Get Ready Because All Hell Is Going To Break Loose In Global Markets

As prepare to head into the second half of 202o, get ready because all hell is going to break loose in global markets.

Another Flood Of Money Printing
(King World News) – Jeff Snider at Alhambra Partners:  On March 15, 2013, the US Treasury Department issued a request for a “large position report” (17 CFR Part 420). Any institution holding $2 billion or more of the 2% notes expiring in February 2023 (10-year maturity) had until March 21 to disclose that fact to the Federal Reserve Bank of New York (faxed disclosures accepted). The repo rate for this particular security as well as others nearby on the curve was acting suspiciously (heavily special).

This wasn’t exactly the time for worry, at least not in the conventional viewpoint. Ben Bernanke’s Fed had acted to growing signs of financial as well as economic trouble in 2012 by restarting QE for a third time that October. The initial launch didn’t seem to have enough impact such that QE3 was supplemented by QE4 (yes, there were four) in late December.

So far as most people were concerned, another flood of “money printing.” Hooray! With the economy seemingly on the mend from a close call, if 2012 had been a false dawn (as Bernanke would eventually write in his sanitized memoir) then surely 2013 would herald the arrival of recovery at long last.

Four times, apparently, was the charm.

But, repo. Something had been amiss in March and while the usual BOND ROUT!!! suspects chalked up the shenanigans to the piles of UST shorts who were surely betting on Bernanke getting it right for once, not even the Fed believed as much. As I documented contemporaneously here, FRBNY under QE4 had been buying up quite a lot of the OTR Treasury supply; stripping the system of the best of the best repo collateral.

Not long after Treasury called for its large position report, almost certainly hoping to point the finger at someone for “shorting” in excess, instead the entity these banks were reporting to, FRBNY, suddenly stopped buying up OTR issues from then on. Funny, huh?

Collateral shortage. Some have called it a safe asset shortage but that isn’t precisely accurate to its inherent nature.

Clearest Signals Of Growing Trouble
Rather than conclude the matter by mid-2013, it was, as these things always are, a sign of things to come. Major imbalances that were merely noticed and then miscategorized. If Euro$ #3 exploded onto the world in the middle of 2014, laying waste to every last chance for worldwide recovery, announcing itself as the oil price crash from then on, the seeds of the debacle were laid, and were visible, in this precursor nastiness the year before.

One of the clearest signals of growing trouble, apart from China and its first SHIBOR summer, was delineated by TIC. The vast majority of people missed the warning simply because they’ve never been taught the proper way to interpret the data (because Economists don’t know, due to the fact they have no idea what happens in the reserve currency system, either).

Foreigners buy US$ assets because they love us, and then sell when they hate us. Or if not us, they hate the dollar. Or something.….more here

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