Jump to content
RikkiTikki

Liquidity, Liquidity, where for art thou??

Recommended Posts

The corona virus scare and subsequent infections will likely hurt economies at all levels, from local to global, so it stands to reason that in hard global economic times with job losses and more deaths involved, people would generally start selling off unnecessary or useless-for-survival assets in order to acquire money to spend for items for prolonged survival and self-reliance during these periods of a sustained economic downturn, and they would generally move out from costly, highly regulated, bureaucratic areas like big cities to pockets of much less densely populated and smaller communites, like small farming towns, with wide spaces between people, and land for self-sufficiency, and less costly living standard, basically, less government.  One of these unnecessary depreciative assets people could be forced to sell is cryptos because they are easy to liquidate for money, are still extremely volatile, and are strongly positively correlated with global economic downturns as we have seen recently; i.e., crypto and fiat values tend to move in the same direction with respect to global economic downturns, and there would be crypto-exchange runs if things got really bad before bank runs, particularly with a weak, prolonged economic downturn causing more critical crypto infrastructure like crypto-to-fiat exchanges to eventually shut down since cryptos are a fragile, budding niche with lacking federal protections and plenty of increasing federal hindrances, unlike banks.  I think cryptos are the future, whether the tech is destroyed in the short term by the strongest governments, so they can hoard it for themselves, or it remains confined to hardcore enthusiasts' niche, particularly gamblers, like crypto traders, but the strongest governments are not willing to concede such economic power to their own people, so that governments have less control and say over their own people.  Governments are like captains of ships - they are the last to go down with the ship, but in this ship the captain only goes down after most of the passengers have drowned. 

Share this post


Link to post
Share on other sites
16 hours ago, KarmaCoverage said:

@Wandering_Dog I see your point. Do you have a specific financial product in mind? or a list?

Yeah, anything that isn't USD_reserves. It's a big list, this is not a joke. 

Looks like US unemployment just went from 4 million to ~20 million in >7 days. If you don't have cash at home, go get some ($1k). Short sellers with in the money positions that have further future upside are still cashing out, even though they know there is further upside--that's not a good signal. The bank failures will start soon. Good luck folks.   

Share this post


Link to post
Share on other sites
On 3/17/2020 at 10:08 PM, xerxesramesepolybius said:

Ramping up liquidity costs Ripple both XRP and USD. They had to invest (in dollars) in both Moneygram and Bitso to get the mexican corridor up and running, give the software away for free and subsidise the ongoing usage of ODL using XRP. I wonder how much the need to do these types of things slow down the growth of liquidity? 

So this is maybe the explanation why we haven't seen new corridors open up this year? I have been wondering why it is so slow. You keep hearing that it's du to regulation issues. But what hinders a USD-THB, USD-KRW or USD-BRL corridor? I haven't heard about any legislation preventing this. And Ripple as always don't say a word ...

Share this post


Link to post
Share on other sites
Posted (edited)
6 hours ago, Wandering_Dog said:

Yeah, anything that isn't USD_reserves. It's a big list, this is not a joke. 

Looks like US unemployment just went from 4 million to ~20 million in >7 days. If you don't have cash at home, go get some ($1k). Short sellers with in the money positions that have further future upside are still cashing out, even though they know there is further upside--that's not a good signal. The bank failures will start soon. Good luck folks.   

I'm not quite that pessimistic, but there is no way the world economy isn't in the process of getting punched, some watery eyes, and a bloody nose.

@Wandering_Dog Where are you getting the data on the short sellers? There are definitely still profits on the short trading. 

For the first time, I heard yesterday from a borrower that her bank offered to move the next 3 mortgage payments to the backend of the loan.

I think that would be an effective strategy for moving the liquidity buffers the banks have on their balance sheets to the house holders who will be experiencing a liquidity crisis, and on top of that... it doesn't require any politicians to peacock for their brand, they can just stay out of it. (At least regarding this single type of liquidity stimulus, they are going to have to put their fancy feathers down, and actually do something at some point)

Here is Ray Dalio's thoughts.

Edited by KarmaCoverage

Share this post


Link to post
Share on other sites
2 hours ago, RippleRicky said:

Has anyone seen this yet?

 

Singapore and Ripple are pretty tight aren't they? Could this potentially be the public intro...I'm just speculating.

 

https://www.straitstimes.com/business/economy/mas-sets-up-us60-billion-swap-facility-with-us-fed

Looks like a direct Swap line between governments. Don't see any mention of Ripple there.

Share this post


Link to post
Share on other sites
Posted (edited)
On 3/19/2020 at 11:49 AM, Wandering_Dog said:

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...

...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.  

I agreed with Ackman's comments - although he has been known to be very wrong in the past. In yesterday's interview, he seemed to be under the impression that the current issues are merely Coronavirus-related(!), and even went so far as to say the economy was in fantastic shape before all of this. Odd.

The UK just announced the enforced closure of all cafes, pubs, bars restaurant and gyms. I wonder how many of those will ever reopen. 20%? 10%?  My main concern is actually ISPs or mobile phone companies. If people are isolated and cannot access the internet or make a phone call, then...

Some in this thread have asked about the rush into dollars. This is primarily due to what amounts to a (roughly speaking) $12trn margin call. Since 2008, most of the money used to save the failing plethora of otherwise-bankrupt corporations comprised loans in USD. Now, lots of that money has just gone up in smoke, and they still have to honour repayment schedules. 

The Fed is trying to ease this situation with interest rate cuts, Repo and swap facilities. Still, we will likely have several periods to come where - between the impending QE4, QE5, QE6, QE7 and other QE-like actions - the USD just skyrockets upwards as people scramble to ensure they have enough dollars to repay their debt. 

That is, until the sheer amount of USD being printed causes a loss of trust and devalues the dollar entirely, prompting a huuuuuge reversal / rush out of USD into...

Edited by JA8

Share this post


Link to post
Share on other sites
1 hour ago, JA8 said:

That is, until the sheer amount of USD being printed causes a loss of trust and devalues the dollar entirely, prompting a huuuuuge reversal / rush out of USD into...

The Chinese Yuan?

Share this post


Link to post
Share on other sites
Posted (edited)
6 hours ago, Archbob said:

Looks like a direct Swap line between governments. Don't see any mention of Ripple there.

Am I wrong, or does this look to me like the US Fed is enabling other CBs to expand the USD money supply? Albeit for a limited time period of the swap?

Edited by KarmaCoverage

Share this post


Link to post
Share on other sites

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 distressed assets (e.g. High yield bonds) that were bid up in good times by people in search for any yield at all, due to central Bank QE policies that sent pretty much destroyed yields and caused ZIRP/NIRP, destroying in particular pension funds. If you introduced XRP as an intermediary bridge asset in the transaction, how would this benefit demand for that assert? It is still absolute dog**** that no one wants as they know it will default, thus the bids disappear from the orderbook, causing illiquidity. 

 

Where XRP does show promise is in obscure  currency pairs by replacing USD and compressing the amount of different pairs that EM currency trades into, thus allowing access to a higher number of bids in a single order book rather than them being scattered across several different currency pairs, thus in theory raising liquidity. 

Share this post


Link to post
Share on other sites
16 hours ago, KarmaCoverage said:

Am I wrong, or does this look to me like the US Fed is enabling other CBs to expand the USD money supply? Albeit for a limited time period of the swap?

Yes and no. The money supply was already expanded by entities without accounts at the US Fed. And, there isn't enough reserve dollars or non US dollars to buy those dollar denominated debts. So the Fed lets other CBs create them to purchase those assets that people need to sell but cant. 

Share this post


Link to post
Share on other sites
4 hours ago, Wandering_Dog said:

Yes and no. The money supply was already expanded by entities without accounts at the US Fed. And, there isn't enough reserve dollars or non US dollars to buy those dollar denominated debts. So the Fed lets other CBs create them to purchase those assets that people need to sell but cant. 

I've never heard of this happening like this, or for this purpose. Are you knowledgeable about the history/usage of inter-CB SWAPs?

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...