Submitted by Tyler Durden on 12/14/2011 - 08:16
As noted two weeks ago when predicting the efficiency and duration of the latest global coordinated USD liquidity injection, we had a sinking feeling the Fed action would have a very brief time span. Sure enough, judging by the action in two critical FX liquidity indicators - the 3M and 1 Y basis swap indicators, the dollar shortage is baaaaack... only this time, very paradoxically, with implied infinite backstopping from the Fed: if even that factor no longer has an influence on the market's perception of liquidity risk we are in very deep trouble. Which of course is to be expected: the gross synthetic dollar short back in 2007 was $6.5 trillion. Add a few years of ZIRP to this, where the USD is also the funding currency of the world, and one can see why the global USD short position currently is in the double digit trillions. So just how will the Fed backstop $10+ trillion in explicit USD shorts? We can't wait to find out.
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chart and more,,,,,,,,,,,,,,
http://www.zerohedge.com/news/rip-fed-dollar-swap-intervention-central-bank-liquidity-injection-half-life-two-weeks
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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