Papertigger, this is hard to digest but there were/are two general movements in money flows. One to risk assets to chase yield and the other held on deposit at the FED after the selling of an asset that was paid for with....er...nothing but a debt of the FEDs balance sheet.
Banks refused to lend most new money and what they did lend went into rising markets. Naturally banks went into more sophisticated money schemes. In the US any seepage of new money went into driving up the USD neutralizing any effect QE was to have had.
If US banks released new money into circulation that would be very inflationary. But they aren't lending and Bernanke hasn't got his inflation: QE isn't working.
And now it is starting to seep into markets that perhaps the FED and the PBOC haven't got a real handle on global money and it is now a possibility that some CB somewhere may panic or the present situation just may sit.
I am coming to believe that Ben won't stop or change the present QE because he is aware of a possible adverse market reaction. Now that would take the pressure off yields but things would be back to where they were and all and sundry would know that QE is a dud.
Smoke and mirrors, some Chinese, some US, Japanese and European but if this is out of control the quiet we hear will be the wheels spinning in CB HQs around the globe.
But of course this could all be a ploy to dampen overheating markets. Every June/August seems to be a downer.
