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There are many liquidity problems brewing that when combined create a dangerous and uncommon financial environment. Other than the changes happening with the U

There are many liquidity problems brewing that when combined create a dangerous and uncommon financial environment. Other than the changes happening with the U.S Dollar as global reserve currency, some of this manifests itself in the Reverse Repo Market. You can see over the last several years and since the 2008 crisis that it has grown exponentially. This typically can be used as an indirect measure of Treasury Liquidity as a whole, which Yellen at the Treasury has been warning about. With this comes an unwinding of quanatitiavive easing, also in place for over a decade and will continue to have unknown effects. It's safe to assume that much of the economy and zombie companies were able to exist on basically free money. As all of this comes together, and if the robbing peter to pay Paul economy continues where trillions can be created just by modifying a balance sheet, then things could end very poorly. Pension funds, real estate both commercial and residential, and many other factors could lead to a bond market crash and a debt crisis that would have no way out since everything is so over leveraged on easy money already. While the future of inflation is up in the air, it remains to be seen if the Fed can manage all of these actions without causing a severe recession. We might find that a bandaid was put on the global economy after 2008 and much of the structural problems remain. Government spending on all kinds of things will have to be reduced along with the Feds balance sheet and where this leads is unknown.

Workaccount2 4y ago
Watching congress grill Powell, it doesn't look like the government is keen on doing anything except blame the fed. Early on I was hoping that Biden, seeing the writing on the wall that he can't do a second term, would step up and be the fall guy for the "terrible policy" of cutting spending and raising taxes. Looks like that isn't going to happen though.
- mistrial9 4y ago
  Joe Biden and his people have historical roots with the same groups that participate in the economy of Argentina, modern Spain and a host of small other countries. The M.O. is to be the great protector, incapable of error.. meanwhile slick PR to gloss over, dismiss or ignore any and all problems, as long as the leadership remains intact. I believe the original authors of the Constitution of the USA would be familiar with much of this, from a command and control perspective. Elaborate insurance and futures markets were already several hundred years old at that time, right?
pphysch 4y ago
2008 was maybe the last moment when Washington could've credibly pivoted and attempted to tackle the debt problem with massive, uncomfortable structural changes. Instead, they chose to kick the can down the road, the use every conceivable tool to "cheat" the global financial system and preserve Washington's hegemony over it. Since 2008, the national debt has gone from $10T to $30T. The only way out at this point is a total collapse of the foreign US debt markets and a hard pivot away from USD as global reserve currency. The rest of the planet is not going to keep getting ripped off like this. Even if Washington tries to start paying down its debt, it's gonna take way too long at this point. The jig is up.
- wins32767 4y ago
  There is nothing to replace it. The reason the US dollar is the global reserve currency now is that the US is the only nation who is exporting enough currency to allow any two arbitrary counterparties anywhere in the world to get their hands on a common currency. And the only way the US can export that much currency is to run a persistent and structural trade deficit financed by debt. No one else has a big enough economy to throw off that much currency other than maybe China and the EU and neither of those want to dislocate their main economic engines by becoming huge net importers.
- gameshot911 4y ago
  Like democracy is for governments, the USD is the worst currency, except for all the others. There's a reason the world always floods to USD in times of crisis.
echelon 4y ago
> changes happening with the U.S Dollar as global reserve currency Could you expand on this? Where, how, and to what level is this occuring? Is it due to the geopolitical tensions with Russia and Saudi Arabia with respect to oil? Is China making a big move with RMB?
- treebeard901 4y ago
  I am not aware of any real long term metrics to track reserve currency usage worldwide. One of the many ways the dollar system is reinforced is by the old idea of the petrodollar. Some would say this has been in place since the 1970s. It's not the entire picture of what makes the dollar the reserve currency, maybe the U.S. Navy can ultimately take credit for it along with the historically liquid financial system behind it. With that being said, much of this system relies on the Treasury market. Saudi investment seems to move based on which political party is in power. Russia has a complicated relationship to the petrodollar as well and has grown more complicated since Crimea in 2014... Part of the staying power of this system is arguably technical because of SWIFT. The double edged sword of using sanctions for geopolitical goals has driven other means of settling international payments even for things like oil. It's less ideal than the system used to be but in the oil producing countries, it's better than being at the mercy of the U.S. Even Japan, which acts as a sort of off shored Federal Reserve given their historical bond holdings has recently cut back and said they plan to cut back more. China also has complicated the picture. The trade war changed many fundamental inflows and outflows and as time goes on more countries will find ways to trade without relying on the dollar. This can be patched over by something like quantitative easing where the Fed steps in to provide liquidity that global trade used to provide, but there is a cost to that as well since they are kind of stuck in a trap of inflation vs job loss and recession. Assuming inflation continues. Don't get me wrong though, the US dollar is still the reserve currency and will be for some time. It's just that the mechanics behind it can and do change and is something that I feel is not widely understood. How about that Bancor though?
onlyrealcuzzo 4y ago
> Pension funds, real estate both commercial and residential, and many other factors could lead to a bond market crash and a debt crisis that would have no way out since everything is so over leveraged on easy money already. Why is the easy way out not 50% or 100% or 200% inflation? It's massively unfair. But it's a lot easier than a decades long depression. One could argue that the renter class of the world has gone through a decade long depression already from 2008. Not sure why they wouldn't just keep that going indefinitely...

Workaccount2 4y ago

Watching congress grill Powell, it doesn't look like the government is keen on doing anything except blame the fed. Early on I was hoping that Biden, seeing the writing on the wall that he can't do a second term, would step up and be the fall guy for the "terrible policy" of cutting spending and raising taxes. Looks like that isn't going to happen though.

mistrial9 4y ago
Joe Biden and his people have historical roots with the same groups that participate in the economy of Argentina, modern Spain and a host of small other countries. The M.O. is to be the great protector, incapable of error.. meanwhile slick PR to gloss over, dismiss or ignore any and all problems, as long as the leadership remains intact. I believe the original authors of the Constitution of the USA would be familiar with much of this, from a command and control perspective. Elaborate insurance and futures markets were already several hundred years old at that time, right?

pphysch 4y ago

2008 was maybe the last moment when Washington could've credibly pivoted and attempted to tackle the debt problem with massive, uncomfortable structural changes. Instead, they chose to kick the can down the road, the use every conceivable tool to "cheat" the global financial system and preserve Washington's hegemony over it. Since 2008, the national debt has gone from $10T to $30T. The only way out at this point is a total collapse of the foreign US debt markets and a hard pivot away from USD as global reserve currency. The rest of the planet is not going to keep getting ripped off like this. Even if Washington tries to start paying down its debt, it's gonna take way too long at this point. The jig is up.

wins32767 4y ago
There is nothing to replace it. The reason the US dollar is the global reserve currency now is that the US is the only nation who is exporting enough currency to allow any two arbitrary counterparties anywhere in the world to get their hands on a common currency. And the only way the US can export that much currency is to run a persistent and structural trade deficit financed by debt. No one else has a big enough economy to throw off that much currency other than maybe China and the EU and neither of those want to dislocate their main economic engines by becoming huge net importers.
gameshot911 4y ago
Like democracy is for governments, the USD is the worst currency, except for all the others. There's a reason the world always floods to USD in times of crisis.

echelon 4y ago

> changes happening with the U.S Dollar as global reserve currency Could you expand on this? Where, how, and to what level is this occuring? Is it due to the geopolitical tensions with Russia and Saudi Arabia with respect to oil? Is China making a big move with RMB?

treebeard901 4y ago
I am not aware of any real long term metrics to track reserve currency usage worldwide. One of the many ways the dollar system is reinforced is by the old idea of the petrodollar. Some would say this has been in place since the 1970s. It's not the entire picture of what makes the dollar the reserve currency, maybe the U.S. Navy can ultimately take credit for it along with the historically liquid financial system behind it. With that being said, much of this system relies on the Treasury market. Saudi investment seems to move based on which political party is in power. Russia has a complicated relationship to the petrodollar as well and has grown more complicated since Crimea in 2014... Part of the staying power of this system is arguably technical because of SWIFT. The double edged sword of using sanctions for geopolitical goals has driven other means of settling international payments even for things like oil. It's less ideal than the system used to be but in the oil producing countries, it's better than being at the mercy of the U.S. Even Japan, which acts as a sort of off shored Federal Reserve given their historical bond holdings has recently cut back and said they plan to cut back more. China also has complicated the picture. The trade war changed many fundamental inflows and outflows and as time goes on more countries will find ways to trade without relying on the dollar. This can be patched over by something like quantitative easing where the Fed steps in to provide liquidity that global trade used to provide, but there is a cost to that as well since they are kind of stuck in a trap of inflation vs job loss and recession. Assuming inflation continues. Don't get me wrong though, the US dollar is still the reserve currency and will be for some time. It's just that the mechanics behind it can and do change and is something that I feel is not widely understood. How about that Bancor though?

onlyrealcuzzo 4y ago

> Pension funds, real estate both commercial and residential, and many other factors could lead to a bond market crash and a debt crisis that would have no way out since everything is so over leveraged on easy money already. Why is the easy way out not 50% or 100% or 200% inflation? It's massively unfair. But it's a lot easier than a decades long depression. One could argue that the renter class of the world has gone through a decade long depression already from 2008. Not sure why they wouldn't just keep that going indefinitely...