Courtesy of Nattering Naybob.
At Jeffrey Sniders Review 2011: Not Crisis But Chronic… Salmo Trutta, “the E-$, as Jeffrey Snider guides us, is contracting, as the $’s use as a transactions currency, and as world trade, waxes and wanes.”
We Natter… Salmo’s grossly abridged comment above, is part of a lengthy and deserving opus of which, I can only attempt to compliment his genius.
Due to dollar denominated transaction pervasiveness, 95% oil, 90% Forex, 85% financial (includes derivatives), 63% commodities and 65% of central bank FX reserves, we see the contraction of world trade and petrodollars being the main culprits.
Putting this another way, the $ market share of said contracting global trade fishbowl is not shrinking, it is the overall bowl and number of dollars in it, that is shrinking. Relative to that, as said ongoing global contraction squeezes up $, shifts in the $28T in narrow money; $20T in US debt and $1.4T in actual physical dollars underpinning a $1.5Q global system, will be amplified.
The point is, in a world seemingly awash in dollars, there is no shortage unless you need them. That is why greenbacks are being hoarded globally and the method of “printing” them, through E$ carry trades (JPY/USD), not quite out of thin air or ex nihilo, is at an extreme premium, witnessed by increasingly negative sovereign bond yields and cross currency swap spreads.
With regard to moneyness, a credit based eurodollar, CP or UST has an obligation attached and cannot always be converted at face value, hence the term “hair cut”, while a federal reserve note has no such encumbrance or hindrance. Only the US Treasury can print dollars and they aren’t printing much of any “new” money, despite the urban myths and what many uninformed people assert.
Salmo, Snider and a select few understand, QE is not stimulus, quite the opposite, as $ are not actually being printed. More importantly, QE dynamics, sequester, subvert, divert and pervert investment capital.
These “side effects” reduce the amount being circulated via real economic transaction, arresting transactions velocity and driving the economy into a coma. Evident consequences being, Salmo’s “secular” strangulation, the stagflation from which we suffer, and overall global economic malaise.
Old Nattering about this can be found in…
The Synthetic Matrix, More Dollar Hegemony Part 6, Mr. Big’s Plan and The Bond Junkies Part 1 and Part 2.
