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Why China's Liquidity Crisis Could Lead to a Perfect Storm in the US Bond Market
Last week while most people were fretting about the nightmare that would be a Larry Summers appointment to chair of the Federal Reserve, I was fretting about another nightmare of equal if not greater proportion. On Friday, July 19 the People's Bank of China (PBOC) eased credit conditions by removing the floor on bank-lending rates. This did not see much reaction from US markets, but I believe this move signals the severity of the credit contraction due to capital outflows. This easing of monetary conditions is potentially the first step toward what may be the inevitable floating of the Chinese currency, and that has ... (full story)