BOOM as at 10th January 2021

CASH IN CHINA

Last week, BOOM pointed out that China seems to understand money better than advanced economy western nations. One aspect of the Chinese monetary system that is extremely difficult to ascertain, however, is the supply of physical cash to the Chinese economy and the rate of recall of cash. In other words, is the cash component of the money supply growing (?) and if so, at what rate? BOOM takes the view that Non-Interest Bearing Cash is an extremely important element to any economy because it is a buffer and gives stability to the Credit Money expansion/destruction process ruled over by the commercial banks.

In July 2020, the Peoples Bank of China (the central bank) announced a project in three areas to create a cash management information system. They are clearly aware of the issue and seem to understand its importance.

If China allows cash to decline well below 5% of the total money supply, then they will inevitably be heading to a financial and economic crisis fueled by out of control asset price inflation and, ultimately, CPI inflation. So far, there is no firm evidence of this so BOOM assumes that they are managing the cash component well (by keeping it well above 5 % of the total money supply).

The critical price of housing in China seems stable — only 10% gain above CPI in the last 10 years according to FRED data.  This indicates that their new bank loans are not being mis-placed into non productive existing house prices in a speculative frenzy. That also means their bank loan expansion must be going towards other destinations — productive asset investments and the purchase of new housing.

The Chinese CPI Inflation rate is now hovering around zero so they are controlling that aspect of the economy well while their money supply from new bank loans continues to expand.

If they have asset price inflation and CPI inflation under control in a growing economy, then they have a well managed economy — no question.

CHINA CURRENCY MANAGEMENT

Their currency over the last 14 years, the Yuan, appears reasonably well managed versus the US Dollar to move around 6.5 Yuan to the Dollar (0.15 USD to Yuan).

BOOM thinks that this is deliberate. Currency stability is critical to the Chinese economy. It prevents the emergence of imported CPI inflation via a depreciating currency and keeps its prices of exported goods stable to buyers. It also allows the Yuan to become a defacto proxy of the US Dollar. This allows China to pay for its imports in Yuan as more and more exporters to China will agree to accept Yuan as settlement if it is stable. This counters the US Dollar hegemony in regard to the settlement of international trades.  The Chinese are patient. They know that the US Dollar international hegemony will continue for about 50 – 100 years. It is a slow process to move Yuan out of China in a controlled manner (and avoiding capital flight).

China is now leading the way with their experiments in CBDC (Central Bank Digital Currency) with a trial of a Regional Coupon/Token scheme in mid 2020. This is a form of electronic cash (non-interest bearing) — not too dissimilar to BOOM’s broader QB cash idea (Quantitative Boosting).

Local, regional currencies that are time-limited are excellent devices to speed transactional velocity in a dedicated region, industry sector and time frame. These Chinese experiments show great sophistication again and reveal a careful, steady approach to money management.

BOOM wrote about this on 3rd May 2020 — CHINA LEADS WITH COUPONS — HISTORY REPEATS

Link: https://boomfinanceandeconomics.wordpress.com/2020/05/02/boom-as-at-3rd-may-2020/

BANKS IN CHINA

There are about 4,500 banks in China. China’s banking sector is the largest in the world by assets, with total assets of US40.1 Trillion in the first quarter of 2019. The China Financial Stability Report 2020 recently released by the People’s Bank of China (PBOC) indicates that Chinese banking-sector financial institutions disposed of 5.8 trillion yuan (approx. USD$880 Billion) in non-performing loans (NPL) over the past three years. This represents about US $ 220 Billion per year which sounds a lot but you must remember that their population is 1.5 Billion. This default total per year is about 0.85 % of the $US 26 Trillion of bank loans in existence. So the Great Chinese Non Performing Loan Problem which some analysts insist is a major problem doesn’t seem to exist as far as BOOM can see.

Commercial banks in China are not the same as Western banks. They are extensions of the State and are carefully monitored for signs of trouble. 

Private wealth in China is a temporary phenomenon. It always ultimately belongs to the communist State. So there is a huge incentive for wealthy Chinese businessmen to be careful in their business dealings. They can take risks and generate reward but they must be mindful that the State is always their partner.

DEBUNKING MYTHS ABOUT CHINA’S ECONOMY

Yukon Huang is a senior fellow at the Carnegie Endowment and author of “Cracking the China Conundrum – Why Conventional Economic Wisdom Is Wrong”. Please listen to him. He reveals common sense in regard to China. Bear in mind that this interview was recorded three years ago but it is still worth listening to.

https: http://www.youtube.com/watch?v=XepCi0I_g6I

CHINA INDICATORS

BOOM’s secondary indicator on the Chinese economy has been trading sideways for 4 months since September. This shows that the Chinese economy is definitely slowing as we move towards Chinese New Year on 12th February. 2021 is the Year of the Ox.

BOOM’s primary China economy indicator has slowed its rate of rise significantly since early December and is now flat. This is a cause for concern. In BOOM’s experience, as long as it rises, the Chinese economy advances. If it falls, the economy contracts. BOOM is watching this closely and will report on progress throughout the year.

GERMANY WHERE CASH IS KING
WE MUST USE CASH

Germans are extremely prudent with their money, they hate paying too much for goods and baulk at using credit cards, preferring to use cash for many transactions. In 2019, it was estimated that Germans used Cash in almost 50 % of day to day transactions. Germany has the highest rate of cash use in the European Union.

Some reports say that up to 10% of the German money supply in existence is in the form of physical, hard cash. This number is hard to prove. But, if it is correct, then it is three times higher than other advanced economies. Up to 20% of GDP transactions in Germany are conducted in cash so it sounds plausible.

At the end of 2017, the total value of Euro banknotes and Euro coins in circulation amounted to €1,200 billion, of which €640 billion was issued by just one nation’s central bank — the Bundesbank. This implies that Germany (with a population of just 83 Million) uses half the cash issued at any given time in the entire Euro Area (population 342 Million). That is a staggering fact. If you look at the history of Euro Cash issuance since 2002, you will see that the German central bank has always provided about 50 % of the Cash in circulation in the Euro Area. This is a constant phenomenon.

Cash is important to all of us. BOOM strongly suggests that we all use it more and more rather than less and less. It is our national money, not bank created money. It is interest free when it is created and it does not cause asset price inflation. Think about it.

BEWARE THE CYTOKINE STORM

Professor Dolores Cahill is the Professor of Translational Science, School of Medicine & Principal Investigator, Conway Institute in Ireland.  She previously worked at Berlin’s Max Planck Institute for Molecular Genetics and has published over 100 scientific papers on molecular biology (genetic engineering). Watch here as she explains how a Covid Messenger RNA Vaccine may possibly be dangerous. She discusses Cytokine Storms, Antibody Dependent Response, Antibody Dependent Enhancement, Immuno-Priming and Immune Super-Priming.

Quote: “There is a huge issue with these mRNA vaccines. People need to know”. Unquote

Link: https://brandnewtube.com/watch/professor-dolores-cahill-people-will-start-dying-a-few-months-after-the-first-mrna-vaccination_87EOnw1bvNU1T32.html

Prof Cahill Papers: https://scholar.google.com/citations?user=LNdLEoMAAAAJ&hl=en

WARNING ON COVID VACCINES

International Journal of  Clinical Practice. 2020 Oct 28;e13795. doi: 10.1111/ijcp.13795.

Quote:  “The specific and significant COVID-19 risk of ADE should have been and should be prominently and independently disclosed to research subjects currently in vaccine trials, as well as those being recruited for the trials and future patients after vaccine approval, in order to meet the medical ethics standard of patient comprehension for informed consent.” Unquote

Quote:  “This risk is sufficiently obscured in clinical trial protocols and consent forms for ongoing COVID-19 vaccine trials that adequate patient comprehension of this risk is unlikely to occur, obviating truly informed consent by subjects in these trials.” Unquote

Link:  https://pubmed.ncbi.nlm.nih.gov/33113270/

DR MIKE YEADON ESSENTIAL VIEWING

Please take the time to listen to Dr Mike Yeadon as he summarizes the phenomenon of Covid 19 more skilfully. His message is deeply genuine and serious. His expertise is unquestionable. He was Chief Scientific Officer for Pfizer Global, Head of Allergy and Respiratory Research.

Quote: “THE PCR TEST IS MONSTROUSLY UNSUITABLE“…….. “We should stop mass testing immediately“. Unquote

Link:  https://www.youtube.com/watch?v=pZd-mnoj6EM

HUGE NUMBERS OF DOCTORS ASK FOR REASSESSMENT OF CORONA MEASURES

Globally, we are seeing a massive campaign of disinformation concerning Covid 19 in the main stream media. While a great number of doctors are presenting different views, unprecedented censorship by the media prevents them from making the news bulletins and headlines. Their opinions are effectively banned.

Information from different thinking experts and professionals can currently be found almost exclusively through targeted searches on the internet or alternative news sources, but not in the mainstream media. Start with THE OPEN LETTER from Doctors in Belgium  —

THE OPEN LETTER
https://docs4opendebate.be/en/open-letter/

SIGNATORIES
https://docs4opendebate.be/en/signatories/

GREAT BARRINGTON DECLARATION

Signatures:     39,544 Doctors    13,083 Medical & Public Health Scientists   
“Current lockdown policies are producing devastating effects on short and long-term public health.”

https://gbdeclaration.org/
Current Signature Count: https://gbdeclaration.org/view-signatures/

Germany

An international group of doctors has launched an extra-parliamentary inquiry into the “exaggerated and oppressive corona measures”, with a view to questioning politicians and scientists around the world.
https://acu2020.org/english-versions/

International
The initiative by Luc Montagnier, Nobel Prize winner in medicine, and Robert F. Kennedy, lawyer, among others, addresses the many inconsistencies surrounding corona policy and is addressed to the presidents of the WHO, the European Commission and the European Parliament.
https://www.internationalfreechoice.com/

United States

In the US, a group of clinician doctors, who see patients on a daily basis, united under the banner “America’s Frontline Doctors” and gave a press conference which has now been watched millions of times.
https://americasfrontlinedoctorsummit.com/

The Netherlands

In the Netherlands, doctors have come together and drafted an open letter addressed to colleagues and the government pleading for proportional measures. This letter aims to stimulate an open and frank debate on how to tackle the Covid-19 outbreak and was signed by more than 2,755 doctors.
https://opendebat.info/

An open, sharp-worded letter, was written by doctors and mental health care providers, that has been signed by more than 2500 healthcare professionals.
https://brandbriefggz.nl/

Spain

A public press conference of “Doctors for Truth” in Madrid, was attended by 400 doctors and scientists under the slogan “A world dictatorship with a sanitary excuse”. “Covid-19 is a false pandemic created for political purposes”. Doctors agree that:
Coronavirus victims did not outnumber last year’s seasonal flu deaths.
Figures were exaggerated by altering medical protocols.
The confinement of the healthy and the forced use of masks have no scientific basis.
The disease known as Covid-19 does not have a single infectious pattern, but a combination of them.
https://niburu.co/gezondheid/15385-artsen-komen-massaal-met-coronawaarheid-naar-buiten

Belgium

A Belgian initiative, which has already been signed by more than 1,500 doctors and health professionals (23rd September 2020)

http://omgekeerdelockdown.simplesite.com/?fbclid=IwAR2bJAAShAlIidjnRQPyVSoZbk1Uj-FTHAthL77hKX_Oo8aMLN3V6DdwAac

An open letter on the initiative of a group of doctors from the Cliniques Universitaires St-Luc, UCLouvain. 13,583 have signed already.

https://belgiumbeyondcovid.be/

In economics, things work until they don’t. Until next week …………  Make your own conclusions, do your own research.  BOOM does not offer investment advice.

CLICK HERE FOR PODCASTS:   OUR BRAVE NEW ECONOMIC WORLD

EMAIL: gerry {at} boomfinanceandeconomics.com
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https://boomfinanceandeconomics.wordpress.com/

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https://twitter.com/BOOMFinance
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HOW MOST MONEY IS CREATED

BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR (but they always need a Borrower to do so)THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY

Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work. 

https://www.youtube.com/watch?v=EC0G7pY4wREhttp://
How is Most New Money Created ?

LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).

From the Bank of England Quarterly Bulletin Q1 2014    —
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.

Youtube Video —  https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction

and

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

Paper:  Money in the Modern Economy  PDF —  CLICK HERE

Quarterly Bulletins Index

http://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2014/qb14q1.aspx

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —

“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”

Reference: https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_04_25_how_money_is_created.html
The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.
“…… the vast bulk of broad money consists of bank deposits”
“Money can be created …….. when financial intermediaries make loans
“In the first instance, the process of money creation requires a willing borrower.” 
“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”

Disclaimer:   All content is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the authors alone on the current and future status of the markets and various economies. It is subject to error and change without notice.The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.

Neither the information nor any opinion expressed constitutes a solicitation to buy or sell any securities nor investments. Do NOT ever purchase any security or investment without doing your own and sufficient research.  Neither BOOM Finance and Economics.com nor any of its principals or contributors are under any obligation to update or keep current the information contained herein. The principals and related parties may at times have positions in the securities or investments referred to and may make purchases or sales of these securities and investments while this site is live. The analysis contained is based on both technical and fundamental research.

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MOLS Denmark

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