Cue Panic As Fed Resumes Liquidity Swap Lines, Lends $200 Million To Swiss National Bank, Most Since October 2010
If yesterday's news broken by ZH that one bank was in dire need of US dollars and ended up borrowing $500 million from the ECB was enough to send the market down almost 5% today, then the follow up news that the FRBNY just reactivated FX swap lines with Europe will likely send ES limit down at tomorrow's open. The FRBNY has just announced that in the week ended August 17, it lent out $200 million to not the ECB, not the BOE, but the "most stable" of all banks: the SNB. This is the first use of the Fed's Swap Lines since March, and the most transacted under this "last ditch global bailout swap line" (see more on how the Fed bailed out the world using swap lines here) since October 2010. This event also gives us a hint that the European bank in question in dire need of cash is Swiss, which in turn means that it is not some usual PIIGS suspect, but one of the two "big ones." If true, this means that the European insolvency, liquidity and what have you crisis is about to take an exponential step function higher.
From the FRBNY:
And the history of FX swap usage:
(8 votes)
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Swiss banks...I thought that was the safe place to be, with their currency soaring and all?
I'm actually VERY surprised to that one also.
I wonder where the loss cam from. Not a bank run. so....
cue end of physical gold and first parabolic move
parabolic, bitchez
http://azizonomics.com/2011/08/10/how-high-will-gold-go/
Dont know much about international banking but....
Could the SNB be a middle man to hide the swaps final destination?
yeah..the fx market intervention
Ouppss this might be the end of the Dollar fall...
I am wondering that if with all the US dollars shorted around the world the next real crisis is not a gigantic short-covering into the USD as when markets start to realize that even with an S&P dowgrade of US, investors are still pourinig money into US Treasuries (unlike any other country in the world) at a crazy speed.
It would solve quite a lot of problems
1) Commodites to plummet (except for Gold and Silver where a sell-off would provide a big opportunity) which in turn would help the US and the entire world with lower energy prices and those likely to pay for this mess are likely to be once again OPEC countries as been in the 80's
2) Solve some of the current US to Chinese issues
3) Repatriation of US dollars into the US
etc......
The big thing is that if one of the two Swiss Banks were to fail, all Switzerland would be BK and as such CDS on the country would skyrocket as well - The same could be said for Japan.
The best trade might be to be long Gold in CHF and JPY at current levels as you would profit from a fall of the CHF and the JPY but have Gold upside
My thoughts exactly.
1. USD rip your face off short cover rally/deflation scare.
2. Commodities/stock plummet.
3. UST buying in earnest.
4. Printing presses go on MAXIMUM OVERDRIVE.
5. Dollars come home to roost.
6. New gold-reference monetary system born.
i doubt it will be as fast. If there's one thing that central planning is good at it's making shit run really retarded 'til the wheels come off. they haven't even started directly monetising debt yet (which even paul krugman admits would stoke hyperinflation), and it will take months at step 4, and months at step 5 — of china and the arabs buying up gold and productive assets to kill their dollar pile — for step 6 to happen.
i do think you have your sequence pretty much right.
Do these 6 steps occur in six minute, hours, days, weeks, months or yeas ?
Yes
3:47 ............... Now Printing 1866.
KITCO is now out 1 ozs and 10 ozs Bars according to thier site.
Looks like public sheer (but silent) panic to buy is just starting.
My target still 2 ozs GOLD gets you an nice new F150.
Eat that SACKS ...
Been buying Krugerrands for the last 2 years (saw the ZH light) but was told last week they had run out. Was put on a list to get them as they come in! That was the first time I've had to wait for them. Says something I think.
Exactly, panic first, then crazy monetization later. If they really want to save the TBTFs they need to monetize IMMEDIATELY. European TARPs, backstop all the banks for any losses etc. They will do it eventually, probably after a few fail-- very Lehmanesque.
akenathon, forgive my ignorance. I am not a finance person by trade. However, I do follow this stuff with a fair degree of regularity, but my depth of knowledge is still shallow compared to those here. Your theory intrigues me, but I am a bit confused.
What do you mean by " gigantic short-covering into the USD"?
Wouldn't repatriation of US dollars into the US cause mass hyperinflation?
Thanks in advance.
Syrin,
Money was created for the last three years, which in turns has been flowing into the system and fuelled a bubble into the short dollard trade as it has been leveraged 100 of times...
Now if part of this money (as per BSN trade) is asked back, the consequences on the USD is that you are likely to assist at many financial institutions running for USD at the same time, thus the USD short-covering.
On the monetary consequences I think it would serve the US by floowding the world with even more dollars but at the same time it would completely debase all other currencies (including the swiss franc and the japanese yen) and as such the entire world would be pegged to the dollar.
Don't forget that 80% of the emerging markets are already in dollars and once the remaining EU mouribound currencies are gone, the likely result is to have a world currency which is the US dollar where its intrinsic value is almost zero...
The people would have no choice but to accept those dollars and if everyone were to exchange those dollars for hard assets, we could assist at a $10'000 in Gold unless the FED in conjunction (Bretton Woods II ????) with world's central banks peg the USD to Gold.
You do realize the Brent spread is now north of $24?
In all history it was about minus 50 cents until this year.
All fall in the price of WTI does not define what the world pays for oil. It doesn't even define what the US pays for oil. It's an obsolete parameter because so little WTI comes out of the ground anymore.
I have been trying to make heads or tails out of this for a while and I am at a loss... BTW, it reached $24.97 today at one point. The spread can be arbed away for about $7, the cost of transport by rail car to the LOOP.
Is it massive short positions with the IBs at the behest of the Treasury to drive down the price and to be covered by the SPR releases?
Is it the beginning of a decoupling of the US dollar and oil?? Brent is world price, WTI is US internal price. Damned if I know....
JPM et al are shorting oil and they are using the SPR release they aquired as the location. The are shorting WTI contracts, because even though America produces squat for oil, the dollar vs WTI is still the international reference point concerning both. This is similar to how silver is still treading water, when we all know demand has increased much more than the price action. JPM shorts real assets to keep the dollar above water, because the dollar trades inversely to real assets. What else is new.....
Ok... but to what end? The price at the pump reflects Brent. Do they really think the sheeple are that stupid?
Looks like the spread has blown out to $26.30....
If this is the true spread, VLO should have insane earnings, last I checked they don't. Something is very amiss.
Ouppss this might be the end of the Dollar fall...
I am wondering that if with all the US dollars shorted around the world the next real crisis is not a gigantic short-covering into the USD as when markets start to realize that even with an S&P dowgrade of US, investors are still pourinig money into US Treasuries (unlike any other country in the world) at a crazy speed.
It would solve quite a lot of problems
1) Commodites to plummet (except for Gold and Silver where a sell-off would provide a big opportunity) which in turn would help the US and the entire world with lower energy prices and those likely to pay for this mess are likely to be once again OPEC countries as been in the 80's
2) Solve some of the current US to Chinese issues
3) Repatriation of US dollars into the US
etc......
The big thing is that if one of the two Swiss Banks were to fail, all Switzerland would be BK and as such CDS on the country would skyrocket as well - The same could be said for Japan.
The best trade might be to be long Gold in CHF and JPY at current levels as you would profit from a fall of the CHF and the JPY but have Gold upside
at least one of the big swiss banks was gobbling up Fedbucks during the lehman era meltdown and the Bloomberg FOIL lawsuit forced that disclosure, maybe the Fed has gotten more devious and will just flow the bailout funds thru SNB to avoid FOIL law
Why would they want to swap Swiss Franks for toliet paper?
Because a lot of their clients took big dumps?
da-dum, tisssss.
All of your Swiss Bikini Team are now belong to us.
Damn all you titty avatars! I try to read this stuff at work and instead, I find myself looking over my shoulder for co workers.
If you're really a central bankster you should, perhaps, be looking over you shoulder for something a bit more alarming. The rodeo is near.
If you're really a central bankster you should, perhaps, be looking over you shoulder for something a bit more alarming. The rodeo is near.
Are we talkin' footlong corndogs here?
Weren't the Swiss big financers of the real estate bubble in eastern Europe? That can't be good.
If memory serves, they were... at least one of the big ones.
A pigmenationally gifted swan alert?
Did I hear my name?
just came back from a dinner with an MD from CS who got 3 new bosses within 3 months, anymore questions? good bye Swiss major banks. same shit happening at UBS.
told them to cover their vested shares by writing calls and buying puts, they all laughed at me. hahaha the last laugh is the best!
go long gold and silver, the real money, not currency!
Massive exposure to Poland and Hungary...
http://www.forbes.com/2011/05/13/tax-havens-fatca-opinions-contributors-...
75% of world debt is denominated in dollars. 40 years of BW has made the dollar like herpes. You just have to live with it and the inconveniences and pain of occasional outbreaks.
The fact that the SNB used the Fed facility and not one provided by the ECB should be worrying. It shows how strapped the ECB really is. Whether the SNB was paid to stand in for another bank (cough cough Soc Gen or Dexia) can only be revealed through extensive forensics. The Swiss used to be able to protect all inquiry into their FX management, but this time, since it came through the newly transparent, user-friendly Fed, they are caught with the tide going out... Expected drop in European indices tomorrow: approx. 2%. BTW, every German banker I talked to today was extremely grumpy. Guess they were not prepared for the DAX double bottom.
No.
It shows how the ECB is set on their only mandate, price stability.
The ECB has about 3 different unofficial mandates right now, liquidity being one of them.
Bollox
"Price stability" has a wide variety of interpretations for Mr. finger-at-the-bazooka-before-I-retire Trichet. ;-)
No kidding. WTF! Is the dollar backstopping everyone on the planet?
Well, for a while, don't cha' know.
"Is the dollar backstopping everyone on the planet?"
Not surprising since the USD is the Global Reserve Currency (for now).
Not everyone, just countries with government funded by central bank operations.
+1823
All it takes is one wild pitch to get by the catcher for the run(s) to score! GAME OVER!
ECB has its hands full with dollar funding needs of Euro-area banks.
This surprises me a bit. If SNB is intervening by pumping out CHF they would need to buy up at least some USD in addition to EUR to prevent their intervention from driving EUR up excessively against other majors in the process. Anyone who understands central bank FX interventions better than I do want to explain?
Good call - the SNB may very be acting as a conduit to a European bank - in theory, they shouldn't be short of capital. Or maybe they don't want to have BofA as a counterparty?
lulz, what is with the set of tits for avatars? am I late to the gang bang?
Sloppy 750ths I'm afraid.
Does that make him "holeier than thou"?
With all the billions in deposits they are getting doesn't make much sense.
200 Mil seems like chump change, doesn't it?
When should we expect to see a blow out in LIBOR and TED?
So we loaned the SNB $200 million so they could buy the UUP or short the UDN?
The "financial media" will not parse the situation as well as it is being done here. It will look upon the face value of the event and ACT accordingly. Hence, the prediction of "...ES limit down at tomorrow's open." Just go with the flow.
Nah, it's OPEX. I'm just going to take a precious metal bath and invite nekkid women over to join me.
(Don't tell my wife)
2 hours before the open: Dow futures down 100 to 200 right now.
Swiss or American, it is all about the bankers. They could give a shit about their account holders.
That sound you hear is the toilet flushing... I don't think you can stop that, once it's begun... especially if it's one of the really big toilets...
And yes, the big toilets can flush too... but when they go, they all go...
Que the mother black swan.
OT:
I'd like to see a ZH poll where we can vote for our all-time favorite troll. Anyone?
On Topic: Do you believe me to be a troll?
Just an FYI - I hold no paper and only mortgage debt. Nothing but beans, bullets, and bullion. I come here for news that I will not see or read about anywhere else. I am not a trader, nor do I wish to be. The comments I make allow me to relieve my deep despair for the farce of a paper world we live in. This place keeps me sane.
On Topic: You typically don't reply quickly to a post, your avatar isn't a flag or some animated face that looks like it was stolen off of Yahoo, and you don't post solely to agitate. So my opinion is 'no'.
On topic: what about me? look at my tits. Schooling: Robotrader trained me before he left to work for Doug Kass. Hint: I am here to seduce and mislead you all. Conclusion: Slaughterer = troll. He only has 20,000 ounces of physical silver.
Not a troll... just someone who probably wasn't breastfed and as a result has deep issues that he can only articulate with an avatar...
+36 DD
"look at my tits"
Now, if that rack was hung on RobotTraders Mom, you'd have the perfect woman!
I would call you a troll for the tits. All we need is for this site to get blocked as adult because of the images.
Otherwise no I like reading your comments.
Not huge, but perky little devils.
Yeah
I have small children who like to see what Dad is doing.
While you do have every right to your Avatar, Your choice has the result of me having to limit my time here.
I won't complain, as I said it is your right.
but, do you understand how it affects others?
Have you tried unchecking "display images" in your browser?
Oh, nuts, that's all we need.
Sancho, Dr. Richard Head isn't a troll. A dick-head, ya, he'd give u that one ;-)
Bur really, we've been around here long enough that your suggestion would fall into the "molden-oldies" category, imho.
- Ned
No, I want to be the greatest troll of ZH. After Harry Wanger, after Leo, after Robo-tard, after "it only costs $5 to dig it out of the ground..."
It would be hard to beat Harry on that one. Or is it Hairy?
Master Bates is my favorite golden oldie troll
AKA Johnny Bravo!
'it only costs $5 to dig it out of the ground'
That phrase still makes me laugh every time, as do the deer in the headlights and O pics.
In the spirit of the Canada thread "The Bachmann Corn-Dog Overdrive" photo will become iconic...
Did you make that up? Fucking brilliant!
Takin' care of business?
I wanna see her stuff six of 'em at once.
Thats for paying subscribers only. But if you sign up, you get to see Randy Travis eat six too.
SR, I humbly must take credit....
slaughterer: If you want to get into training to be the "greatest" then you have a long slog ahead of you. But, well I'll offer to, ... er ... <oh yeah> ya, "coach" u on how to ... er ...
- Ned
Slaughterer.... Leo was many things but he was'nt a troll....not at least by the standards of the Hedge
Leo is/was deluded in a very different manner than the typical troll, fer sure!