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RIP Fed Dollar Swap Intervention: Central Bank Liquidity Injection Half Life Two Weeks
As noted two weeks ago when predicting the efficiency and duration of the latest global coordinated USD liquidity injection, we had a sinking feeling the Fed action would have a very brief time span. Sure enough, judging by the action in two critical FX liquidity indicators - the 3M and 1 Y basis swap indicators, the dollar shortage is baaaaack... only this time, very paradoxically, with implied infinite backstopping from the Fed: if even that factor no longer has an influence on the market's perception of liquidity risk we are in very deep trouble. Which of course is to be expected: the gross synthetic dollar short back in 2007 was $6.5 trillion. Add a few years of ZIRP to this, where the USD is also the funding currency of the world, and one can see why the global USD short position currently is in the double digit trillions. So just how will the Fed backstop $10+ trillion in explicit USD shorts? We can't wait to find out.
3 Month Euro Basis Swap now almost back to pre November 30 global bailout levels:
... but the real action now is in the 1 Year Basis Swap which is back down to December 2008 levels.
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That's going to happen when you insist that a solvency crisis is a liquidity crisis. Reality sucks that way...
Is that low of -107.195 just for this year or what?
Ben can always print more dollars. And with a half live of 2 weeks, that means the dollar supply will increase X2 in 1 year.
Nice....
Yeah, I remember the first time I burned through $200 billion in two weeks. It was such a blur.
Telephone Mr. Sheen
When the 3m EUR$ BSW was at -157 this was very alarming indeed. The fact that the 3m hasn't gone down to the same end Nov levels whereas the 12mo has, indicates that EU banks are going out looking for $ in a further timeframe. Short term i'd say this is a bit more forgiving as they dont need to roll that over 3months from now but have a whole 12mo to pull their shit together.
Will they pull their shit together? Ya...probably not.
http://www.bloomberg.com/apps/quote?ticker=EUBS1:IND
We easily are on par for a Lehman crunch.
Except now Euro-TARP is a dream and the rumor-mill is in the process of shutting down.
Ugliness cometh.
Bernanke to the rescue in February or March. By then the house will be engulfed in flames.
these swaps are going to unwind via contribution to a consolidated global currency
PAR?
ymbfj
(you must be f'n joking.)
Thanks for the link - I was going to look it up, but you saved me the effort.
Looking at the 5yr chart is that in the fall of 2008, the swap action was clearly one of sudden, massive panic. Recent action that has gotten us back into that range has been much more of a controlled grind down with a few smaller panics. If real panic does seep into the mkts, it drops from a much lower level - hence I guess your comment.
Duplicate.
What do you mean with RIP?!
It's going to raise from its ashes twice as magnificient!
Bankruptcy, it is a bitch.
Repudiation is a godsend
Bankruptcy is a clearing
Rehypothocation is a bitch
The Bernank is a MoFo
Corzine is a shitsack.
gold & silver paper prices/rehypothecation ponzi collapsing, will the physical dealers follow these prices down? december will be an interesting month for the precious metals market
I agree. Is this the uncoupling many of us have been looking for? If physical prices don't follow suit, then I would say financial armageddon is finally here.
CM and LP, I was thinking the same thing. I have been waiting for another drive-by in metals so I could use up some dry powder and DCA more silver. However, when I talked to my local guy, he said if they smash it again, he'll just jack premiums because he knows damn well what will happen. He told me he got ass blistered in the crash and does not plan to take another beating. It took the guy three years to fully recover, and it cost him his marriage.
Someone down slammed you CM. Hahahahaha Robot trader must be lurking.
i feel his pain. the "for richer or poorer" vow apparently doesnt apply to most women lol
A bunch of coin shop owners with mustard stained plad shirts sitting there telling you they are temporarily out of stock does not constitute uncoupling. I am not tring to piss on your sand castle but if that is your catalyst for financial armageddon you are going to be disappointed. And yes almost all of them have mustard stained shirts.
There are lots of dealers of physical, including banks and the U.S. mint so for those of us holding physical already, you certainly haven't rained on anything.
I will point out that you bring up the common sense issue of supply and demand. Something that applies to everything, but is very important when it comes to essential items such as food, water, and oil.
I didn't junk you, but I think you complete miss the point which simply was, if you haven't gotten physical yet, it may be too late. Those of us who have been accumulating since the 90's (or even the 70's) really don't give a shit either way, even if gold goes to a few hundred dollars an ounce.
You are spot on. I don't represent those that bought it the 70's, 80's or 90's. I started buying in the last few years mostly because of what I read on here. You can tell me it's too late but what the f can I do about that? I represent the generation that was told to invest in the stock market, only to watch it crash twice already with my retirement funds in it. I was told to buy a home and build equity and not long after I did the housing market crashed. Now the advice is to buy gold (not from the mint is what i was always told, and banks just seems wrong too). So I go to the dealers I can find with the best prices. I hope prices seperate so for once I can be on the right side.
You described it perfectly. Lots of peopel feel the way you and I do. As a contrarian, I always traded the market and never did buy/hold even back in the day. And did super well with position trading, not day trading.
Gold: the price is signaling deflation. And I agree. The needle is shifitng back to deflation with the whole global economy going into a big slump. Unlike 08 where Asia was booming. If you hod on to gold, it's relative value will hold compared with paper assets. Stocks become ultra risky going foward as one by one you get surprise disapointments (BBY, FSLR) and more bankruptcies (MF Global, AMR). Bond yields and dividends will not keep pace with the increased cost of living in this biflaitonary world.
I also agree with the deflation theme playing out. I am banking on the inflationary response to it.. but in the meantime hopefully it's (gold) relative value will hold compared too stocks, real estate etc. But would'nt cash be king in that environment?
As you say, it depends on the response. If the Fed unleashes massive QE/ Monetary expansion gold will sky in a heartbeat. You can't trust the Fed as a guardian of the US economy, but you can count on them for one thing: they always want to kill the dollar. And gold is a perfect oil hedge as well
My guess is Ben lets us sweat it out for a while. He wants us begging him to unleash it. Many weak hands (probably very soon) will dump the metals and run to cash pushing up the USD. Then when people are begging enough to his liking he will unleash QE on a massive scale. I will contunue to short the shit out of the banks until that point. Thats my plan anyway.
Many weak hands (probably very soon) will dump the metals and run to cash pushing up the USD
If you mean paper gold yes. Not physical. Hedge fundies and weak hands are in paper and if they need to cover other paper losses they'll sell. People who bought physical are mostly those with a very long term horizon, people trying to protect their wealth and savings, and central banks. Many got it that the old playbook no longer applies. The Fed can't print to it's heart's delight because raw material prices are ultra-sensitive. And biflation is killing the US and even global middle class and that causes geopolitical instability. Gold is perfectly positioned to smooth out the wrinkles, acting as a floating life preserver that maintains it's level whether the tide is in or out
Not sure the Obama administration is going to be too keen on a MASSIVE QE a couple months before an election...
Who said it would be before the election? Remember bush jr barely winning his second term and talking about his "mandate" right after? Wait till Obama gets in. You want to see a mandate? The stimulus that will come out of it will make Kito spill his cafe latte all over his Ugs.
I totally agree with this.., I wouldn't be surprise to see some major deflation before the next inflation/QE wave. More QE is almost guaranteed.
But not until after the election... at that point - who knows where the market will be.
From history - the market does love uncertainty /sarc
B O is done - he stands absolutely NO chance of re-election.
Yellow or brown mustard stains?
It's mostly yellow because they use the cheap mustard. You have to take the focus away from the bits of sandwich caught in their beard to see it.
Definition of Rubic's cube = Finding a physical dealer of gold that will accept a Brokerage money market account check, which one writes from the gains off an equity crash but before the price of gold doubles via the fed hitting the print button and hoping the check doesn't bounce ala MF Global or that the PM dealer doesn't renig during the time he's waiting for said check to clear. Has anyone thought this transition from fiat to physical out ? I have physical but at some point it will be time to escape fiat completely and I see lots of snags. I'm aware many ZH commentors think it's foolish to try to time it or wait until the last minute.
I'm aware many ZH commentors think it's foolish to try to time it or wait until the last minute.
Count me as one of them
Amen. Trying to time the collapse = gambling.
www.pmbug.com
I was practicaly raised on Acey Duecy so yea a gambler at heart.. if you trade stocks/options/futures your a gambler too as far as I'm concerned.
I'd bet 9 out of 10 ZH readers are stock gamblers with the same questions dancing around their head.. so I'm asking fellow gamblers/speculators what plans they have made to escape the fiat ponzi.
Dealers might, but producers?
Comay, I just followed up your thought. My dealer in London U.K. has refused to sell. Told me "you know the market is being manipulated" LMFAO. This is the point that physical Gold behaves like physical Silver, at least 50% over spot and I might think about it. Paper gold to zero and physical to the moon.
I'm waiting for an update of this little chart
http://goldprice.org/ebay-gold-prices/
of course, it's not the diddly 1oz and 10oz gold bars and coins that really matter. what really matters is physical supply demand picture for the bigger fish with bigger orders.
So just how will the Fed backstop $10+ trillion in explicit USD shorts?
War, invasion and the forced appropriation of middle class and rural Americans capital.
See how it works, download "Google Shoot View", if you still can find it. Otherwise watch youtube
The Fed is quickly unravelling. The policies of the last 20 years are quickly unravelling. THE ONLY GOOD FED, IS A DEAD FED! Chaos Looms.
reality sucks when it is a spiked dildo.
Grab your ankles Bennyboy!
more like. grab your ankles Sheeple.
If you are not prepared, (the 99%), stange things will be entering your ass.
2 years stored food in cans,5 gallon buckets,etc. Guns&ammo. 400 gallons stored water. 50 gallons Kero. 50 gallons gas. 5 Gallons of 2 cycle oil. 15 cord firewood. chainsaw+splitter. Gardening tools. Seeds.Medical Kit with many drugs. cash.silver.gold. Who you calling a sheeple. Sure I left some out cuz I'm sick of typing.
aint life great!
Merkel just killed the euro..500 billion limit, say good night Irene
Good night Irene.
"Merkel just killed the euro..500 billion limit, say good night Irene"
Whay do you mean Irish66? Talk to me. I'm not up to speed on this situation like some on this blog seem to be, only noticing now that something big is may be imminent.
What's the significance of 500 billion? How has Merkel killed the euro?
C'mon man don't keep me in suspense.
Zzzzzzzzz - mmmph - snort - zzzzzzzz - HUH! - what! - oh - c'mon man - wake me back up when my SILVER is over $100/oz - zzzzzzzzzzzz
that's bullish, don't even have to ask!
S&P is still over 1200 so technically it's still working but at this point who cares?
S&P's soon to be at 700.
Time to print. Deflationary spiral is coming. Hand me that gold bar honey my paperweight has zombie blood on it.
Printing can never keep up with the cataclysmic destruction of digital dollars. Get a hold of actual cash fast because thats the only thing to survive the deflationary death star that will obliterate all things physical.......
You got that ass backwards
REAL MONEY (it's metal and it's yellow) will survive
Your concept of CASH, not so much
and one can see why the global USD short position currently is in the double digit trillions.
So what. The dollar is going up and up. USD to 100-120 easy once Europe fully implode and then Japan.
Then we do what with exports, sell them to ourselves?? Kind of a good idea sort of like monetized exports! lol!!
The US doesn't need exports. The only thing the US exports is US dollars. So print away and let the stupid foreigners take fiat paper in exchange for real hard goods.
Yes you guys expot toilet paper and I will keep wiping my arse
And after you finish wiping your ass you'll use it to blow your nose.
"Then we do what with exports, sell them to ourselves??"
No, then we just buy them with freshly printed FRN's and use them ourselves.
Then we do what with exports, sell them to ourselves??
All we export anymore is bad paper...
It is a free lunch to monetize an ever strengthening currency. Ok maybe not free but it is mostly a tax on furriners.
It is certainly preferable to monetizing an ever devaluing currency.
How does it feel to have everything that this goverment or banking cabal tell you turn into a lie?
In a word, normal.
Say what? You mean we are stupid idiots? Nah, we trust all our elected officials and the non-elected czars who are plotting to install uber-ism as we speak. We trust all the non-transparent, corruptocrat deals they make and just feel good we still have available all the food, cars, reality shows and booze that we want. And the 1% really ain't gonna go away, so we'll continue to have all the goodness that we are use to.
Besides, nothing bad can happen here in America.
It will suck, tho, if I won't be able to surf the web or reply to all my emails while cruising 70 mph in bumper to bumper morning rush hour traffic.
Say what? You mean we are stupid idiots? Nah, we trust all our elected officials and the non-elected czars who are plotting to install uber-ism as we speak. We trust all the non-transparent, corruptocrat deals they make and just feel good we still have available all the food, cars, reality shows and booze that we want. And the 1% really ain't gonna go away, so we'll continue to have all the goodness that we are use to.
Besides, nothing bad can happen here in America.
It will suck, tho, if I won't be able to surf the web or reply to all my emails while cruising 70 mph in bumper to bumper morning rush hour traffic.
they only pay attention to the s and p level when thye do this stuff, and there we still aren't about to break trend.tell me when it happen.
Jim Willie is a bit paranoid, but he first mentioned the HUGE AND INCREASING dollar "carry trade" a few years ago.
This is the functional equivalent of a dollar short position. Everyone corporations and governments alike borrowed in dollars for various reasons.
I mentioned about a year ago that i wish we had a way to measure all the indirect functional or synthetic shorts in the dollar. A hint was when it was estimated there was 200 trillion in dollar funding needed over the next ten years. I forget the source.
Heading into a kondratiev winter it was clear that level of additional funding was not likely to be available from increased productivity and deferred consumption.
Does that mean dxy at 120 or 40?
I dont think the ROW is keen on being slaves to the dollar, cos that is essentially what the deficit now represents.
A strong dollar would imply subservience.
You notice how the commercials are buying up Euros? I don't think they'll wind up burned. Sameold shit. zig while everyone else zags and wait for it to turn, as surely it will.
So we should get synthetic short-covering, and maybe a further $ rally? (While it lasts...)
USD is less powerful than the Fukushima nuclear leaks??
Opportunity for an ink and paper merchant?
More realistically, an opportunity for electron producers.
USD keeps going up... we'll have to make some more of them to take advantage.
yes, it seems so
but even these myopic merchant$ are now seeing that the addition of more debt, now, is an economic negative, since the economic engines mayOrMayNot be keeping up, already
the glass is half-something!
so debt is a necessary evil, again?
YAY!!!
Ohhh that 500 point "Coordinated" rally seems so stupid in retrospect (as opposed to moronic at the time)
Next year they should try and spread out the Santa Claus rally over a 2 week period. Helps the christmas spirit.
all they have to do is keep the Vix under 30 and the sheep are happy
Becky Qwick just bashing the shit out of the editor of Time like he molested her kid for the heinous crime of putting "The Protestor" on the cover for POY. Its sick & hilarious at the same time like everything else these days.
not defending her outburst because I did not see it, but it is a rather poor choice for PoY, IMO.
My money was on Steve Jobs this year, was kind of surprised really
They said it should've been DSK or Jobs. Who reads Time anyway? Its not even a magazine anymore, its a badly written pamphlet.
Last month I bought a hard copy for the first time in years at SFO to read on the jump to LA. Finished it before we were over Santa Barbara, it was 54 pgs with the ads. How is it still in business?
I was thinking Terry Duffy, on the cover with a picture of him reading his revealing remarks in Congress. Maybe next year...
It is a solvency crisis and a liquidity crisis and a banking crisis
until they realize that, they will keep failing....
though default will be only way out of this, at least for some countries and banks.
Hmmm how about that dollar crash? #WhatDollarCrisis?
where else but ZH are you going to consistenly read under-reported issues and analysis? no where.
I love this place.
State Street bails out of UK bonds.
http://www.cnbc.com/id/45665013
If you ask me that is pretty signifigant, thanks.
Another confirmatory biflation data point spotted today: India inflation still over 9% despite crashing economy: India stocks down 22%, Rupee down 18% since July, GDP growth falling below inflation, rising trade deficit.
+1 'wacky races to the bottom' muttley dawg laugh.
The RBI increased interest rates & intervened at 52/53 level by selling dollars unfortmuttley that too had a half life of around a week.
http://www.youtube.com/watch?v=SKm5xQyD2vE
Loves me some Muttley! Every time the "professor's" little experiments crash and burn......
Yikes,check out gold's big brudder gettin' a beatin'........ Pt down forty bucks at $1450.
The hammer will fall Once Europe is downgraded
imagine if we trade into 1200 SP...big technical number fibs, averages converge. same tipping point as the flash crash. retracement from the march 2009 lows. i was shorting SP down to it...exitted. market closes on that friday...2 hours later SP DOWNGRADES US DEBT.... the number frightens me...kyle bass on cnbc at 9central.
"let the games begin!"
@1200
Good call
This is great.
I guess you want to short just about everything except the dollar and U.S. bonds.
I went and took a peak at my physical in hand silver and gold stacks, they are still shining, but, but, but, but should I BTFD's?
I just don't know anymore.
We might get to see BAC in the 4's today before close.
Is the Don Corleone Corzine movie going to be on again today? I need something to distract/attract my attention.
Yes, I believe that walking sack of scat is going up The Hill again.
He should be gagged, bagged & tagged!
when the US was put on watch...the downgrade came soon after...this news is very close...maybe after the close on friday.
Timing on the exact day of the collapse maybe hard but there will be several red lights we blow thru that will nail it down. First one is obvious, the collapse of the euro, money will flood into the US dollar seeking saftey. The question then becomes will the printing presses be ramped up into full out production when that happens? Unrest in Japan or the collapse of the economy there will be another red light blown thru, whether that happens before or after the euro collapse is anyones guess at this point. Commondities skyrocketing to the point of fresh fruit/vegatables rotting in the ports will be one of the last red lights before the US gets Tboned in the economic intersection.
No matter how you slice and dice it we've got less than 20 months before TSHTF, whether that be hyperinflation or deflation is again anyones guess because you'd have to think like Ben, Hank, Timmy and O to even try and venture a guess.
Great article. It is pure futility.
Here is my House Oversight Committee testimony for tomorrow on the futility of trying to bail out the Eurozone Titanic.
My House Oversight Testimony on The Eurocrisis, The Fed And Implications for Taxpayershttp://confoundedinterest.wordpress.com
SP500 daily chart resumes choppy downtrend. Opposite for USDX.
My long term indicators have continued to warn of USD strength and EURO weakness and these signals have increased since 2009. The overdue dollar rally should be substantial.
http://stockmarket618.wordpress.com