Tuesday, June 25, 2019

Learn Economics Topic Seventeen

17. Eurodollars, Repos, and Jeffrey P Snider:

The Derivatives Monster Creates a Bull From Capital, Not Labor

Siphoning off capital takes place as interest rates generally decline, and it is a dangerous game.

Why Did the Fed Turn Dovish? Not Just Trump
One could almost say that keeping business cycles going is a sign of economic weakness! The Fed fears the pain of a downturn on the banks and counterparties. Barely over 40 percent of all derivatives trade through clearinghouses.

Fed and Trump Fail the Eurodollar

The Eurodollar market is all about US dollars. It is being starved of liquidity, which will hurt US trade. It could cause the dollar to rise as dollar shortages become the norm worldwide.

Unstable Repos and the London Connection

Repo fails are a sign of financialism gone bad. London is the seat of this financialization, which generates wild profits while the real economies of the western world continue to languish. Jeffrey P. Snider's look into repo fails is quite revealing.

Scarcity and the Hoarding of Bonds as Gold in Repo

The pressing question regarding the repo markets centers on collateral demand and scarcity. How much real and potential demand is there for sovereign bonds, used as collateral for all sorts of financial markets?

Repo Watch Looking for the Next Economic Crisis

Repo watching is an important economic indicator. If repos don't roll over, credit freezes up. It is sort of like looking at a giant glacier, waiting for the big collapse on the edges.

The essence of Jeffrey P. Snider's thesis is that yes, the Fed expanded its balance sheet after the Great Recession, and it did QE. But it did not fix the broken Eurodollar system and even from 2008 through 2018, there has been a chronic shortage of Eurodollars. It did not really allow full recovery. Therefore, shrinking the balance sheet now is a deflationary danger confronting the financial system in 2018 and perhaps going forward.


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While I have supported some economic policy, it turns out that racism was a strong motivator for some of those policies. I oppose racism in all forms and prove my commitment by rejecting anything other than the Westphalia or Westfalia view of sovereignty, which is mutual respect for all nations by all other nations. 

Perverse sovereignty is as bad or even worse than excesses in globalization which gives banks power over governments. Both are ultimately bad for America. This blogger supports free trade and opposes a border tax. But government should be stronger in order to rein in big banks who abuse the people with toxic loans.

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