However, as I have been more or less preaching that the Fed's interest rate hikes were headed in a wrong direction for many months now, and have been seeing warning signals that a crisis was imminent, I certainly do not rule it out.
At this point, it boils down to what happens when and in wha…
However, as I have been more or less preaching that the Fed's interest rate hikes were headed in a wrong direction for many months now, and have been seeing warning signals that a crisis was imminent, I certainly do not rule it out.
At this point, it boils down to what happens when and in what order.
One thing I do know is that, with the Fed's overnight reverse repo market having just the other day hit a new record, there is an inherent presumption that the US markets have ample liquidity. If $2.4T is not enough, then the derivative mess is much MUCH larger than anyone can even imagine.
In theory the US markets should have a cushion. In reality....who knows?
This derivatives mess, it is a big worry, or worse. I am concerned it will damage the faith in placing money in the US. Of course, where else is there? Nowhere, and soon not even here!
The GLOBAL derivatives market (mess) is estimated to be $1Quadrillion. The US share is merely $200Trillion.
The problem isn't the currency, it's the derivative. Derivatives are ultimately synthetic securities that amount to little more than a side bet on an underlying transaction. Somehow, by having a few side bets at long odds is supposed to "hedge" one's risk on a transaction.
The derivatives mess is lighting up this time in the UK first. Will it spread to the US? At some point, probably. Whether through pension funds or more likely hedge funds has yet to be played out.
Where else will it spread? Pretty much everywhere. Think of it as an economic pandemic.
I'm not forming any firm conclusions as of yet.
However, as I have been more or less preaching that the Fed's interest rate hikes were headed in a wrong direction for many months now, and have been seeing warning signals that a crisis was imminent, I certainly do not rule it out.
At this point, it boils down to what happens when and in what order.
One thing I do know is that, with the Fed's overnight reverse repo market having just the other day hit a new record, there is an inherent presumption that the US markets have ample liquidity. If $2.4T is not enough, then the derivative mess is much MUCH larger than anyone can even imagine.
In theory the US markets should have a cushion. In reality....who knows?
This derivatives mess, it is a big worry, or worse. I am concerned it will damage the faith in placing money in the US. Of course, where else is there? Nowhere, and soon not even here!
The "money" isn't IN the US.
The GLOBAL derivatives market (mess) is estimated to be $1Quadrillion. The US share is merely $200Trillion.
The problem isn't the currency, it's the derivative. Derivatives are ultimately synthetic securities that amount to little more than a side bet on an underlying transaction. Somehow, by having a few side bets at long odds is supposed to "hedge" one's risk on a transaction.
The derivatives mess is lighting up this time in the UK first. Will it spread to the US? At some point, probably. Whether through pension funds or more likely hedge funds has yet to be played out.
Where else will it spread? Pretty much everywhere. Think of it as an economic pandemic.
What is the "economic vaccine?"
I'm not sure I'm ready to hear this.
There is no "vaccine". This is one contagion that just has to burn itself out.
1 Quadrillion dollars should make on Hell of a bonfire, yes?