China FLOODING the markets with liquidity to counter any loss of faith stemming from the coronavirus pandemic and a looming supply chain catastrophe

Monday, February 10, 2020
By Paul Martin

by: JD Heyes
Sunday, February 09, 2020

By week’s end, there were still more signs that China is having great difficulty controlling the spread of the coronavirus — so much so that the country’s Communist leaders have begun taking drastic measures to keep their economy, and that of most of the world, from collapsing.

First, Chinese leaders extended the country’s Lunar New Year break in the hopes that doing so would give them and the health ministry a chance to get a lid on the virus’ spread before everyone went back to work. That didn’t happen, however.

Now, as Zero Hedge reports, more cities and more companies appear to be shutting down rather than reopening, with Rabobank noting that leaders are beginning to realize just how serious and deep the damage to the Chinese and global economy will be if the outbreak goes on much longer.

“We are, after all, talking about 80 percent of the economy, and 90 percent of exporters, simply not functioning,” Zero Hedge’s Tyler Durden reported.

Yet, a look at global stocks does not give any indication that a major disruption is coming. The question to ask then is why? How come the global markets are ignoring what could be the biggest global pandemic of death and chaos in a century? How come stocks are not responding negatively to the loss of the world’s second-largest economy?

“The answer, it turns out, is the same as it always is — or has been for the last decade or more … LIQUIDITY!” Durden noted.

He adds:

Typically, China’s central bank (PBOC) floods the system with liquidity ahead of the lunar new year holiday to ensure banks can fund themselves for the week off and window-dress/support asset-values to ensure optimism and consumption continue. Also, typically, that repo-provided liquidity is rolled off shortly after the holiday is over.

But as the Lunar New Year celebration was approaching and it became obvious that the coronavirus was spreading beyond the government’s control, the PBOC doubled down (and then some) on the injection of liquidity into the economy in an amount not seen before: To the tune of about $300 billion.

Some would call this a ‘conspiracy’

The Rest…HERE

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