This page has been archived and commenting is disabled.
Relative Central Bank Balance Sheets And Currency Races To The Bottom
Zero Hedge posts a weekly update of the Federal Reserve's bloated balance sheet as we believe it is critical to visualize the spiraling debt burden at our "central bank" especially since any day now the Fed will begin purchasing treasury securities outright in defiance of Geithner's lies to the contrary (China can't sell its planned Bills: at 0.925 Bid-To-Cover does anyone honestly think they will instead prefer to buy dollar denominated toiler paper and not roll out their own QE version momentarily?). As Cornelius pointed out earlier the dollar can't find a floor these days: rerisking is rampant the argument goes and that kills the greenback. However, the circular logic also holds: create dollar pain (by whatever means possible) and thus stimulate the market, Larry Summer's all time wet dream (would anyone like to wager that when hedge fund positional disclosure become mandatory DE Shaw will fight until the bitter end). And in this simplistic trilateral world (have fun gaming the yuan), the strength of any one of the trio in the dollar-yen-euro triangle results in implicit weakness of the other two. And vice versa. Yet aside from major broker-dealers who are axed in a given equity direction and thus have all the incentive to impact underlying currencies, is it possible that specific governments may manipulate currency strength via central bank positioning? Why yes.
Comparing the balance sheets of the Federal Reserve, the Bank of England and the ECB indicates that certain shanningans by the former two (and particularly massive agency purchasing specifically by the former former) may be responsible for persistent weakness of their respective currencies to the detriment of a (hyper)inflation allergic Europe (America's brush with the Weimar Republic was luckily offset by 3,000 miles of salt water, and even the UK had the Chunnel to thank). The bottom line is that while the Fed and the BE's balance sheets continue expanding, that of the ECB has been in shrinkage mode for a while now. Behold:
Federal Reserve:
Bank of England:
European Central Bank:
The most curious thing is that the absent the half a trillion reduction in foreign bank liquidity swaps the Fed's balance sheet would be in the stratosphere. But the premise is Europe is stable so Bernanke can rein those in. Ironically the more pressured Europe is to take up America's and Britain's economic slack, the more pronounced will be the pressure on Europe, both fiscally and monetarily, resulting in yet another eventual round of liquidity swap bail outs (and that is without even mentioning the "Eastern European Question"). But for now America is happy (the dollar is getting pillaged) and a disorganized Eurozone is dropping deeper into deflationary chaos (has anyone heard a peep out of Raiffeisen Bank lately? - speaking of RZB, it is enough to note that a Google search of the bank results in the first two hits being its Czech and Russian subsidiaries). How long can this persist? For a direct answer, the best proxy may, ironically, be the S&P500 yet again. Keep a close eye: the unwind of the central bank balance sheet game theory defection race (as well as every other unwind) will manifest itself there first.
Hat tip Andy Dufresne who seems to have found a good internet connection in Zihuatanejo
»
- 4177 reads
- Printer-friendly version
- Send to friend
- advertisements -
I have seen Denninger discuss the Fed's removal of "slosh" and have not been able to find any reading material or info about that. If someone could offer some advice or direction, I would be grateful. thank you.
See:
http://www.gmtfo.com/RepoReader/OMOps.aspx
Click on TIOs and TAF at top right corner.
Thank you!
Is there any validity to this claim ? http://www.examiner.com/x-6012-State-of-the-World-Examiner~y2009m6d24-Ba...
i believe most emphatically yes and posted
elsewhere here to that effect......the common
sense answer is that the money center banks
and fed are insolvent.....how much crap has the
fed bought over the past 9 months? the fraud
can continue only so long and that someone
cries uncle.
the rumour based answer is that many us
embassies have been shipped large amounts of
cash for local currency purchases to last for
up to 1 year....i can't unravel this one....tom
price's office denies it....
Could be?
http://www.newyorkfed.org/newsevents/news/research/2009/rp090615.html
No. This is bullshit. First, bank holidays are not planned, they ocurr as emergency measures. Second, this particular myth as is circulating would imply thousands of people being in the know. It would not be a secret at all.
there is no rule stating that bank holidays
must be either planned or unplanned or due to
emergencies or other interests of the state
or banking cartel. nor is there any rule stating
that a bank holiday must be consequent to a
secret or a rumor.
Even if it was to happen, they would not call it a Bank Holiday. It will probably be called 'Freedom and Liberty Bank Jolly Fun Days' (FLBJFD). See it's not a Bank Holiday, it is FLBJFD.
the most acidic, stringent, and pungent zh
clip yet....brilliant....wait until all of that
crap comes tumbling out of the closet....the
money will escape despite the fed's best effort
to keep it locked up in the closet....
but....don't underestimate the fed's ability
to levitate the dollar....but ultimately
gravity prevails.....
gold is your best friend - it and it alone is
money.
ANON>>gold is your best friend - it and it alone is money.
That would be INCORRECT, there seems to be another metal that although has more industrial uses, has also functioned as money for several thousand years along side gold. The same "money" that has a larger concentrated short position against it (as % of global annual production)than any other commodity.
you read too much into my statement - which was
slightly hyperbolous....i think
it is generally understood that those who
accept gold as money would also accept silver
though in the small.
Point of information:
'Chunnel' refers to the Channel tunnel, NOT the North Sea Channel - hence your comment "the Weimar Republic was luckily offset by 3,000 miles of salt water, and even the UK had the Chunnel to thank)" should read "and even the UK had the Channel to thank" as there was no Channel tunnel at that time.
good catch. out of curiosity did Eurotunnel file for bankruptcy again recently? have not kept up on that one
T., Have not yet made it to Zihuatanejo, but I am working hard to get there. Anyway, better to be anonymous, agree with you 100% on that one... Andy
Your first link to 6/9 Fed bal sheet pic is broken, don't know if that was a take down notice or what. But the link to the Fed site directly is very interesting 'tales' of Maiden Lane 1,2,3. Their site works much like the musical edition, but of course not as charming due to lack of music. Someone call the PR dept!
I'm tired, I'll cheat:
http://economic-undertow.blogspot.com/2009/07/greshams-law-writ-large.html
The laughing man has a gallows laughter, like all of us :-)
As KD would put it, "We're fucked, but they're fucked worse."
Mauldin believes that Euro has a problem. So do others.
Ke sera sera
que sera sera
Since Europe has the bigger problem, watch money flee to the dollar when all hell breaks loose!
Everyone seems to forget that Congress gave a $600billion "line of credit" to the Treasury to support the IMF. I am not smart enough to know what that means as a practical matter on the Central Bank side but if and when the 'line of credit' gets drawn on the pressure on the Treasury market is going to be stupendous,unless Ben buys it.
The last week of July by the way has a current auction calender of $139 billion in new borrowing. What's more important to Tim G? A continuing stock rally or a lower rate for Uncle Sam and those silly mortgage borrowers? Maybe it doesn't make any dif what he wants. At this point I suspect GS contemplating a Patton like rush to Berlin and might engineer for at least a few days them borrowing at a lower rate than Uncle Sam. It probably wont last to what a victory it will be.
I would love to see a chart of the Fed's off-balance-sheet items.
Anon #9632,
Whether the claimed bank holiday will happen I do not know.
But banking affairs might be worse then usually thought.
Reggie Middleton claims that J.P Morgan is insolvent after analyzing their balance sheet. http://boombustblog.com/20090121766/Re-JP-Morgan-when-I-say-insolvent-I-really-mean-insolvent.html
He has some research of other banks that are risky too.
Gunther