This is a special edition of Macrovoises with hedge fund manager Eric Townsend.

The premier financial podcast targeting professional finance, high net worth individuals, family

offices, and other sophisticated investors.

Now for this special edition of Macrovoises, here's hedge fund manager Eric Townsend.

Macrovoises All Stars episode 54 was recorded on September 9th, 2019.

I'm Eric Townsend.

Professor Steve Keane is back with us today and Steve prepared an excellent set of charts

to accompany today's interview.

You can find the download for the chart book next to Steve's picture on our homepage at

macrovoises.com.

Steve, over this past weekend, China announced that effective next week, they're going to

be cutting their required reserve ratio, which is the percentage of assets that banks

have to actually have real money to back the loans that they make.

Now forgive my perhaps naive ignorance here, but it seems to me, Steve, if what you're

concerned about is you think that maybe there's some storm clouds on the economic horizon

and you wanted to make the banking system stronger, what you would do is increase reserve

requirements to make absolutely certain that the banking system is sound and can get

through the next crisis.

On the other hand, if you're convinced the banking system is going to fail and you want

to delay that event, you would reduce reserve requirements in order to delay the inevitable.

Now it's admittedly cynical, but why would China suddenly reduce the percentage of reserves

that the banking system needs to have?

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