FLASH: Asian Markets To Open Down More than 2%

Good news everyone: the markets aren’t set to open down 10%, just a mere 2%.

However, let’s not get comfortable with such minor losses, as China just halted bank cash transfers.

Pardon the link to the nefarious advertising whoring folks ar Forbes; but the story is theirs.

Here is my favorite part of the tale:

The specific reason given—“system maintenance” at the central bank—is preposterous.  It is not credible that during the highest usage period in the year—the weeklong Lunar New Year holiday beginning January 31—the central bank would schedule an upgrade and shut down cash transfers.

A better explanation is that the country’s banking system is running dry.  Yes, there is an increased need for money in the run-up to and during the Lunar New Year holiday, but that is only a small factor.  After all, central bank officials knew this spike in demand was coming—it occurs every year at this time—and a core function of central banks is to manage seasonal liquidity fluctuations.  Moreover, the holiday has not started yet, and the PBOC, as that institution is known, could have added more liquidity to meet cash needs.

So what’s really going on?  This crunch follows similar incidents in June and December of last year.  In June, for instance, the central bank used the excuseof a “system upgrade” to allow banks to shut down their ATMs and online banking platforms.  As a result, they conserved cash and thereby avoided a nationwide meltdown.

The meltdown is coming folks. Are you ready?

S&P cuts are -5.5 below fair value and European futures are indicating a -1.5% open as well.

UPDATE 8:05pm: Both Korean and Japanese markets have bounced of the lows, but still down about 2%. However, european and American futures have recovered, considerably, pretending that the world isn’t about to meltdown. FOOLISH WESTERNERS!