LIBOR case going through the courts, if they lose, its going to make PPI look like small change, I've just dumped all my Barclays shares just in case.

Its a rocky road at the moment, and is going to get worse, hence the need for PBOC to inject the funds.

If I was in China, and making real money, I would be looking carefully where to put my savings, keep everything spread around and avoid any returns that look too good to miss, avoid any sort of leveraged investment.

Pete

 

[Graham]

Hi Pete,
I sort of got half the jist of what was going on, but you spelt it out more clearly.
PM you later.

Gra.