Mish's Global Economic Trend Analysis

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• Capital Flight From China, One Person at a Time, Via ATM and Bitcoin
• Multi-Pronged Attack on Donetsk Rebels Likely Within Days
• New Yuan Loans and Shadow Banking Collapse in China; Record Bank Deposit Slump

Capital Flight From China, One Person at a Time, Via ATM and Bitcoin Posted: 13 Aug 2014 12:55 PM PDT In response to New Yuan Loans and Shadow Banking Collapse in China; Record Bank Deposit Slump reader "CF" from Hong Kong who works in China explains how he is pulling every cent he can out of renminbi (yuan) , converting instead to Hong Kong dollars. From "CF" regarding his personal "capital flight" experiences ... Hey Mish, I am a reader from Hong Kong who works and lives in China and earns RMB. I never doubted a collapse in Chinese shadow banking would happen. I have been constantly converting my RMB into HKD. Before, I would just take 20,000 RMB (max allowed by customs) and withdraw the max from ATMs in Hong Kong each day and just eat the 15RMB fee/bank exchange rate. [Mish note: 20,000 RMB is about $3248 at current pricing] Now with bitcoin. I can convert RMB to bitcoin, send it to myself and put it back in my bank in Hong Kong as HKD without any currency controls. However, bitcoin is volatile so I only keep my cash in BTC for as little time as possible. The alternative is to sit hours at a tax bureau to obtain a certificate saying you paid taxes before you can remit any money at a bank that charges 200 RMB [$32.50] per wire transfer. China is going to face some serious issues in the next decade or so. I've lived here for a few years and I can say that the apartment I rent which was built in late 2000's will not last 30 years. I've had pipe bursts, and cardboard walls fall apart. My landlord told me she bought this apartment for her 5 year old when he gets married. It will never last. I'm willing to bet the building will be torn down. Starting over will be cheaper than fixing. The scary thing is this is central Beijing - the capital. In engineering, there is a saying, "Cost, Speed, Quality; Choose 2", China clearly chose the Cheap, Fast building route. Keep the articles coming. "CF" One person at a time adds up if enough do it. And I highly suspect they are. Those in China may wish to consider GoldMoney which has Vaults in Hong Kong, Canada, Singapore, Switzerland and the UK. GoldMoney allows Precious Metals Trading in Hong Kong Dollars, Australian Dollars, and New Zealand dollars , US dollars, and 5 other currencies. For those looking for an EFT, please consider OUNZ. I discuss OUNZ in How Much Gold Should Someone Own? Where and How To Own It? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Multi-Pronged Attack on Donetsk Rebels Likely Within Days Posted: 13 Aug 2014 09:08 AM PDT Donetsk is surrounded and rebels expect a major coordinated attack within days. Here is a map of major military operations by both sides from August 1 to August 10. click on map for sharper image Legend Blue jets inside red circles are locations where Ukrainian military planes are confirmed to have crashed after being shot down. (This is only for the period of the map, August 1-10. Blue jets shooting into blue circles are locations of Ukrainian air raids, again just for the period August 1-10. Blue circles with "X" inside them are Ukrainian artillery strikes. Red circles with "X" inside them are rebel artillery strikes. Red lines with arrows are rebel advances Blue lines with arrows are Ukrainian advances Solid red lines (no arrow tips) are rebel defense lines The original map is in Russian. I asked reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian, to put the cities and captions in English. The edited map above is what you see above. Click on first link for the original. Jacob writes ... Don't be fooled by the appearance of the site. This is a very well-informed, pro-rebel news and analysis site. You won't find any maps like this in American sources. The rebel-held area is in pink. As you can see, the Ukrainians have made a very significant dent in the rebel south-center even as the encircled Ukrainian "cauldron" directly to the east was liquidated. As you can also see, the city of Donetsk is hard-pressed. According to all rebel sources, a full multi-pronged advance on Donetsk is very likely to commence within the next few days. I saw a headline about Kiev telling civilians to get out of the city. Good luck with that. Donetsk has almost a million residents. And the rebels have indicated that they finally have resources for a counterattack. Here are some possible weapons Ukraine may use to take Donetsk: "Uragan" "Smerch" "Tyulpan."  As you can see, there are fates worse than "Grad". In a follow-up just a bit ago Jacob commented "Two more Ukrainian combat detachments have been surrounded in the last 3 days or so, since the end of the period represented in that map. Understand that the rebel area functions as an amoeba that is capable of swallowing and liquidating Ukrainian units." If the rebels can mount a counter-attack it will be because of equipment captured and men freed up from  the Southern cauldron. Regardless, an all-out surge on Donetsk will take many lives, and destroy the property of thousands. Scars will last for decades. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

New Yuan Loans and Shadow Banking Collapse in China; Record Bank Deposit Slump Posted: 13 Aug 2014 12:05 AM PDT A major alarm bell just rang in China with the release of July credit figures according to Macro Business Australia. Chinese Credit Just Collapsed and shadow banking with it. Here are a couple of charts. Yuan Loans New yuan loans were 385.2 bn versus 780.0 bn expected and prior was 1080. Shadow Banking Aggregate social financing was 273 bn yuan versus 1500.0 bn expected and prior was 1970 bn implying that shadow banking credit contracted 112 bn in the month. Record Bank Deposit Slump Bloomberg reports China Record Bank-Deposit Slump in July Erodes Lending Capacity. China's local-currency bank deposits fell by a record in July, eroding lenders' capacity to extend new credit just as the world's second-biggest economy shows signs of faltering. Yuan-denominated deposits fell by 1.98 trillion yuan ($321 billion) to 111.62 trillion yuan from the previous month, the central bank said today. That's the biggest monthly decline in figures dating back to 2000. A plunge in China's broadest measure of new credit last month and new yuan lending that was less than half of the median analyst estimate underscored risks of a deeper economic slowdown as a property slump bites. China Credit Growth Declines Sharply The Wall Street Journal reports China Credit Growth Declines Sharply. China's credit growth dropped sharply in July after surging a month earlier, reflecting Beijing's concern over a rapid buildup of debt in the world's second-largest economy. The growth of both bank loans and total aggregate credit hit their lowest single-month levels in over four years, although the decline in credit seemed to reflect moves by the central bank to rein in June's steep credit rise. Some economists suggested that it also reflected lower appetite for risk among banks. In an unusual move, China's central bank released a statement following the data's release. July's slower credit growth is still within "a reasonable range," it said, adding that it would maintain steady credit growth in the coming months. Stock markets in China and Hong Kong fell on the surprisingly weak data. The sharp decline in total credit was due to slower growth in bank loans as well as a decline in nonbank financing activities such as trust financing as Beijing cracks down on the country's ballooning shadow banking activities. "If such slow credit growth continues over the next months, it will definitely affect the economy," said Standard Chartered economist Li Wei. However, the credit growth in June and July combined didn't fall far from historical levels, suggesting that July's weak level may represent a correction from the previous month's strong credit growth. Expect many more reports like these and dramatically lower GDP growth as well, if China makes any effort to rebalance its economy as I suspect it will be forced to do. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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