Category: zerohedge

70% Of Brooklyn Home Sales Are To Hedge Funds, Investors And International Buyers

It has been over a year since we listed the three “pillars” of the latest dead cat bounce in the housing market. Recall: “the REO-to-Rental subsidized investment program, which led to an epic surge in demand for multi-family housing, i.e., rental, units was, together with offshore investors parking their cash in the US for safekeeping (taking advantage of the NAR’s anti-money laundering check exemptions) and the big banks Foreclosure Stuffing, the key reason for the recent, stimulus-fueled and quite transitory bounce in house prices in assorted markets.” In other words, the latest artificial move higher in the housing market had nothing to do with an “improving” economy (and implicitly, everything to do with the epic injection of liquidity by all global central banks and chinese loan creation). Today we got confirmation that once again we were correct: to wit: “Douglas Elliman rep: 70% of Brooklyn home sales going to hedge funds, investors and international buyers.”

In other words, just over two thirds of the “bounce” in the Brooklyn housing market has – much to the chagrin of hipsters everywhere – been due to the REO-to-Rent program and various other initiatives to make Wall Street America’s biggest landlord, as well as foreigners parking hot cash in the US, for money laundering reasons or otherwise.

From the NYT:

Standing in the dining room of the early 1900s-era brick rowhouse, deep in the Bushwick section of Brooklyn with not a frozen yogurt shop or Starbucks to be found, Alan Dixon, an investor from Australia, struggled to tally the houses he had bought in the area over the last year.

 

“What, 70? 72?” he asked, raising his eyebrows in question at a group of investors, contractors and designers standing nearby. A dozen construction workers scurried around, fastening plasterboard to walls and laying tile on floors, readying the four-bedroom house that the group purchased in June for $635,000 for leasing in less than two weeks’ time for as much as $5,490 a month.

 

Finally, someone locates the number on a piece of paper — 70, later corrected to 71. “That sounds right. Something like that,” Mr. Dixon said with a laugh, tugging on the cuff of the pink shirt he wore under his gray suit jacket.

 

It’s easy to understand why it might be difficult for Mr. Dixon to keep track. In just two years, the investment fund he oversees for Australian investors and retirees has purchased more than 538 homes, townhouses and brownstones from Jersey City to Queens and Brooklyn.

 

Mr. Dixon and his investments in New York area residential real estate are a microcosm of a much bigger trend sweeping the country.

 

A handful of large private equity and real estate investment firms, including the Blackstone Group and Colony Capital, have bought billions of dollars’ worth of single-family homes in some of the areas most affected by the housing collapse. The goal for these Wall Street investors is not to buy and flip the properties for a quick profit à la real estate bubble of the early 2000s. Instead, they are hunting for steady, dividend-like returns they believe can be earned by renting out the homes.

 

…

 

“I’d say by the spring, maybe 70 percent of the sales we were seeing were to hedge funds, investors and others taking advantage of what was happening in Brooklyn,” said Stephanie O’Brien, a real estate broker with Douglas Elliman in Brooklyn. “Only about 30 percent were actual end users or first-time buyers.”

 

The higher prices have changed the character and makeup of neighborhoods, often pushing more lower- and middle-income families farther east in the borough. “What’s happening is good, because it increases real estate values, but on the other hand people who have been living in these neighborhoods and hoping to one day buy or rent a larger apartment are getting priced out,” said Ron Schweiger, the Brooklyn borough historian.

So with 70% of “buyers” accounted for by the Wall Street investment and the international money laundering community, the other 30% or so of the appreciation has been banks continuing to keep millions of shadow inventory units off the market, creating an artificial subsidy and pushing prices higher due to a fake housing shortage.

Oh, and no so-called recovery.

h/t fonzanoon


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/9Ixhzc5fcMQ/story01.htm Tyler Durden

Late-Day Let-Down Spoils NASDAQ Party As Bonds & Bullion Bid

Energized by a lower crude oil price – and collapsing JPY – equity markets hit their highs shortly after 8pmET on Sunday night, trod water thorugh the Asian and European markets and started more aggressive selling once US cash markets opened. Coincidentally (or not) when Obama started speaking around 1445ET, US equities took a dramatic dive – catching down to an already weaker signaling VIX rally. EURJPY stayed in sync through all of this priming ignition pumps right into the close as NASDAQ 4,000 close was desperately needed (but the dot-com darlings were all hit). Gold and Silver's early monkey-hammering was met with buyers which lifted then up 0.5% and 0.8% respectively on the day (and 2% off their lows). WTI crude recovered more than half of its losses (-0.6% on the day) but Brent not so much as the spread broke to new 8 month highs. VIX closed higher and Treasury yields trended lower all day from the overnight open to close practically unchanged as the USD lost half its early gains to end +0.25%.

 

Unclear what the catalyst for the mid-afternoon dump in stocks was – pre-emptive month-end rebalancing? Obama? something in precious metals?

 

 

Commodities early smackdown saw a number of bid surges up during the day around the US open, EU close, and before the equit market began to roll over…

 

Don't get too excited about the Iran peace premium…

 

Stocks tracked EURJPY once again…

 

but VIX diverged…

 

 

Today's move in context…

 

Charts: Bloomberg

Bonus Chart: Don't tell anyone but the last 3 weeks have seen gas prices in the US rise at the fastest pace in 5 months…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/PFNO5a-yr74/story01.htm Tyler Durden

Late-Day Let-Down Spoils NASDAQ Party As Bonds & Bullion Bid

Energized by a lower crude oil price – and collapsing JPY – equity markets hit their highs shortly after 8pmET on Sunday night, trod water thorugh the Asian and European markets and started more aggressive selling once US cash markets opened. Coincidentally (or not) when Obama started speaking around 1445ET, US equities took a dramatic dive – catching down to an already weaker signaling VIX rally. EURJPY stayed in sync through all of this priming ignition pumps right into the close as NASDAQ 4,000 close was desperately needed (but the dot-com darlings were all hit). Gold and Silver's early monkey-hammering was met with buyers which lifted then up 0.5% and 0.8% respectively on the day (and 2% off their lows). WTI crude recovered more than half of its losses (-0.6% on the day) but Brent not so much as the spread broke to new 8 month highs. VIX closed higher and Treasury yields trended lower all day from the overnight open to close practically unchanged as the USD lost half its early gains to end +0.25%.

 

Unclear what the catalyst for the mid-afternoon dump in stocks was – pre-emptive month-end rebalancing? Obama? something in precious metals?

 

 

Commodities early smackdown saw a number of bid surges up during the day around the US open, EU close, and before the equit market began to roll over…

 

Don't get too excited about the Iran peace premium…

 

Stocks tracked EURJPY once again…

 

but VIX diverged…

 

 

Today's move in context…

 

Charts: Bloomberg

Bonus Chart: Don't tell anyone but the last 3 weeks have seen gas prices in the US rise at the fastest pace in 5 months…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/PFNO5a-yr74/story01.htm Tyler Durden

Ron Paul Asks "Can Karzai Save Us?"

Submitted by Ron Paul via the Ron Paul Institute,

After a year of talks over the post-2014 US military presence in Afghanistan, the US administration announced last week that a new agreement had finally been reached. Under the deal worked out with Afghan President Hamid Karzai, the US would keep thousands of troops on nine military bases for at least the next ten years.

It is clear that the Obama Administration badly wants this deal. Karzai, sensing this, even demanded that the US president send a personal letter promising that the US would respect the dignity of the Afghan people if it were allowed to remain in the country. It was strange to see the US president go to such lengths for a deal that would mean billions more US dollars to Karzai and his cronies, and a US military that would continue to prop up the regime in Kabul.
 
Just as the deal was announced by Secretary of State John Kerry and ready to sign, however, Karzai did an abrupt about-face. No signed deal until after the next presidential elections in the spring, he announced to a gathering of tribal elders, much to the further embarrassment and dismay of the US side. The US administration had demanded a signed deal by December. What may happen next is anybody’s guess. The US threatens to pull out completely if the deal is not signed by the end of this year.

Karzai should be wary of his actions. It may become unhealthy for him. The US has a bad reputation for not looking kindly on puppet dictators who demand independence from us.
 
Yet Karzai’s behavior may have the unintended benefit of saving the US government from its own worst interventionist instincts. The US desire to continue its military presence in Afghanistan – with up to 10,000 troops – is largely about keeping up the false impression that the Afghan war, the longest in US history, has not been a total, catastrophic failure. Maintaining a heavy US presence delays that realization, and with it the inevitable conclusion that so many lives have been lost and wasted in vain. It is a bitter pill that this president, who called Afghanistan “the good war,” would rather not have to swallow.
 
The administration has argued that US troops must remain in Afghanistan to continue the fight against al-Qaeda. But al-Qaeda has virtually disappeared from Afghanistan. What remains is the Taliban and the various tribes that have been involved in a power struggle ever since the Soviets left almost a quarter of a century ago. In other words, twelve years later we are back to the starting point in Afghanistan.
 
Where has al-Qaeda gone if not in Afghanistan? They have branched out to other areas where opportunity has been provided by US intervention. Iraq had no al-Qaeda presence before the 2003 US invasion. Now al-Qaeda and its affiliates have turned Iraq into a bloodbath, where thousands are killed and wounded every month. The latest fertile ground for al-Qaeda and its allies is Syria, where they have found that US support, weapons, and intelligence is going to their side in the ongoing war to overthrow the Syrian government.
 
In fact, much of the US government’s desire for an ongoing military presence in Afghanistan has to do with keeping money flowing to the military industrial complex. Maintaining nine US military bases in Afghanistan and providing military aid and training to Afghan forces will consume billions of dollars over the next decade. The military contractors are all too willing to continue to enrich themselves at the expense of the productive sectors of the US economy.
 
Addressing Afghan tribal elders last week, Karzai is reported to have expressed disappointment with US assistance thus far: “I demand tanks from them, and they give us pickup trucks, which I can get myself from Japan… I don’t trust the U.S., and the U.S. doesn’t trust me.”  
 
Let us hope that Karzai sticks to his game with Washington. Let the Obama administration have no choice but to walk away from this twelve-year nightmare. Then we can finally just march out.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/N5hPgRI_QTM/story01.htm Tyler Durden

Ron Paul Asks “Can Karzai Save Us?”

Submitted by Ron Paul via the Ron Paul Institute,

After a year of talks over the post-2014 US military presence in Afghanistan, the US administration announced last week that a new agreement had finally been reached. Under the deal worked out with Afghan President Hamid Karzai, the US would keep thousands of troops on nine military bases for at least the next ten years.

It is clear that the Obama Administration badly wants this deal. Karzai, sensing this, even demanded that the US president send a personal letter promising that the US would respect the dignity of the Afghan people if it were allowed to remain in the country. It was strange to see the US president go to such lengths for a deal that would mean billions more US dollars to Karzai and his cronies, and a US military that would continue to prop up the regime in Kabul.
 
Just as the deal was announced by Secretary of State John Kerry and ready to sign, however, Karzai did an abrupt about-face. No signed deal until after the next presidential elections in the spring, he announced to a gathering of tribal elders, much to the further embarrassment and dismay of the US side. The US administration had demanded a signed deal by December. What may happen next is anybody’s guess. The US threatens to pull out completely if the deal is not signed by the end of this year.

Karzai should be wary of his actions. It may become unhealthy for him. The US has a bad reputation for not looking kindly on puppet dictators who demand independence from us.
 
Yet Karzai’s behavior may have the unintended benefit of saving the US government from its own worst interventionist instincts. The US desire to continue its military presence in Afghanistan – with up to 10,000 troops – is largely about keeping up the false impression that the Afghan war, the longest in US history, has not been a total, catastrophic failure. Maintaining a heavy US presence delays that realization, and with it the inevitable conclusion that so many lives have been lost and wasted in vain. It is a bitter pill that this president, who called Afghanistan “the good war,” would rather not have to swallow.
 
The administration has argued that US troops must remain in Afghanistan to continue the fight against al-Qaeda. But al-Qaeda has virtually disappeared from Afghanistan. What remains is the Taliban and the various tribes that have been involved in a power struggle ever since the Soviets left almost a quarter of a century ago. In other words, twelve years later we are back to the starting point in Afghanistan.
 
Where has al-Qaeda gone if not in Afghanistan? They have branched out to other areas where opportunity has been provided by US intervention. Iraq had no al-Qaeda presence before the 2003 US invasion. Now al-Qaeda and its affiliates have turned Iraq into a bloodbath, where thousands are killed and wounded every month. The latest fertile ground for al-Qaeda and its allies is Syria, where they have found that US support, weapons, and intelligence is going to their side in the ongoing war to overthrow the Syrian government.
 
In fact, much of the US government’s desire for an ongoing military presence in Afghanistan has to do with keeping money flowing to the military industrial complex. Maintaining nine US military bases in Afghanistan and providing military aid and training to Afghan forces will consume billions of dollars over the next decade. The military contractors are all too willing to continue to enrich themselves at the expense of the productive sectors of the US economy.
 
Addressing Afghan tribal elders last week, Karzai is reported to have expressed disappointment with US assistance thus far: “I demand tanks from them, and they give us pickup trucks, which I can get myself from Japan… I don’t trust the U.S., and the U.S. doesn’t trust me.”  
 
Let us hope that Karzai sticks to his game with Washington. Let the Obama administration have no choice but to walk away from this twelve-year nightmare. Then we can finally just march out.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/N5hPgRI_QTM/story01.htm Tyler Durden

Chart Of The Day: How China's Stunning $15 Trillion In New Liquidity Blew Bernanke's QE Out Of The Water

Much has been said about the Fed’s attempt to stimulate inflation (instead of just the stock market) by injecting a record $2.5 trillion in reserves into the US banking system since the collapse of Lehman (the same goes for the ECB, BOE, BOJ, etc). Even more has been said about why this money has not been able to make its way into the broader economy, and instead of forcing inflation – at least as calculated by the BLS’ CPI calculation – to rise above 2% has, by monetizing a record amount of US debt issuance, merely succeeded in pushing capital markets to unseen risk levels as every single dollar of reserves has instead ended up as assets (and excess deposits as a matched liability) on bank balance sheets.

Much less has been said that of the roughly $2 trillion increase in US bank assets, $2.5 trillion of this has come from the Fed’s reserve injections as absent the Fed, US banks have delevered by just under half a trillion dollars in the past 5 years. Because after all, all QE really is, is an attempt to inject money into a deleveraging system and to offset the resulting deflationary effects. Naturally, the Fed would be delighted if instead of banks being addicted to its zero-cost liquidity, they would instead obtain the capital in the old-fashioned way: through private loans. However, since there is essentially no risk when chasing yield and return and allocating reserves to various markets (see JPM CIO and our prior explanation on this topic), whereas there is substantial risk of loss in issuing loans to consumers in an economy that is in a depressionary state when one peels away the propaganda and the curtain of the stock market, banks will always pick the former option when deciding how to allocated the Fed’s reserves, even if merely as initial margin on marginable securities.

However, what virtually nothing has been said about, is how China stacks up to the US banking system when one looks at the growth of total Chinese bank assets since the collapse of Lehman.

The answer, shown on the chart below, is nothing short of stunning.

 

Here is just the change in the past five years:

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China! Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!

Here is how Diapason’s Sean Corrigan observed this epic imbalance in liquidity creation:

Total Chinese banking assets currently stand at some CNY147 trillion, around 2 ½ times GDP. As such, they have doubled in the past four years of increasingly misplaced investment and frantic real estate speculation, adding the equivalent of 140% of average GDP – or, in dollars, $12.5 trillion – to the books. For comparison, over the same period, US banks have added just less than $700 billion, 4.4% of average GDP, 18 times less than their Chinese counterparts – and this in a period when the predominant trend has been for the latter to do whatever it takes to keep commitments off their balance sheets and lurking in the ‘shadows’!

 

Indeed, the increase in Chinese bank assets during that breakneck quadrennium is equal to no less than seven-eighths of the total outstanding assets of all FDIC-insured institutions! It also compares to 30% of Eurozone bank assets.

Truly epic flow numbers, and just as unsustainable in the longer-run.

But what does this mean for the bigger picture? Well, a few things.

For a start, prepare for many more headlines like these: “Chinese buying up California housing“, “Hot Money’s Hurried Exit from China“, “Following the herd of foreign money into US real estate markets” and many more like it. Because while the world focuses and frets about the Fed’s great reflation experiment (which is set to become bigger not smaller), China has been quietly injecting nearly three times in liquidity into its own economy as the Fed and the Bank of Japan combined!

To be sure, due to China’s still firm control over the exchange of renminbi into USD, the capital flight out of China has not been as dramatic as it would be in a freely CNY-convertible world, although in recent months many stories have emerged showing that enterprising locals from the mainland have found effective ways to circumvent the PBOC’s capital controls. And all it would take is for less than 10% of China’s new credit creation to “escape” aboard from the Chinese banking system, the bulk of which is quasi nationalized and thus any distinction between prive and public loan creation is immaterial, for the liquidity effect to be as large as one entire year of QE. Needless to say, the more effectively China becomes at depositing all this newly created liquidity, the faster prices of US real estate, the US stock market, and US goods and services in general will rise (something the Fed would be delighted with).

However, while the Fed certainly welcome this breakneck credit creation in China, the reality is that the bulk of these “assets” are of increasingly lower quality and generate ever lass cash flows, something we covered recently in “Big Trouble In Massive China: “The Nation Might Face Credit Losses Of As Much As $3 Trillion.” It is also the reason why China attempted one, aborted, tapering in the summer of 2013, and why the entire third plenum was geared toward economic reform particularly focusing on the country’s unsustainable credit (and liquidity) creation machine.

The implications of the above are staggering. If the US stock, and especially bond, market nearly blew a gasket in the summer over tapering fears when just a $10-20 billion reduction in the amount of flow was being thrown about, and the Chinese interbank system almost froze when overnight repo rates exploded to 25% on even more vague speculation of a CNY1 trillion in PBOC tightening, then the world is now fully addicted to about $5 trillion in annual liquidity creation between just the US, Japan and China alone!

Throw in the ECB and BOE as many speculate will happen eventually, and it gets downright surreal.

But more importan
tly, as with all communicating vessels, global liquidity is now in a constant state of laminar flow – out of central banks: either unadulterated as in the US, Japan, Europe and the UK, or implicit, when Chinese government-backstopped banks create nearly $4 trillion in loans every year. If one issuer of liquidity “tapers”, others have to step in. Indeed, as we suggested a few weeks ago, any possibility of a Fed taper would likely involve incremental QE by the Bank of Japan, and vice versa.

However, the biggest workhorse behind the scenes, is neither: it is China. And if something happens to the great Chinese credit-creation dynamo, then we see no way that the rest of the world’s central banks will be able to step in with low-powered money creation, to offset the loss of China’s liquidity momentum.

Finally, when you lose out on that purchase of a home to a Chinese buyer who bid 50% over asking sight unseen, with no intentions to ever move in, you will finally know why this is happening.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZACrd_nbepc/story01.htm Tyler Durden

Chart Of The Day: How China’s Stunning $15 Trillion In New Liquidity Blew Bernanke’s QE Out Of The Water

Much has been said about the Fed’s attempt to stimulate inflation (instead of just the stock market) by injecting a record $2.5 trillion in reserves into the US banking system since the collapse of Lehman (the same goes for the ECB, BOE, BOJ, etc). Even more has been said about why this money has not been able to make its way into the broader economy, and instead of forcing inflation – at least as calculated by the BLS’ CPI calculation – to rise above 2% has, by monetizing a record amount of US debt issuance, merely succeeded in pushing capital markets to unseen risk levels as every single dollar of reserves has instead ended up as assets (and excess deposits as a matched liability) on bank balance sheets.

Much less has been said that of the roughly $2 trillion increase in US bank assets, $2.5 trillion of this has come from the Fed’s reserve injections as absent the Fed, US banks have delevered by just under half a trillion dollars in the past 5 years. Because after all, all QE really is, is an attempt to inject money into a deleveraging system and to offset the resulting deflationary effects. Naturally, the Fed would be delighted if instead of banks being addicted to its zero-cost liquidity, they would instead obtain the capital in the old-fashioned way: through private loans. However, since there is essentially no risk when chasing yield and return and allocating reserves to various markets (see JPM CIO and our prior explanation on this topic), whereas there is substantial risk of loss in issuing loans to consumers in an economy that is in a depressionary state when one peels away the propaganda and the curtain of the stock market, banks will always pick the former option when deciding how to allocated the Fed’s reserves, even if merely as initial margin on marginable securities.

However, what virtually nothing has been said about, is how China stacks up to the US banking system when one looks at the growth of total Chinese bank assets since the collapse of Lehman.

The answer, shown on the chart below, is nothing short of stunning.

 

Here is just the change in the past five years:

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China! Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!

Here is how Diapason’s Sean Corrigan observed this epic imbalance in liquidity creation:

Total Chinese banking assets currently stand at some CNY147 trillion, around 2 ½ times GDP. As such, they have doubled in the past four years of increasingly misplaced investment and frantic real estate speculation, adding the equivalent of 140% of average GDP – or, in dollars, $12.5 trillion – to the books. For comparison, over the same period, US banks have added just less than $700 billion, 4.4% of average GDP, 18 times less than their Chinese counterparts – and this in a period when the predominant trend has been for the latter to do whatever it takes to keep commitments off their balance sheets and lurking in the ‘shadows’!

 

Indeed, the increase in Chinese bank assets during that breakneck quadrennium is equal to no less than seven-eighths of the total outstanding assets of all FDIC-insured institutions! It also compares to 30% of Eurozone bank assets.

Truly epic flow numbers, and just as unsustainable in the longer-run.

But what does this mean for the bigger picture? Well, a few things.

For a start, prepare for many more headlines like these: “Chinese buying up California housing“, “Hot Money’s Hurried Exit from China“, “Following the herd of foreign money into US real estate markets” and many more like it. Because while the world focuses and frets about the Fed’s great reflation experiment (which is set to become bigger not smaller), China has been quietly injecting nearly three times in liquidity into its own economy as the Fed and the Bank of Japan combined!

To be sure, due to China’s still firm control over the exchange of renminbi into USD, the capital flight out of China has not been as dramatic as it would be in a freely CNY-convertible world, although in recent months many stories have emerged showing that enterprising locals from the mainland have found effective ways to circumvent the PBOC’s capital controls. And all it would take is for less than 10% of China’s new credit creation to “escape” aboard from the Chinese banking system, the bulk of which is quasi nationalized and thus any distinction between prive and public loan creation is immaterial, for the liquidity effect to be as large as one entire year of QE. Needless to say, the more effectively China becomes at depositing all this newly created liquidity, the faster prices of US real estate, the US stock market, and US goods and services in general will rise (something the Fed would be delighted with).

However, while the Fed certainly welcome this breakneck credit creation in China, the reality is that the bulk of these “assets” are of increasingly lower quality and generate ever lass cash flows, something we covered recently in “Big Trouble In Massive China: “The Nation Might Face Credit Losses Of As Much As $3 Trillion.” It is also the reason why China attempted one, aborted, tapering in the summer of 2013, and why the entire third plenum was geared toward economic reform particularly focusing on the country’s unsustainable credit (and liquidity) creation machine.

The implications of the above are staggering. If the US stock, and especially bond, market nearly blew a gasket in the summer over tapering fears when just a $10-20 billion reduction in the amount of flow was being thrown about, and the Chinese interbank system almost froze when overnight repo rates exploded to 25% on even more vague speculation of a CNY1 trillion in PBOC tightening, then the world is now fully addicted to about $5 trillion in annual liquidity creation between just the US, Japan and China alone!

Throw in the ECB and BOE as many speculate will happen eventually, and it gets downright surreal.

But more importantly, as with all communicating vessels, global liquidity is now in a constant state of laminar flow – out of central banks: either unadulterated as in the US, Japan, Europe and the UK, or implicit, when Chinese government-backstopped banks create nearly $4 trillion in loans every year. If one issuer of liquidity “tapers”, others have to step in. Indeed, as we suggested a few weeks ago, any possibility of a Fed taper would likely involve incremental QE by the Bank of Japan, and vice versa.

However, the biggest workhorse behind the scenes, is neither: it is China. And if something happens to the great Chinese credit-creation dynamo, then we see no way that the rest of the world’s central banks will be able to step in with low-powered money creation, to offset the loss of China’s liquidity momentum.

Finally, when you lose out on that purchase of a home to a Chinese buyer who bid 50% over asking sight unseen, with no intentions to ever move in, you will finally know why this is happening.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZACrd_nbepc/story01.htm Tyler Durden