Tuesday, September 8, 2015

China's Central Bank Explains Its Rapidly Shrinking Foreign Exchange Reserves

As global financial markets continue to feel tremors, China's central bank, the People's Bank of China, said overnight that a record drop of foreign-exchange reserves in August was partly due to its own intervention, as well as increased demand for foreign currency from Chinese companies and individual investors.

In its first public statement since reporting Monday that the reserves fell $93.9 billion, to $3.56 trillion, in August, the bank cited "multiple factors," including its own market intervention, price fluctuations in reserve assets, and movements of other foreign currencies.

The drop in reserves was the largest monthly fall on record.



  1. Does this mean an increase in the supply of the US dollar?

  2. Perhaps an increase in QE volume, yes. The Fed likely either (1) has a proxy like Belgium, Luxemburg or Japan to 'offshore QE' in order to soak up the dumped T-bonds ... OR (2) will rely on QE4 to purchase back those dumped bonds.

    Either way, this does NOT stimulate our economy or the US dollar in the long-term, only undermines trust and credibility which is often vital to keep their fiat ponzi scheme afloat.

    Also note that the Chinese are good liars. This whole stock market scandal could be orchestrated as a ruse to dump unwanted T-bonds, the cherry on top being this used as an excuse to do so. Long term yields are not solvent when a country is in economic decline like the US is, unless you're a creditor that can trust that nation to pay back debt obligations. Can China trust the US to pay back debt obligations? Hmmmm ... ... likely not.