Oct 02 2024 36 mins 3
Desperate? Chinese Open Up The Liquidity Flood Gate
Dock Workers Strike: Headache For Kamala
Bonds & Gold Signal Inflation Woes
“Be careful what you wish for is a phrase that we often hear, and I think this is a perfect case in point this week in China. They will get their 5% GDP growth rate, and they will be successful in that endeavor. At what cost remains to be seen. From last week to this week, the PBOC liquidity spigots have been turned on and left on. How have markets responded? The CSI 300, the Shanghai Stock Exchange, up between 20 and 30% in less than a week. I'd say that's a positive response. Be careful what you wish for.” —David McAlvany
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany.
Last night, Dave, we met and we were talking about what is it that drives us. I've been studying the process of the hero's journey where there's a call to action and then they encounter some sort of trial and then they come away better. And I was thinking back to just meeting your dad and realizing when I was in my twenties that this place was a place that was driven on ideology. There was a hero's journey sort of built in to your dad, to your family. It was just interesting because there's so many financial firms that are out there that really they just want to know how much money they made that day. But there was mission involved in this.
I bring that up, Dave, because not only did we talk about that, but last week you were thrust into the position of Mr. Mom and had to teach a little bit about the American constitution and freedoms and just what makes us different and what we're fighting for.
David: Yep. Just a rehash of the balance of power, a rehash of thinking through why from a historical perspective it made sense to understand human nature and create this checks and balances between the three branches of government. And the details of when things don't go right, how you address it. It's a complex thing. If you haven't read the Constitution in a while, I would encourage you to take the next couple of weeks and go through each of the main sections and just appreciate what it is. Because I think sometimes not appreciating what we have, you can very quickly fall prey to the modern critique of, it's an old document and who needs it anyways. We live in a new world with new ideas and we can do better.
Kevin: And I'm looking at this new world that we live in, Dave, everywhere really, but the United States, which still has the Constitution, even though we're weakly holding onto it. And it concerns me because the Constitution was a sacrificial document that basically said, "Look, we're going to take coercion and domination out of the hands of the government." We had free markets. Okay? And what we have now—
Let's look at China, which is a direct opposite of that. China is doing what Mario Draghi did back in 2011. They're basically saying, "We'll do whatever it takes. We're just going to print a bunch of money." And as I was thinking about this, Dave, what we do here is try to stick with keeping people free from coercion and domination. How is that done? Well, you have to protect yourself from the very effects of what these central banks and governments are trying to do to control the people.
David: Be careful what you wish for is a phrase that we often hear, and I think this is a perfect case in point this week in China. They will get their 5% GDP growth rate, and they will be successful in that endeavor. At what cost remains to be seen. From last week to this week, the PBOC liquidity spigots have been turned on and left on. Originally it was bank reserve requirements cut by 50 basis points, repo rates cut by 20 basis points, then came direct access by brokers to the PBOC to buy stocks and encouragement, enticement for them to buy stocks.
Insurance companies and corporations themselves by the end of the week had access to the PBOC to do stock buybacks.
Dock Workers Strike: Headache For Kamala
Bonds & Gold Signal Inflation Woes
“Be careful what you wish for is a phrase that we often hear, and I think this is a perfect case in point this week in China. They will get their 5% GDP growth rate, and they will be successful in that endeavor. At what cost remains to be seen. From last week to this week, the PBOC liquidity spigots have been turned on and left on. How have markets responded? The CSI 300, the Shanghai Stock Exchange, up between 20 and 30% in less than a week. I'd say that's a positive response. Be careful what you wish for.” —David McAlvany
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany.
Last night, Dave, we met and we were talking about what is it that drives us. I've been studying the process of the hero's journey where there's a call to action and then they encounter some sort of trial and then they come away better. And I was thinking back to just meeting your dad and realizing when I was in my twenties that this place was a place that was driven on ideology. There was a hero's journey sort of built in to your dad, to your family. It was just interesting because there's so many financial firms that are out there that really they just want to know how much money they made that day. But there was mission involved in this.
I bring that up, Dave, because not only did we talk about that, but last week you were thrust into the position of Mr. Mom and had to teach a little bit about the American constitution and freedoms and just what makes us different and what we're fighting for.
David: Yep. Just a rehash of the balance of power, a rehash of thinking through why from a historical perspective it made sense to understand human nature and create this checks and balances between the three branches of government. And the details of when things don't go right, how you address it. It's a complex thing. If you haven't read the Constitution in a while, I would encourage you to take the next couple of weeks and go through each of the main sections and just appreciate what it is. Because I think sometimes not appreciating what we have, you can very quickly fall prey to the modern critique of, it's an old document and who needs it anyways. We live in a new world with new ideas and we can do better.
Kevin: And I'm looking at this new world that we live in, Dave, everywhere really, but the United States, which still has the Constitution, even though we're weakly holding onto it. And it concerns me because the Constitution was a sacrificial document that basically said, "Look, we're going to take coercion and domination out of the hands of the government." We had free markets. Okay? And what we have now—
Let's look at China, which is a direct opposite of that. China is doing what Mario Draghi did back in 2011. They're basically saying, "We'll do whatever it takes. We're just going to print a bunch of money." And as I was thinking about this, Dave, what we do here is try to stick with keeping people free from coercion and domination. How is that done? Well, you have to protect yourself from the very effects of what these central banks and governments are trying to do to control the people.
David: Be careful what you wish for is a phrase that we often hear, and I think this is a perfect case in point this week in China. They will get their 5% GDP growth rate, and they will be successful in that endeavor. At what cost remains to be seen. From last week to this week, the PBOC liquidity spigots have been turned on and left on. Originally it was bank reserve requirements cut by 50 basis points, repo rates cut by 20 basis points, then came direct access by brokers to the PBOC to buy stocks and encouragement, enticement for them to buy stocks.
Insurance companies and corporations themselves by the end of the week had access to the PBOC to do stock buybacks.
