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There's A Liquidity Crunch Developing
Submitted by Alasdair Macleod of GoldMoney.com,
This week an article in Euromoney points out that liquidity in bond markets is drying up. The blame is laid at the door of regulations designed to increase banks' capital relative to their balance sheets. Furthermore, the article informs us, new regulations restricting the gearing on repo transactions are likely to make things worse, not only reducing bond market liquidity further, but also affecting credit markets. The reason this will be so is that in a repurchase agreement a bank supplies credit to non-banks for the period of the repo.
One could take another equally valid point of view: the reason for deteriorating liquidity in bond markets is due in part to yields being unnaturally low. If you price bonds too highly, which amounts to the same thing, few investors want to buy them without the unconditional support of the central bank as a ready buyer. This, after all, is why just the hint of tapering recently was enough to derail the markets. So here again we come up against the same choice: if the Fed insists on mispricing the market with its interventions and zero interest rate policy it must fully support the market with both QE and also twist applied to the yield curve to maintain market liquidity.
For the investment analysts and commentators that still expect tapering this must come as something of a surprise. The underlying point they have missed is that once a central bank embarks on a policy of printing money as a cure-all, it is impossible to stop, or even to just taper without risking a liquidity crisis. Increasingly illiquid markets are now telling us that QE should be increased.
The point was rammed home this week by the ECB's decision to lower interest rates. The move was sold to the financial press as designed to stimulate inflation and reduce the risk of deflation. However, central to the deflation argument is the need to stimulate liquidity in the secondary markets, which according to the Euromoney article "are now close to breakdown".
At least the ECB rate cut should defuse tapering expectations in US markets, making it easier for the Fed to back down from its failed experiment. The Fed now needs to plant the suggestion that QE will have to be increased, or a similar mechanism designed to boost liquidity introduced.
This will not be difficult in the prevailing economic conditions. Even though GDP remains a positive figure, concerns over deflation abound and are preoccupying more and more analysts. These are concerns which analysts can readily accept as an immediate and greater risk than inflation.
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Looking good for 20,000 DOW!
Dow 20,000 will be the day bitcoin reaches 20 million. Wish we could hotlink the Ron Paul "it's happening" Gif!
www.ounce.me showing 4 bitcoins currently buy you an ounce of gold, or 0.06 bitcoins buy you an ounce of silver. I bet we will see parity within six months.
every thread on here turns into a bitcoin thread. Interesting.
ZH the blog started at the time BitCoins were introduced. Draw your own conclusions.
Over.
Curiouser and curiouser. How many rabbit holes are there?
Answer: Infinite
Good News: All rabbit holes lead to the same location.
Bad News: That location is a Black Hole.
Conclusion: Put your head between your legs and...
What?
ROI, supply, and demand apply to bonds?
Whocouldanode?
algo_dog.....
why so bearish.....
@BingRunner so Tyler is Satoshi Nakamoto? wow, nice catch!
I see you mentioned this 'bit coin' could you tell me more?
how does bit coin's business model exceed that of western union's?
By a bit...coin?
1 Western Union is not a cop magnet.
2 Western Union does not encourage internet gambling.
3. Western Union tries to avoid the drug trade and money laundering.
Other that that, I don't know. Damn fine question.
Western Union will not eventually be outlawed for use by the citizens of the US and most likely other Western nations..
I prefer to call it Bubblecoin
how can a crypto-currency that only 10% of the world's population can use be a genuine competitor to sound money?
1) you have to have uninterrupted internet access
2) you need to be more internet savvy than the average person to ensure you are using it efficiently and safely
those chumps who had their Bitcoins stolen from a bitcoin 'bank service provider' , I'm betting, were people who liked the idea of bitcoin but weren't technically proficient enough to take on board the full responsibility of maintaining their account themselves (otherwise why the f%^*& would you use an intermediary )
These are Western Union's thoughts on Bitcoin -
http://shitco.in/2013/11/02/western-unions-thoughts-on-bitcoin/
every thread on here turns into a bitcoin thread.
that's because more and more folks are jumping on the bitcoin bandwagon...
p.s., i'm not anti-bitcoin...not at all...just don't have that much confidence in electricity.
yeah and if you know anything about programming you know that its only a matter of time before BitCoin is hacked and utterly worthless.
If yer sooo knowledgable, write the program and beat the l33t h@ck3rz to the punch!
".....showing 4 bitcoins currently buy you an ounce of gold, or 0.06 bitcoins buy you an ounce of silver. I bet we will see parity within six months."
Yea at one time they said the same thing about tulip bulbs.
Looking for 2% mortgages!
It's got to be driving Ben and Janet crazy to make Peter Schiff correct yet again.
Merry Fucking Christmas
Retailers Ready to be Grinched for Christmashttp://www.fool.com/investing/general/2013/11/10/retailers-ready-to-be-g...
There's going to be a Christmas miricle.
As long as it includes Bitcoin...
Or a nice lottery ticket...
Massacre of the Innocents?
I was in a Marshall's in NYC (outer borough), and the line to get to the register was a 45 minute wait. Eventually you come to lines of impulse garbage buys they have set up. People were ripping through that crap like corn syrup. I'm not so sure Christmas will be disappointing to retailers. You would think eventually it will be. I'm not so sure about this year.
Important note: Not everyone in NY works in the financial sector, so that is not why people had money (unless you really believe in trickle down economics..lol).
"Swipe yo EBT!"
It just doesn't ring without that "It's Free!" in front of it...
This is simply the exponential law at work. They must increase QE exponentially or everything will fall down.
"This is simply the exponential law at work. They must increase QE exponentially or everything will fall down."
It takes more and more debt to pay off more and more debt.
Does this mean the ECB will no longer take condom wrappers as collateral in repo's ?
What is the world coming to.You mean real assets have to back these loans.
Gold, the bankers kryptonite.
Yep, that is why the collapse is imminent.
Yep, that is why the collapse is imminent.
If not sooner. ;-)
It's game over here in Europe, the general public just has to accept it at first, we are bankrupt The big bang theory will be validated when the first country or major bank goes "pop".
As fellow European I asking you: Why not both?
I mean major bank and country goes "pop" in almost same time. It would for "eurosceptics"/eurorealist enough munition for next few decades and give a wake up call for every eurooptimist or rather should we call the useful idiot.
I don't think so. You may find out you're one of the ones left standing after the USD goes Babylon.
Cap'n Crunch's very 1st Commercial
http://www.youtube.com/watch?v=uZSjFtdKcCU (1:00)
CInnamon Crunch Cap'n Crunch cereal tv commercial
http://www.youtube.com/watch?v=2MRZBVL2nLw (1:05)
Surprise; central banks fuck with the economy, offer savers nothing for buying bonds, and buy them themselves.
DUH!
In the shuffling madness
Of the locomotive breath,
Runs the all-time loser,
Headlong to his death.
He feels the piston scraping --
Steam breaking on his brow --
Thank God, he stole the handle and
The train it won't stop going --
No way to slow down...
10 yr yield at 2.75% and rising. Maybe printing 2 trillion would do the job. This is gonna get real ugly...oh well buy BTFATH oh and TWTR.
ah, great song- the song ends and the forces of central bankers become ineffective, just some math, expoential stuff...
yes, we are bankrupt honey, the last was spent on american eagles and the boat sunk. lucky to be alive :)
Bitcoin is one conceived idea to a dying reserve currency.
Bitcoin is the canary in the fed's QE to infinity coal mine.
How many BitCoins will it take to build a Death Star and what would the value of each BitCoin have to be?
"Many" and "a lot"?
Obviously the value of a bitcoin must be at least 700 oz of gold. Please.
I read that somewhere.
So they are tapering, they just aren't telling us about it. This amounts to a stealth tapering. They won't tell the media about it because they don't want to give the aglo rammers an excuse to ram.
They can only ram if they have a credible excuse in the media. Otherwise people start looking behind the curtain and start asking questions
and there goes the gold-gone forever! wheelbarrow of dollars for one once, i think not.
http://www.bloomberg.com/news/2013-11-10/gold-vault-for-2-000-tons-opens-in-shanghai-as-bullion-goes-east.html
things that make you go hmmmm...
McLeod and goldmoney no doubt have their own reasons for opposing the capital requirements of Basil III, but I do not believe this is a valid argument globally. In the US there are immense excess reserves of banks at the Fed, and many corporations have large hoards of cash. Europe is different, but their banks are not shy about borrowing from the US. Both economies badly need capital investment. If the private sector is not willing, it must be done by governments.
Here's a better idea: put those 1+Billion hollow-points to good use by shooting all the jerks in Govt(s) that "think" they can build a better mousetrap!
Anna singing "Tomorrow" 7 years
http://www.youtube.com/watch?v=AY6fxXQkc2E (1:07)
I think they have things to a level where people are sitting on their hands. Asset prices may make sense at 4.5% aot mortgage rate for a few years, but not at 9%. You could accept the refi risk buying in 2009 when the asset price was lower, but not now. at 75% LTV your equity could vaporize quickly at higher refi rates and NOI woudnt cover debt service. So, do you really wanna load more margin in your stock account, invest in something at a low yield and high price? We are at stall speed.
the reason for deteriorating liquidity in bond markets is due in part to yields being unnaturally low
Kind of like a fork in the block chain caused by a pool of selfish miners.
One could take another equally valid point of view: the reason for deteriorating liquidity in bond markets is due in part to yields being unnaturally low.
That statement is as deserving of a "Well, duh!" response as any I can think of.
Looking good for BitCoin.
Soon it will all be bitemecoin.
the reason for deteriorating liquidity in bond markets is due in part to yields being unnaturally low.
That one. Forget the other one.
If the CBs of the world are the only one buying debt, because that's how it's monetized, then pretty soon the only buyers of debt will be the CBs because they continue being "profitable" no matter how low they drive interest rates.
So this a boon for prime borrowers who want to take on debt, but a bane for everyone else.
So who are the prime borrowers, anyway, who get free money ... people who really don't need free money.
It's called Kleptocracy. Free money always ends in collapse. John Law learned that lesson well in 1720. Don't the morons in charge know any history?
The morons in charge of the morons in charge know damn well how it always ends, which is why they're using the free toilet paper to buy gold and then get their gold off-shore or otherwise safe from seizure.
The game they're playing goes back millenia. What's different now is that we have over a quadrillion dollars of derivatives linking together all these insolvent entities so that just one Barings, or Lehman, or Bear Stearns can bring down the entire house of cards literally overnight ... unless the Fed steps in to "guaranteee" private obligations with the "full faith and credit" of the United States. Of course that's well outside their legal authority.
Try wait. The courts are supposed to provide a venue for making sure the laws are applied in a way that favors those with the best lawayers ... but when was the last time anyone just sued the Fed, much less won their case?
Why bother pretending we have a constitutional republic when it's really form of oligarchical feudalism, or totalitarian fascism?
[quote] The Fed now needs to plant the suggestion that QE will have to be increased, or a similar mechanism designed to boost liquidity introduced. [/quote]
Fsck that, bring on the deflation already!
Any traders here .... watch the NOB spread ... on the weekly. ZB-ZN is falling through round# support/resistance points, first at 8.0, then 7.0, and then 6.0. Trading now under 5.5. 30-yr making new multi-yr lows to 128'12 and falling faster than the 10-yr. Not much on the chart at 5.0 or lower until ~2.0 level. There's a very deep exchange-traded intermarket spread at CME for little slippage.
Last time the NOB was this low was the straight-line rise of summer 2011 after bottoming in Q1, 2011 where it actually inverted, 30-yr less than 10-yr, pricewise ... just after Fukushima, in early April 2011, going negative below -0.5.
Dollar-Yen went crazy right after Fukushima with what looked like Fed and BoJ intervention but didn't seem to be announced anywhere.
I think we could be seeing a repeat of that in just a few months, with NOB spread inverting. There's a lot of longs who will be in massive pain as it falls ... which could be as sharp a fall as it rose in early 2011 after the Fukushima stealth-bailout from the Fed to "stabilize" Japan and nip the nuclear-fear trade in the bud.
Hey, no reason for Japan to worry if their cars are being sent back for being radioactive, eh? The whole NE main island is unfit for habitation per US cleanup standards, but there's a gag order out and anyone who talks is facing the end of their career.
I think we'll be seeing NOB fall to 2.0 and then 0 after it breaks 5.0 on a pit-close basis.
The Fed is trying to support the bond market but they're powerless to stop a waterfall decline in the market that THEY thinned out by buying bonds for no economic reason, just pure price/rate manipulation.
Hey, if only 1% of the money from panic-selling of bonds ends up in gold and silver, it'd be their biggest rally in history, well-surpassing 1979, which was faster than 2011.
If ZB is too slow for you to trade, check out UB, UltraT-Bond futures.
liquidity can't be drying up with 200b per month qe.....if it is, it is going into someone's personal account....besides those green shoots from a few years ago are veritable rain forests by now.
I suggest "TurboLax" for 'fast effective relief!
Sumptin is get ready to go crunch, no?
http://canadafreepress.com/index.php/article/59113
I guess it can just go on like this f o r e v e r . . .
So we are doomed to whatever fate awaits us with the continuation and perversion of easy credit and money-printing. Instead of risk takers getting poor quickly through a market crash and deflation and then better quickly once the bad assets are written down we get theft from the savers to the banks and govvy types through zirp, inflated financial assets, and the slow drip of trickle-down to the 99%. We put more and more people out of work though automating all tasks that take people - including HFT, medicine, data analysis, and other non-trivial efforts. Government programs for the poor continue to expand to keep the sheeple in line - and the progressives in power. So - we appear to be going to the same end as deflation except more slowly. Is that really what we as a nation want? The slow death of japan - american style?