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Revisit FRBNY FX Swaps, ECB And Margin Credit

CalibratedConfidence's picture




 

Here are some updated charts regarding the US FED bailout of Europe and a couple charts regarding US Margin Credit, Investor Net-Worth according to NYX-data and Money Market Fund levels (spoiler alert: retail is a dead horse)

On February 9th Zerohedge broke the news that the FED is now directly injecting Dollars into subsidiaries of foreign banks.  Remember, this "Euro Bailout" was something Chairsatan promised Congress he wouldn't do, according to Senator Bob Corker who was in on the specific meeting being referenced (more info here).

Without the H.8 information, CNBC infotainment channels and slide-show CPM websites could easily mistake the data in the following charts as balance sheet stress, economic pressures, and financial industry health in Europe is improving.  To the contrary, it's so bad that freebasing USD isn't doing the trick, it's time for direct injections into the blood stream (subsidiary bank injections) as opposed to using the entity created specifically for the purpose of reducing the re-emergence of financial strains in short funding (FRBNY FX Swaps purpose listed at top).

 

Part A

FRBNY FX Liquidity Swaps

 

 

ECB Daily Liquidity Condition

Via ECB

"The liquidity needs of the banking system result from the minimum reserve requirements imposed on euro area credit institutions and from autonomous factors, which are normally beyond the direct control of the ECB. Such factors can be banknotes in circulation and government deposits with some national central banks."

 

 

 

The day-to-day change in the Current Account and Deposit Facility has become more stable:


 

 

Part B

As for the "retail driven" rally...


 

 

As for the US investors, even with the constant injection of money into the system to prop up asset prices, they are utilizing MOAR margin creditWith SPY closing on its high (note: Free Credit Cash Accounts increase was roughly 29%, the largest in 7 years):


 

 

Addressing Net-Worth or the lack thereof...

 

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Fri, 02/15/2013 - 13:05 | 3246790 steve from virginia
steve from virginia's picture

 

 

 

That the Federal Reserve is 'bailing out' the EU with asset swaps is a silly assumption when taken on its face.

 

An asset is an asset, trading one for another is a game of musical deck chairs ... played on the Titanic.

 

No asset is worth very much/anything: one blind man is giving descriptions to another blind man.

Fri, 02/15/2013 - 15:39 | 3247326 CalibratedConfidence
CalibratedConfidence's picture

@steve from virginia & @disabledvet

 You're forgetting the fact that the US has its own Soveriegn Central bank, the Eurobloc is not established like the US is.  Also, USD is the reserve currency currently.  The usage of these swaps goes beyond just exchanging currency.  Litigation arbitrage plays heavily into the use of FRBNY FX swaps.  here's the description of the entity courtesy of FRBNY:

These swap facilities respond to the re-emergence of strains in short term funding markets in Europe. They are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets, by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions.

As for the legal end of why a sovereign central bank would want to partake in FX swaps is outlined here:

http://www.calibratedconfidence.com/2012/01/sovereign-default-immunity-u...

And a specific study of the legal protection SCB's get can be found here:

NML Capital, Ltd. v. Banco Central de la República Argentina:

http://blogs.law.harvard.edu/corpgov/2011/08/03/court-rules-argentine-ce...


Fri, 02/15/2013 - 13:19 | 3246837 disabledvet
disabledvet's picture

I would take this one step further and say "you're getting the wrong kind of love." the Euro is fundamentally a "long commodity" currency..hence what they need are NOT dollars (long income producing assets and working capital money) but actually "more euro's." Nay...veerily..."they refuse to print and their currency whithers on the vine." it reamins to be seen whether this MASSIVE deflation will "slam into the US labor market." that would be bad of course...clearly he Fed has made itself vulnerable due to it's politicized "get to work"'campaign. Like I said "you'll see it a the grocery store" if I'm right here. Prices will PLUNGE as the "pure utilitarian nature of American capitalism rears it's head." while I could very much see a 40% decline in equity prices here I very much have a lot of potential buys on that particular menu. Having said that "again...I prefer to be wrong about it all to begin with."

Fri, 02/15/2013 - 09:08 | 3245880 Haus-Targaryen
Haus-Targaryen's picture

So essentially this says that Europe is heading for a correction too. 

Bring. It. On.

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