Sunday, February 2, 2020

China’s central bank will inject CNY1.2 trillion (USD170 billion)


I don't see how forcing newly created non-risk assets onto bank balance sheets is going to help correct a real hygiene problem...





5 comments:

Ralph Musgrave said...

So it's not just in the West where the politicians and bureaucrats who control the money pringing press distribute freshly printed money to their friends in the banking industry rather than to Main Street....:-)

Matt Franko said...

Ralph if they buy the assets off of the non-bank sector those non-bank entities get a deposit account balance at a bank for their former govt securities account at a bank so it can be exactly opposite of what you are saying...

Banks get both a new Asset (the Reserve Assets) and a new Liability (the customer deposit account) so banks do not benefit if fact this depresses the bank leverage ratio and it retards the bank's ability to provide additional credit...

No surprise that China is down 8% today even after this "pumping!" or wtf the Monetarist morons call it.. probably made it worse...

Matt Franko said...

Ralph if govt forces a transaction upon the banking system that increases BOTH bank Assets and Liabilities how is that helpful to the banks? How is that "giving them money!" ? How is that "giving" the banks anything?

Retained Earnings or Shareholders Equity at a bank is (A-L) it doesnt change if both A and L increase an equal amount... how is this then helpful?

Andrew Anderson said...

if govt forces a transaction upon the banking system that increases BOTH bank Assets and Liabilities how is that helpful to the Franko

Maybe in China they can force an asset swap but in the US I suspect the process is for the Central Bank to OVERPAY for bank assets - and that does increase equity, i.e. is a gift.

S400 said...

“I don't see how forcing newly created non-risk assets onto bank balance sheets is going to help correct a real hygiene problem”

You mean where sewage is let out among playing kids in the US making them sick in deceases that used to be gone long time ago...