Gartman, on CNBC, "the liquidity crunch in China is very serious, but i'm not expecting anything serious. I'm really not concerned. Usually these things resolve themselves in a very benign manner. That is a concern that bothers me. but I'm not really concerned. I'm not expecting a major dislocation".
The problem Gartman has with China comes from the fact that he can't see the gravity of the core problem facing the PBOC philosophy of control and the need for uncontrolled free market forces to determine the short market rate. He does not know like everyone else, except me, why it is impossible to demand manage the demand for money into a "benign" result. Not even the Chinese communist party can order under pain of death all the participants to behave correctly and expect to be successful.
Also, Gartman smells trouble, but how is trouble there communicated to the invincible US market? The answer is obvious. If there's a demand squeeze it must be that there's not enough money flowing back into the Chinese money market from the Chinese economy. PBOC fights this circumstance by adding funds, but they can't add fast enough because if they tried, they'd be throwing inflated yuan onto the fire. They, all of them, need another source of funds, and that source must be large and liquid. Where can they find that?
Anybody got any ideas? |
