Chinese Yuan Vs. China Errors and Omissions in Balance of Payments

To keep track of China capital outflows, we need to look at China’s "errors and omissions" line in its balance of payments. This number represents the residual of the main BOP accounts registering trade and investment flows—in other words, capital that has moved across China’s borders without being documented. The capital outflows accelerated in 2015 and that is when the Yuan started depreciating. So these two are correlated.

 

European Bank Deposits Update: Greece sees outflows

This week we had an update of the deposits at the European banks. Deposit outflows continue. What strikes me most is that we see inflows to safer countries (Netherlands, Germany, France) and outflows of the periphery (Italy, Greece, Ireland).

Most curiously, the largest deposit outflow can be seen in Greece (red chart). We peaked out in Greece deposits after a series of bailouts starting in 2010. Ever since the debt restructuring in 2012, the deposits kept going down, which collapsed the trade credit.

Bank Deposits Eurozone Periphery

As a result, (especially) imports and even exports are collapsing. This is the way of restructuring. Bailouts in 2010 strengthened exports. Restructuring of debt starts in 2012, bailouts are gone, exports collapse.

And the best thing is, the debt hasn't gone away, it's all there.

End of GLD outflow

Have we seen the end of the GLD outflows? It sure came faster than I anticipated.

Instead of ETF gold supply coming onto the market, we now get a supply crunch due to ETF gold buying. And this on top of the Chinese who are still buying in record amounts as we can see on the Shanghai Gold Exchange. On top of that we are now again going into backwardation on the 1, 2, 3 month GOFO level and the high grade mine supply is going to decrease going into 2015.

This might as well be the real bottom in gold.

PIIGS Bank Deposits Outflow Accelerating

As I noted a month earlier, Spain's bank deposits posted an outflow and this outflow is accelerating for the month of May 2013. This time, Italy is posting outflows too.

Greece, Cyprus are of course still in a decline. I expect bail-ins to come if this trend continues. Europeans should be worried about their deposits.