As if we needed more evidence, the Chinese liquidity system is stuck. As much as authorities in China might complain about the global credit-based reserve currency system, as PBOC Governor Zhou Xiaochuan put it in March 2009, and quietly seek out its replacement, they not only allowed it to happen they quite eagerly participated in it so long as it appeared to fuel their economic ‘miracle.’ The monetary system in China is not Chinese; it is at most translated into RMB as its basis is derived elsewhere. And in the world of the late 20th century and especially the first decade of the 21st that means primarily ‘dollars.’
It is perhaps one of the biggest shocks to traditional thinking where you can very easily observe the eurodollar system’s decay by looking at nothing more than the People’s Bank of China’s assets. While the 2008 panic is notably absent for various reasons (only somewhat related to this specific examination), its aftermath is the most prominent feature.
This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ September 20, 2016.
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