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The $9 TRILLION Crash Your Broker Doesn't Even Know About
The financial world focuses far too much on stocks. The stock market, despite being at record highs (meaning record market capitalizations) remains one of the smallest, and least sophisticated markets on the planet.
Consider that stocks, even at current lofty levels, have a global market capitalization of slightly over $60 trillion.
In contrast, the global bond market is well over $100 trillion.
And the global currency market trades OVER $5.3 trillion per day.
It is currencies, not stocks, where the most significant moves occur. The currency markets are the largest, most liquid markets in the world. They are always first to move when things change. Stocks are the DUMB money compared to currencies.
So who cares?
Everyone should care, because, globally, the world is awash in borrowed money… most of it in US Dollars.
When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.
I’ve written before about this problem. Last month I projected that the US Dollar carry trade (borrowing in US Dollars to finance other investments) was the largest carry trade in the world. At that time I believed the US Dollar carry trade is believed to be north of $3 trillion.
I was WRONG… WAY, WAY WRONG. It’s MANY MULTIPLES LARGER THAN THAT.
Off-shore lending in US dollars has soared to $9 trillion and poses a growing risk to both emerging markets and the world's financial stability, the Bank for International Settlements has warned.
SOURCE: the TELEGRAPH.
The US Dollar carry trade is north of $9 trillion… literally larger than the economies of Germany and Japan COMBINED.
And the US Dollar is rallying… HARD.

The fact that Oil is imploding at the same time this happens is not coincidence. Oil producers and explorers were financing their projects using what? BORROWED DOLLARS.
This is going to begin seeping into emerging markets and other assets soon. Imagine what the world would look like it $9 trillion worth of shorted Dollars had to be covered? Imagine the SELL PRESSURE this would induce in all other assets.
Just like 2008.
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Just a thought ... almost everyone has been surprised by how long this debacle has been kicked down the road. I know I am surprised.
I suspect that the CB's are all surprised too - amazed that they seem to be able to get away with it. This provokes the idea that 'this time it is different'.
Hmmm ... in one way, this time it is different - it is vastly bigger. This boom/bust skimming/scalping is global in scope.
Perhaps that is the reason it is all going in 'slow motion' compared to what many people expected... that probably also means that when it kicks over the cliff it will also be different - and my guess is much faster - to counterbalance the much slower drift over he edge. Or perhaps it will show up as a 'much larger drop' .... so this time it is 'different' - in scale, speed of change .... but not in the basic process or ultimate outcome.
And the stock market continues to rally...
Treasury Warns Congress (and Investors): This Financial Creature Could Sink the System by Wolf Richter • December 8, 2014
When was the official announcement from D.C. that there is no law in the United States? Did I miss it?
dollar positions are usually hedges, but no one considers the stock market a hedge (against monetary inflation) once the effectiveness of monetary inflation switches off, so are the bets.
l fully agree that while the eyes of many people are on stock prices currencies can only be ignored at great risk. The strengthening dollar may be sending a signal that the whole system is unstable. Other currencies are under assault because both economies are weak and countries are buried in debt they can never repay at real market interest rates.
The change in currency values may be dramatic and using history as a guide markets often show no mercy when this shift occurs. For months the major world currencies had traded in a narrow range as if held in limbo by some great force. This has allowed people to think we were on sound footing as central banks across the world continued to print and pump out money chasing the "ever elusive growth" that always appears to be just around the corner. Recently the major currencies have made multi-year highs or lows depending on the match-up.
John Maynard Keynes said By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. While there are not many Bond Vigilantes there are a slew of Currency Vigilantes and they are ready to make their presence known. Weakness in the value of the Yen, Pound, and Euro must not go unnoticed. The article below looks at why this trend may accelerate and cause the stock market to drop like a stone.
http://brucewilds.blogspot.com/2014/10/fed-concerned-that-stong-dollar.h...
Contracts can only be enforced if you have police powers...
If they can't be enforced then the lenders, aka Wall Street, go bye-bye.
And to enforce them may take forever and a day. This fact ushers in contagion. Bottom-line is other currencies are under assault because both economies are weak and countries are buried in debt they can never repay at real market interest rates. When investors become unwilling to buy the bonds of heavily indebted nations causing the bond bubble to burst the values of currencies in those countries will tumble.
A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. There is no single commonly adopted definition of derivative or derivative contract in the European Union. This plays havoc with what and when reporting rules apply. It also highlights divisions in how national regulators view reporting rules for the $693 trillion over-the-counter derivatives market.
Remember this is only part of a much larger market, it is estimated the total derivatives market includes hundreds of trillions of dollars in non-reported agreements and private contracts. Everyone paying attention knows that the size of the derivatives market is 20 times larger than the global economy. The article below explains some of its ins and outs of derivatives and why they could collapse the economic system.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html
no money
no economy
let them eat fiat...
gold and silver ,the only true money
the rest is just fiat accounting fraud..
I wonder how gold will behave when the debt pops and deflation occurs : as a commodity or as money ?
That depends a lot on your perspective. I'd say gold has never done anything, really. Outside of temporary anomalies, an ounce of gold has always bought a good suit and pair of shoes (nice ones), going back to Ancient Rome. Currencies come and go, and gold just sits there. That's why I have some of it, sitting there.
Now, the price of gold as measured in other things, particularly currencies, changes a lot. If you're thinking in terms of currencies, your guess is as good as mine. I'm guessing as deflation sets in, the price of gold in currencies will reflect supply and demand, in those currencies. The price of gold in those currencies would probably go down, to the point where people are willing to buy it at that price with their suddenly more-valuable and hard to come by units of currency. Then inflation will kick in, and the price of gold in that currency will go up.
Outside of that currency, the price of gold will appear to have...just sat there. For instance, the price of gold has only been going down priced in USD lately. For those with Yen, or Euros, or Rubles, the price of gold has been going up. Or, as I keep saying, the price of gold hasn't been doing anything at all; the value of the other currencies has been declining, so the price of gold appears to have risen (and seen from inside the environment of those currencies, as a matter of practicalities it has beeen rising).
Just a couple of variables to consider when looking at the value of gold versus dollars:
Most of our inflation is exported. What happens if other countries dedollarize because they finally recognize that the dollar is a weapon they have no defense against besides not using it?
Separately, just what will the Fed do in any given scenario. If you start seeing too much deflation might they choose to inflate or hyperinflate?
Another 'currency' that is traded more on the Forex than on all the physical makets put together is XAU....paper gold. What happens on the Forex dwarfs the Comex. Look there to see where gold is going. If someone selld XAU to get USD it can shake the gold market far more than a country buying a few dozen tons of physical.
round house kick
to the head....
plus one
House GOP struggling as shutdown deadline looms:
http://www.msnbc.com/rachel-maddow-show/house-gop-struggling-shutdown-de...
Every one in the world wants to know why this shitshow of all the skank corruption and criminality of the Rothchillian-ZOG continues unabated, or cared about:
"The question Americans should be asking is not whether to raise the debt ceiling, but rather why the Federal Government, which is authorized by the Constitution to create and issue interest-free money, instead borrows that money at interest from a privately owned central bank, thereby plunging future generations into debt slavery to that bank? THAT is the real question Americans should be asking"
MSNBC is a piece of shit and Rachel Maddow is a stupid cunt.
GOP isn't the problem - all fucking gewbermint is the problem - if that fucking communist in the white house had any desire other than to cause shit, it would be a cold day in hell
fuck you barry
Rachel likes to think she is progressive, but really she is middle of the road. And she works for a company owned by a conpany (GE) that builds war materials and weapons
And I love GE and all my profits for their superb work :-)) !!!
MORE aerospace & defence and less entitlements, though I know that means you would have to get a job to keep your bong full.
Johns Boner and McStain about as big a pieces of shit as 0bozo
Conspiracy Fact: UN reports confirm Israel aiding ‘rebels’, Al-Qaeda groups fighting in Syria
That chart in the article is one day going to be called the "Great Exit."
The "connected," and "chosen" ones are moving their operations to Europe.
That is, unless anyone can think of any good reasons the dollar should actually be going up.
It has begun.
An American, not US subject.
So using your worst case scenario/linear logic gold will be available in LARGE quantities at terrific prices in short order?
"This is going to begin seeping into emerging markets and other assets soon. Imagine what the world would look like it $9 trillion worth of shorted Dollars had to be covered?"
So...okay...what's the big secret then? Just buy dollars or go long almost any USD/xxx forex pair.
Yep, the bond market has got problems that are bad and getting worse but derivatives are the thermonuclear device that will likely kill everything around it.
...unless the holders of those derivative bets (~0.1% of the population) decide to make all those bets null and void...
Their debts/problems go away, your debt/problems do not.
This is the end game IMO, and it will still result in hyperinflation and scarcity.
Well I'm long the dollar so...
Might be hard to make them go away if $100+ trillion disappears.....
A really naïve (and sincere) question about
"and it will still result in hyperinflation and scarcity."
Till now, I believed that debt imploding would provoke deflation (given MV=PQ), as monetary aggregates decrease. Why do you think it will create hyperinflation ?
This is a real question, not a trap :-) Thanks in advance.
Not to steal Jim Lubbad's epic work i think that I will give you the link to his published thesis...
https://gold-forum.kitco.com/showthread.php?93752-Deflation-Precedes-Hyperinflation-Long-Answer
It is so impressive that a Uninversity Professor actually plagarized it. (Search out my name in that thread and you will find the outcome of that theft.)
Deflations precede hyperinflations.
Furthermore if you look at the Dollar Chart the USDX is exhibiting an Exponentional Growth curve. In any adiabatic system Exponential Growth always results in an Exponential Collapse. Resources do have limits and the World is an adibat.
I read, this morning, the following article...."The $9 Trillion Crash Your Broker Doesn't Even Know About..." ~ Phoenix Capital. It is published on our very own Zerohedge. That is funny..you are commenting on it. Did you read it?
The truth is that the author is correct. Borrowing Dollars is like borrowing shares of Stock when shorting. The World has shorted the Dollar heavily through BORROWING THEM. When the Long Side of the trade increases then it places pressure on the Short Side to cover their shorts.
Of course it will not be possible. Thus that means insolvency, bankruptcy, and FINANCIAL RUIN for those whom have borrowed and cannot cover the call.
Of course this demonstrates that either the Dollar will collapse (hyperinflationary) or liquidation sales of assets will be forced which will send the price of goods into the toilet (deflationary).
The Bankers will allow deflations for a little while to accumulate the Hard Goods for pennies on the Dollar. Then they will print like crazy and destroy the currency in order to "save the markets".
Yes. They are out to steal your wealth and consolidate their power.
For anyone too impatient to read his whole post, he nailed it at the end. Everything that is happening is not a mistake or by happy accident. Just watch the consolidation that happens in shale for a leading indicator of evidence.
"Deflations precede hyperinflations."
This is not a well-known fact, but it is a fact non-the-less. The huge global debt bubble must first collapse before any hyper-inflation is possible.
http://www.globaldeflationnews.com/inflation-vs-deflation-part-1which-on...
its a debt bubble of catastrophic proportion
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
Thanks so much for your really useful answer - much more than I expected ! I'll need quite a few days to chew and digest it (as well as the link your provided) completely.
"I read, this morning, the following article...."The $9 Trillion Crash Your Broker Doesn't Even Know About..." ~ Phoenix Capital. It is published on our very own Zerohedge. That is funny..you are commenting on it. Did you read it?"
Yes, I read it :-) And I'm posting my question on this very thread :-)
A few points concerning Jim Lubbad's text, now. Please consider this coming from a quasi-student:
a) I understand the point about hyperinflation following deflation. But still, MV=PQ contains both M and V, not only M. How can you get hyperinflation if the velocity crashed ? Isn't it what's called stagflation ?
b) Surprised that real estate is higher than OTC stocks in the inverted "credibility" pyramid !
c) Beautiful statement : "all fiat currency is a short position on gold". Almost lyric.
d) Really counter-intuitive for a beginner : "So first comes hyperinflation, then, and only then, comes the massive printing as the central bank tries desperately to keep the government functioning. So don't look for massive printing to see hyperinflation coming."
Many thanks again. I'll go through the text a few times and come back if necessary.
Regarding a) ... Remember, hyperinflation is simply the loss of confidence in a currency. As a result, said hyperinflation will end up driving velocity much much higher, regardless of the velocity prior to the loss of confidence occuring.
I think that point is missed quite often in all the talk of relative valuations - at the end of it all it comes down to perception and confidence, and no amount of jiggery-pokery will re-direct the herd when the stampede starts.
p.s Thanks TTom & Ewtman for links
Not being an econ nerd I won't answer your questions so someone like TallTom can answer more eruditely.
The thing I think will bake any econ nerd's mind is that nothing happens in a political vacuum. Remember, the US and the Fed are not the only state and bank of concern. There are a lot of other players and they all have input into the game. Cumulatively, they and their markets hold far more dollars than our domestic market - our inflation is exported. This might explain why you could see hyperinflation before the turbo printing begins.
Oh, and that thing Mike Tyson said about having a plan. "Duck! It's a nuke!"
What the author points to is a massive deflationary spiral and drops in everything from precious metals to HY to stocks to RE. Yields on US treasurires would outright crash and values would go through the roof. The question is 1) will the banks, governments, do anything about it? (they most definetly would), 2) will it work? 3) and if it (massive printing on a scale we have not yet seen) did work, what would happen to the price of gold?
It's the response of the CBs / IMF / BIS to the deflationary spiral that will cause hyperinflation. The alternative of laissez-faire is a ride straight back to the stone age.
We get there either way.
I'm hoping either early industrial era or late iron age myself.