Home » Posts tagged 'dollar shortage'
Tag Archives: dollar shortage
The Global Dollar Shortage is Here – And It’s Becoming A Big Problem
The Global Dollar Shortage is Here – And It’s Becoming A Big Problem
Another week and another signal flashing red to deal with. . .
The credit market – in my opinion – is indicating an inevitable ‘crunch’ coming up. And even worse – we’re seeing the global dollar shortage deepening.
Many readers know I haven’t exactly been shy about focusing on this dollar shortage problem all year – you can read more here, and here.
Personally – I think this may be the trigger that kicks off a brutal, worldwide, financial crisis. . .
For instance – just look at what’s happened with Emerging Markets because of a tightening Federal Reserve, a stronger dollar, and drying liquidity.
Don’t forget – a dollar shortage is synonymous with disappearing liquidity. Which means we can expect more violent and sudden market crashes to occur – just like we saw last over the last two weeks.
Stock markets (and bond markets) around the world took big losses. The only thing that really outperformed was gold.
The fear of rising ‘real’ U.S. interest rates and slowing economic growth (especially from China) is making investors rethink their positions.
Not to mention the cost of borrowing short-term dollars via LIBOR (aka London Interbank Offered Rate) is indicating aggressive financial tightening.
Take a look at the 3-month U.S. dollar LIBOR rate – it just had its biggest one day jump since late May.
And even more startling – it’s now at its highest level since 2008.
So what does this mean?
Well – it’s indicating that the short-term borrowing of dollar denominated debt’s getting very expensive. And investors – especially overseas – are finding it harder and costlier to get their hands-on U.S. dollars.
This isn’t a big surprise – but what’s making me worried is just how costly and scarce these dollars are becoming. . .
Corporations worldwide borrowing dollars for business operations. And even ordinary citizens with mortgages and credit cards (which are mostly driven by LIBOR) will face higher interest payments.
…click on the above link to read the rest of the article…
‘Ground Zero’ – Will The Dollar Shortage Kick Off The Next Financial Crisis?
‘Ground Zero’ – Will The Dollar Shortage Kick Off The Next Financial Crisis?
There’s an old saying.
“You can’t fight the dollar.”
And what this means is: because the world’s chained to the U.S. dollar (thanks to its reserve status) – everyone’s constantly affected by whichever way the dollar’s value goes.
If the dollar declines – then the foreign economies and currencies get a boost from an inflow of capital.
But if the dollar rises – then the opposite happens. Foreign economies and their currencies sink.
You can understand why, then, so many countries today are peeved with the Federal Reserve’s tightening. They’re all suffering the unintended consequences of a stronger dollar.
I’ve written about this problem before. . .
Foreign Central Banks from all over the world – such as Argentina, India, Vietnam, Indonesia, and many more – are all defending their own local currencies against a stronger dollar.
Those that borrowed trillions of dollars are exposed here. A rising dollar against their own falling local currencies creates a mismatch between liabilities (the rising U.S. dollar). And assets (their own weakening currencies).
Also keep in mind that as rates rise, the dollar-indebted foreign corporations and banks are all feeling the pain of increased borrowing costs.
For instance – I wrote last week that onshore bond defaults in China just hit a record high as liquidity gets tighter. . .
That’s why today – as U.S. interest rates rise (especially as of late hitting a seven-year high). And the dollar gets stronger – the global cost of capital keeps getting more expensive.
Thus – putting it simply – overseas investors and corporations are finding it increasingly difficult and costlier to get their hands on dollars.
And yet – so far – the market doesn’t realize just how costly and scarce U.S. dollars are becoming. . .
…click on the above link to read the rest of the article…
The Dollar Shortage & China’s Bond Selling Are About To Corner the Fed
The Dollar Shortage & China’s Bond Selling Are About To Corner the Fed
Earlier this week – news went by relatively unnoticed by the ‘mainstream’ financial media (CNCB and such) that Beijing’s started selling their U.S. debt holdings.
Putting it another way – they’re dumping U.S. bonds. . .
“China’s ownership of U.S. bonds, bills and notes slipped to $1.17 trillion, the lowest level since January and down from $1.18 trillion in June.”
Remember – dumping U.S. debt is China’s nuclear option (which I wrote about back in April – click here to read if you missed it).
And although they’re starting to sell U.S. bonds – expect it to be at a slow and steady pace. They don’t want to risk hurting themselves over this.
I believe China may be selling just enough to get the attention of Trump and the Treasury. A soft warning for them not to take things too far with tariffs and trade.
Yet already just as news hit the wire that China was selling bonds a few days ago – U.S. yields spiked above 3%. . .
Don’t forget that China’s the U.S.’s largest foreign creditor. And this is an asset for them.
And although them selling is worrisome – the real problems started months ago. . .
Over the last few months, my macro research and articles are all finally coming together. This thesis we had is finally taking shape in the real world.
I wrote in a detailed piece a few months back that foreigners just aren’t lending to the U.S. as much anymore (you can read that here).
I called this the ‘silent problem’. . .
Long story short: the U.S. is running huge deficits. They haven’t been this big since the Great Financial Recession of 08.
And it shouldn’t come as a surprise to many.
Because of Trump’s tax cuts, there’s less government revenue coming in. And that means the increased military spending and other Federal spending has to be paid for on someone else’s tab.
…click on the above link to read the rest of the article…
The Anatomy of a Crisis: A Strong Dollar and Disappearing Liquidity
The Anatomy of a Crisis: A Strong Dollar and Disappearing Liquidity
Since March – the dollar’s rallied over 7%. And it’s caused the Emerging Markets to implode.
But the bigger problem is what lies ahead.
And that’s a global dollar shortage – which the mainstream continues to ignore. . .
I’ve touched on this a couple months back. Wondering when the mainstream would start to realize that the stronger the dollar gets – the more pressure global economies will feel.
I wrote. . . “This is going to cause an evaporation of dollar liquidity – making the markets extremely fragile. Putting it simply – the soaring U.S. deficit requires an even greater amount dollars from foreigners to fund the U.S. Treasury. But if the Fed is shrinking their balance sheet, that means the bonds they’re selling to banks are sucking dollars out of the economy (the reverse of Quantitative Easing which was injecting dollars into the economy). This is creating a shortage of U.S. dollars – the world’s reserve currency – therefore affecting every global economy.”
Since then, things have only gotten worse. . .
First: Jerome Powell – the Fed Chairman – issued a statement at the end of June that they would actually increase the amount of rate hikes over the next two years. This means they’re tightening even faster.
Second: the U.S. Treasury increased their debt-borrowing needs to the highest since the financial crisis – which was over a decade ago. Therefore, they will need even more dollars to fund their spending.
“The department expects to issue $329 billion in net marketable debt from July through September, the fourth-largest total for that quarter on record and higher than the $273 billion estimated in April [a 17% increase], the Treasury said in a report Monday. The department’s forecast for the October-December quarter is $440 billion, bringing the second-half borrowing estimate to $769 billion, the highest since $1.1 trillion in July-December 2008…”
…click on the above link to read the rest of the article…
