With our esteemed monetary dictators out enjoying a late summer vacation in Jackson Hole, WY this week, the Western resort to the stars has suddenly become The Situation Room for central bank intervention. In this, the Fed has been running on high alert because of the geo-financial events coming primarily from China, but also within the constructs of both Wall Street, and in Europe.
So why then do I place this under the radar crisis on par with Benghazi? Because while the Fed heads have their ‘big bad secret meetings’ to hash over next year’s monetary policy, the truth is that the real policy makers within the central bank are busting their butts to stave off a double-headed attack that not only threatens their sycophants equity positions, but also the solvency of the dollar.
Earlier today I put some pieces of the pie together and came up with an interesting parallel in the bond market. As the 10 year has slipped back under 2 percent over the past seven days, something besides the old ‘flight to safety’ for investors was taking place that is kicking the Fed and the BLICS into high gear.
It is that China is dumping dollars in the hundreds of billions to secure their own markets.
The PBoC cut the RRR for all banks by 50bp and offered additional reductions for leasing companies (300bp) and rural banks (50bp). All these will take effect as of 6 September, and the total amount of liquidity injected will be close to CNY700bn, or $106bn based on today’s onshore exchange rate. In perspective, the PBoC may have sold more official FX reserves than this amount since the currency regime change on 11 August.
There you have it: in the past two weeks alone China has sold a gargantuan $106 (or more) billion in US paper just as a result of the change in the currency regime!
But wait, there’s more: recall that one months ago we posted that “China’s Record Dumping Of US Treasuries Leaves Goldman Speechless” in which we reported that China has sold some $107 billion in Treasurys since the start of 2015.
When we did that article, we too were quite shocked at that number. However, we – just like Goldman – are absolutely speechless to find out that China has sold as much in Treasurys in the past 2 weeks, over $100 billion, as it has sold in the entire first half of the year!
In retrospect, it is absolutely amazing that the 10 and 30 Year Bonds have cratered considering the amount of concentrated selling by China. – Zerohedge
Interesting how the 10 year, as well as the dollar, have declined in relation to China’s massive dumping of treasury reserves. And while it may be true that some investors have moved cash into treasuries after getting out of the markets the past couple of days, it doesn’t fully explain the 7-21 day decline when the markets were not yet in turmoil.
Then of course we have the attempted stick saves in the equity markets… but where exactly is all the buying coming from?
Are we witnessing the corruption of central banks? Are we observing the money-creating powers of central banks being used to drive up prices in the stock market for the benefit of the mega-rich?
These questions came to mind when we learned that the central bank of Switzerland, the Swiss National Bank, purchased 3,300,000 shares of Apple stock in the first quarter of this year, adding 500,000 shares in the second quarter. Smart money would have been selling, not buying.
It turns out that the Swiss central bank, in addition to its Apple stock, holds very large equity positions, ranging from $250,000,000 to $637,000,000, in numerous US corporations — Exxon Mobil, Microsoft, Google, Johnson & Johnson, General Electric, Procter & Gamble, Verizon, AT&T, Pfizer, Chevron, Merck, Facebook, Pepsico, Coca Cola, Disney, Valeant, IBM, Gilead, Amazon.
Among this list of the Swiss central bank’s holdings are stocks which are responsible for more than 100% of the year-to-date rise in the S&P 500 prior to the latest sell-off.
The Fed is prohibited from buying equities by the Federal Reserve Act. But an amendment in 2010 – Section 13(3) – was enacted to permit the Fed to buy AIG’s insolvent Maiden Lane assets. This amendment also created a loophole which enables the Fed to lend money to entities that can use the funds to buy stocks. Thus, the Swiss central bank could be operating as an agent of the Federal Reserve. – Paul Craig Roberts.org
If you notice why Steve Liesman (yes, I am pronouncing it LIESman) never corrects the assumptions that the Fed doesn’t have a mandate now to use QE to protect the markets, now you know. And can you imagine how much money has been needed to be printed since Friday, and funneled through Switzerland to buy stocks so that the Fed shows none of this on their primary balance sheet?
But we also need to look at the last (but certainly not least) monetary issue that is making Jackson Hole ground zero for observation of the ongoing crisis.
Thanks to some info dropped from our esteemed Russian Analyst, I put this together from a meeting taking place right now at the annual MAKS airshow.
The lineup of officials in Moscow tomorrow:King of Jordan, King of KSA, Crown Prince of Abu Dhabi, Egypt’s President, Iranian Vice-President
#Breaking: Saudi King Salman will visit Russia on August 25. He’ll attend the MAKS air show along with Putin. An arms deal may be on its way
Significant detail: Looks like Saudi &Jordanian Kings as well as Iranian & Syrian officials will all be in Moscow at the same time next week
And then imagine that Egypt’s Sisi is visiting Moscow on August 26-27. Russia is up to something – Yuri Barman
So, is it possible that the U.S. is getting hit broadsides with two nations attacking the dollar simultaneously when America appears to be at its most vulnerable?
Stay tuned! Because according to Jim Sinclair in an interview with USA Watchdog this morning, the best is yet to come.