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The size of the PBOC's balance sheet is shrinking ... rapidly. Far from being a conscious...
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Thursday, September 20, 2012, 10:46 AM ETThe size of the PBOC's balance sheet is shrinking ... rapidly. Far from being a conscious decision to tighten monetary policy, the shrinkage has more to with capital flows. To fix the price of the yuan, the PBOC is forced to print as money flows into the country, but must sell securities as capital reverses. The policy means the PBOC has a very large stimulus bullet in its chamber - letting the yuan go.
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Sounds like this is the real rationale for the FED's QEnfinity - a currency war. They are putting a lot of pressure on them so that they can force up the value of the Yuan.
We'll see who wins. I suspect that Joe Sixpack ends up losing in the end.