Pump and Thump, Finally Dump

US and Japan Pump It, Chinese Dam It and Suck, And Europe Sullenly Suffers Shrinkage – UPDATE by Lee Adler, Wall Street Examiner UPDATE: Shortly after I completed this post, the BoE announced a 200 billion yuan ($32.6 billion) swap line with the PBoC, according to the Financial Times. This is the first time a …

Lots Of News, Signifying Nothing New

I don’t think there is a whole lot to say about this week’s numbers beyond what I have been saying for the past several months. Nothing substantial has really changed. China’s external account is worsening, and will continue to worsen since global imbalances have no choice but to adjust. Growth in China is slowing but remains relatively rapid, and as unhealthy as ever, but there is little likely to be done to improve the quality of growth until 2013. Beijing will continue veering back and forth between stomping on the credit accelerator and stomping on the credit brakes as the only way they can manage the economy.

The Role Of Reserve Ratio Requirements In China – A Brake For Credit Growth?

by Dr. Dirk Ehnst

I have recently presented some joint work with Finn Körner, showing Chinese data at a conference in Berlin. We had the impression that China is using the reserve ratio requirements (RRR) to fight inflation. Increasing the RRRs would lessen room for the banks to expand credits. This would only work if banks care about the RRR. In case they are not constrained by RRRs, changes in the RRR might only have psychological implications, which doesn’t mean that they wouldn’t work.