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European Dollar Shortage Back With A Vengeance As Short-Term ECB $ FX Swaps Hit 2012 High
Two months ago it was the Schrodinger market, best exemplified by China where the economy was both rising and contracting at the same time depending on what data one looked at. Now, that the global contraction is confirmed and one can no longer claim anyone is decoupling from anyone else (especially not with a fiscal cliff looming), it is the Copperfield market: everything and anything all about distraction. Because while stocks gallop ever higher, corporations are generating ever worse results, on the bottom, but especially on the top line, central banks are doing everything to redirect attention from the underlying reality and to the possibility, repeat possibility, that they may print at some point soon. With Germany's blessing of course. Naturally the biggest distraction that is needed is in Europe, where various Spanish regions, and Sicily, have already confirmed they are insolvent, not to mention the Spanish banking system, and where there is nothing in place to provide the over €1 trillion in liquidity needs (financial and sovereign debt maturities, roll overs and interest payments) over the next year.
Today we present the latest math-based fact that will need the loudest distraction from the ECB yet (or maybe, the reason why Draghi, for three days in a row, was posturing with promises of inevitable intervention). As the ECB has just announced, and as the Fed will disclose on Thursday with the usual 4 day lag, 10 European banks, via the ECB's swap line with the Fed, have demanded a whopping $8 billion in 7 Day FX swap operations for the week starting July, double the prior week's $4.2 billion (by presumably the same 10 banks), and the most so far in 2012. Looks like not only is Europe not fixed, but banks suddenly have developed a huge appetite for USD - could it have something to do with forced over-repatriation of all EUR-based assets, in a desperate attempt to keep the EUR higher, even if it means ending up with far less USD than capital levels demand? No worries, there is always the ECB to cover the underfunding if and when needed.
And for a brief yet quite hilarious tangent: as the chart above shows, the marginal rate charged for liquidity swap borrowings was at 0.66% in the past week just shy of its 2012 highs. So what does that "unmanipulated", self-reported indicator of interbank availability of US Dollars, the 3 Month USD Libor, show?
As of this morning we just hit 2012 lows of course, or more or less the inverse of what the ECB and the Fed are saying is the true cost of dollar availability.
What can one do but laugh at this point.
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Let's please the idiots, everything is fine, come on swallow that blue pil...
Time all most perfect to start Israel/Iran/USA war, when it gets even worse we must take the peoples attention off of the economy. Olympics are too boring....
ECB and FED has no solution, market is set for crash. http://www.freefdawatchlist.com/2012/07/secret-rescue-plan-of-ecb-and-euro-zone.html
There is no way to properly price risk in this enviroment.
There is no way to properly price assets in the this enviroment.
Thus there is no way to actually discern where any individual asset class should be trading. Hence why coorelations are where they are.
The mystery is why anyone still pays 2&20.
So I price reward instead. "Natural gas prices are 80% cheaper in the USA than anywhere else outside of Australia." and of course "the USA is the most energy hungry place on the planet for a reason." not that I am disagreeing with you of course. Just looking for a solution..."to your problem."
In these difficult markets, it can be difficult for the average investor to know how to position themselves. So it's best to turn to the experts and let them position you.
Bending over a barrel isn't very comfortable...
No body trades equities anymore. Only computer algos trade now. What humans think no longer matters. If the algos say that red is blue, then its blue!
In a world where there is no mechanism or "market" that allows true price discovery, this is the death knoll for western paper. Got physical?
OT
Silver just spiked and is coming down, gold did not go with it. What happened?
You're watching the stock market. It's all magic. And especially gold and silver.
Correct, but wouldn't it be nice to see silver re-couple? The historic Gold:Silver price has been 15, what is it now?
.
I watch the spot prices daily and this is the second time in a week that the prices decoupled, even momentarily. Their prices normally move in tandem along with the PGMs as part of TPTB's anti-PM-upside-volatility manifesto, so I also think it's something to watch.
Of course, Bill Murphy has recently cranked up the air horn regarding something about a London Trader, silver not being there, etc but it was all very crazy tin foil hat stuff and he's ONLY BEEN RIGHT FOR DECADES.
looks like JPM had a shakeup. Gosh darnit guys, who's minding the black box?!
http://www.crainsnewyork.com/article/20120727/FINANCE/120729893
My best guess is that someone just bought a lot of silver.
Dear Ben
I'm still waiting for that helicopter full of money you promised. I have emailed you my contact information, please let me know in advance when you plan on delivering. I know there may be something lost in translation since I consider gold is money and you do not. If it makes it easier on the helicopters I will accept fiat and exchange it for gold on my own.
Sincely
Dr. Engali
I know Ben promised that, but it was deliberate misinformation on his part. Every new dollar has to be BORROWED into existence, meaning a bankster somewhere will be earning interest on it from the day of its birth. He lied to you, sorry to say.
Hey Doc,telegram....jus' sign here.
.
Dear Mr Engali
If the evident recent success of fiat money regimes falters, we may have to go back to seashells or oxen as our medium of exchange. In that unlikely event, I trust, the discount window of the Federal Reserve Bank of New York will have an adequate inventory of oxen.
Sincerely
ALAN GREENSPAN
http://www.federalreserve.gov/boarddocs/speeches/2002/200201163/default.htm
This is the stuff that breaks markets right here. Spot on with Draghi.
IS bandar dead?
http://www.voltairenet.org/Syria-reportedly-eliminated-Bandar
Here's another 2012 low ,since nobody these days watches their diet,the level Iron is hittin' new lows:
http://av.r.ftdata.co.uk/files/2012/07/iron-ore-year-to-date-Reuters.png
......lookin' a bit yella.
I caught that mid-July. Maybe Ford should re-consider going to aluminum bodies (tee-hee).
Anywayz- one of the few bright spots I have for July.
Must tank markets to scare Fed into action.
Must front run Fed's actions.
So you ask, Tyler: What can one do but laugh at this point.
Throwing up works, too.
I'll have to disagree. This is the "Tale of Two Cities" market: It is the best of times. It is the worst of times.
Very good article. Helps explain why we don't see more inflation despite expansion of the money supply. M2 grew by 9.5% from 5-11 to 5-12
http://www.federalreserve.gov/releases/h...
But M3 is not growing. Myabe b/c the Euro people are sucking up dollars like crazy therefore almost zero velocity thus deflation presently with high inflation post-poned for a few months or longer.
"Fed Abandons M3 Without an Honest Explanation" [11/05/2005] Alan Greespan*
http://www.kitco.com/ind/williams/nov252005.html
Ps. "Plunge Protection Team' 2/23/97* Note: Brooksley Born as Chairwoman of CFTC ?,... and the close proximity [timing] to the FSMA of 1999 ?
http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm