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Liquidity, Liquidity, where for art thou??


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Just throwing this out there, do you think Ripple should amp up it's push of XRP to further show it's superiority in providing liquidity in these times?? I mean if ever there was a moment to grab the bull by the horns this is it.  I know regulation is in the albatross in the room but a little leap of faith wouldn't hurt right now especially since there talking the possibility of this lasting into the late summer in the states.

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@Wandering_Dog nailed this one... The economy has been running like a camp fire with some idiot pouring gasoline on it. Sure it flamed up, but at 0% the gasoline is now empty. So we will w

I wish people stopped trying to plug ripple every time some entity mentions liquidity issues, it just showcases their lack of financial understanding.  The issue right now is a lack of demand on

Off the top of my head: war. You close your business, you hide in a hole. The only problem is the financial system isn't shut, so I think the simplest analogy presented thus far that gets it right (fr

1 hour ago, RikkiTikki said:

Just throwing this out there, do you think Ripple should amp up it's push of XRP to further show it's superiority in providing liquidity in these times?? I mean if ever there was a moment to grab the bull by the horns this is it.  I know regulation is in the albatross in the room but a little leap of faith wouldn't hurt right now especially since there talking the possibility of this lasting into the late summer in the states.

This question assumes they are not already.  What leap of faith are you envisioning?  They seem to be engaged in all of the highest volume, sticky currency corridors.  

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15 hours ago, RikkiTikki said:

Just throwing this out there, do you think Ripple should amp up it's push of XRP to further show it's superiority in providing liquidity in these times?? I mean if ever there was a moment to grab the bull by the horns this is it.  I know regulation is in the albatross in the room but a little leap of faith wouldn't hurt right now especially since there talking the possibility of this lasting into the late summer in the states.

By definition, you cannot provide liquidity with an asset of fixed supply and no governing authority. This means the concept you are describing, giving accounts the purchasing power to clear markets during times when accounts have no reason to buy, is impossible. Not a tough concept. Fixed supply assets don't do liquidity over any significant time horizon. 

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That's because everyone is hoarding dollars. This at its root is a corona virus problem, not a liquidity problem. As soon as you find a cure, people will stop freaking out and liquidity in London hub will return.

Any amount of USD you release right now would be dried up pretty fast because no one wants to trade.

Edited by Archbob
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7 hours ago, Archbob said:

That's because everyone is hoarding dollars. This at its root is a corona virus problem, not a liquidity problem. As soon as you find a cure, people will stop freaking out and liquidity in London hub will return.

Any amount of USD you release right now would be dried up pretty fast because no one wants to trade.

No, the crisis would have happened with or without the virus. Its just happening faster now.

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48 minutes ago, Wandering_Dog said:

No, the crisis would have happened with or without the virus. Its just happening faster now.

No, it really wouldn't have. People wouldn't be trying to hoard USD if there weren't a crisis. People are trying to cash out to buy supplies and also people are being laid off they they want to withdraw cash. None of this happens without a crisis.

Edited by Archbob
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I can't imagine people still want to hoard USD, while so incredibly much QE by the government(s) these days. I would say these are the last contractions of the USD as the world reserve currency, but that's probably overly dramatic and as usual will turn out to be not true  

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22 hours ago, Wandering_Dog said:

By definition, you cannot provide liquidity with an asset of fixed supply and no governing authority. This means the concept you are describing, giving accounts the purchasing power to clear markets during times when accounts have no reason to buy, is impossible. Not a tough concept. Fixed supply assets don't do liquidity over any significant time horizon. 

Time will prove you wrong.

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12 hours ago, Archbob said:

That's because everyone is hoarding dollars. This at its root is a corona virus problem, not a liquidity problem. As soon as you find a cure, people will stop freaking out and liquidity in London hub will return.

Any amount of USD you release right now would be dried up pretty fast because no one wants to trade.

@Wandering_Dog nailed this one...

5 hours ago, Wandering_Dog said:

No, the crisis would have happened with or without the virus. Its just happening faster now.

The economy has been running like a camp fire with some idiot pouring gasoline on it. Sure it flamed up, but at 0% the gasoline is now empty.

So we will watch as the gasoline burns off, and see if the fire is structurally bigger/hotter/better, or if it is just the same except for the fact that we are out of gasoline now?

Frankly I'm surprised that it took so long for a correction to begin. Corona virus is just the excuse. The big boys have been slowly pulling out over the past 2 years.

What is interesting about this virus situation, is that in contrast to the '08 financial crisis which was when the banking institutions that experienced a liquidity crisis, and we did TARP stimulus for "Wallstreet".

With this virus and local businesses closing, we are going to see a liquidity crisis on "Mainstreet". Which is the reason I think people are floating (pun intended) the idea of giving every household $X000. Which would put the stimulus where the liquidity problems will be.

@Wandering_Dog is there an historical comparison of a "Mainstreet liquidity crisis"? I'm thinking the great depression, but I dont know euro economic history well. By "Mainstreet" I mean households,  not SMEs. 

I already know some servers and bartenders who are adding up how many months their savings can last. The biggest number I've heard is 3 months, the lowest is "I cant not work, I have to pay rent".

Edited by KarmaCoverage
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Off the top of my head: war. You close your business, you hide in a hole. The only problem is the financial system isn't shut, so I think the simplest analogy presented thus far that gets it right (from POS Summers) is that economic time has stopped but financial time is still running. The next analogy that best captures the situation is from Ackman yesterday, that a tsunami is coming, we are watching the water slowly recede, and in a few months all financial assets will be destroyed by the largest wave of defaults in history. The CB's will have is to backstop every asset on Earth, they will absorb the market. Unless, the gov's cut checks for everyone, but it may already be too late. Just FYI, the virus is not that bad (its bad if you're old)--what's bad is that payments have stopped, money markets have frozen, and we have created a large opaque out of reach section of the financial system that actually creates the majority of our money--all in order to circumvent 0% interest rates, which has created an ocean of complex instruments held by poorly connected balance sheets. So on top of a normal end of credit cycle liquidity crunch, you have a nightmarish behemoth of payment obligations spread out in a way that CBs can't get to as well as they normally could, compounded by B3, D-F etc restrictions on connecting balances sheets and short term funding. This is why with FX swap lines open, standing CP facility, QE and CB repo all going simultaneously, they still aren't getting cash to balance sheets that need it.   

As you mention, this will be as bad and potentially worse than the great depression. The data is currently implying worse than 1929 wrt financial assets. Keep in mind we'll see all hotel on Earth bankrupt by the end of the month, all airlines, most restaurants, huge swaths of the service sector will disappear this month, as though they just got carpet bombed.  

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@Wandering_Dog what do you mean by "complex instruments" and "poorly connected balance sheets"?

I've already heard through the grapevine that a restaurant (beach front next to a pier) which just rebuilt and reopened, is getting crushed by the debt service, and will have to file bankruptcy. While not fully due to this virus, I can walk by and see an empty parking lot.

I do think the economic impacts will hopefully be worse than the health impacts, as the societal level. I'd rather have dead balance sheets, than dead bodies.

Edited by KarmaCoverage
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If rates are 0, but you need 7 to make retirement, someone goes out and creates an instrument that gets 7. They pull together lots of various instruments and package them together. They fund these instruments from multiple sources as they have to continually rebuild them over time to meet the required characteristics and the restrictions to who can hold which types of instruments, who can fund short term, and who has been pushed via regulation out of certain funding sources. So Junko-san, random bloke in Japan, buys something similar to an annuity with a return of 7% in order to get through retirement. But, that instrument is actually a bundle of put and call sales plus put and call purchases in multiple assets and multiple currencies in multiple legal jurisdictions and through multiple intermediaries. When each of those financiers faces balance sheet issues because of payments, the assets they've created are at risk--and when CBs need to get a payment to a particular party to prevent fire-sales of positions underlying part of that mess, none of them are account holders at the CB, and many of them face restrictions about which type of short term funding won't further exacerbate their regulatory requirements. 

 

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