China pushed tonight to throw 50 billion yuan into their markets. 50 billion yuan is $8 billion. Does SHIBOR look like an $8 billion problem to you?
Looks like a little bit bigger of an issue than that.
Reports that China had credit issues have been disseminating for years. The background here is that China stemmed credit to get costs under control, but in doing so many of their corporations were going under, unable to obtain financing. That’s the funny thing about statists – when credit dries up, only the well connected and morally popular can get loans for anything. The black market for credit was pushing rates that would make a loan shark blush.
To tap into those double digit interest rates, the rumor was that China’s finance markets were running money out the back door and into the black markets.
If this is the tipping point for China, my calls just as recently as yesterday for 1,540 SP will be fond memories, because we’ll pass through them like a hot blade through butter.
Do yourself a favor and throw out everything you were working on yesterday. It’s worthless now. Start over from a point without preconceived notions. You’ll save yourself money in the long haul.