Comments on: The Dollar As A Funding Currency http://fistfulofeuros.net/afoe/the-dollar-as-a-funding-currency/ European Opinion Mon, 13 Feb 2012 07:39:06 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: hot news http://fistfulofeuros.net/afoe/the-dollar-as-a-funding-currency/comment-page-1/#comment-51675 hot news Sun, 23 Oct 2011 21:39:21 +0000 http://fistfulofeuros.net/?p=6465#comment-51675 <strong>hot news...</strong> [...]The Dollar As A Funding Currency | afoe | A Fistful of Euros | European Opinion[...]... hot news…

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]]> By: Are Russia’s Consumers Getting “Carried Away” With Themselves? | afoe | A Fistful of Euros | European Opinion http://fistfulofeuros.net/afoe/the-dollar-as-a-funding-currency/comment-page-1/#comment-27799 Are Russia’s Consumers Getting “Carried Away” With Themselves? | afoe | A Fistful of Euros | European Opinion Thu, 26 Nov 2009 07:29:26 +0000 http://fistfulofeuros.net/?p=6465#comment-27799 [...] a weak dollar. The latest warning in this respect comes not from Nouriel Roubini (or even from me, but see this post, and this recent interview I gave on Forex Blog), rather it emmanates from Germany’s new finance [...] [...] a weak dollar. The latest warning in this respect comes not from Nouriel Roubini (or even from me, but see this post, and this recent interview I gave on Forex Blog), rather it emmanates from Germany’s new finance [...]

]]> By: Sunday Morning « the news links http://fistfulofeuros.net/afoe/the-dollar-as-a-funding-currency/comment-page-1/#comment-27719 Sunday Morning « the news links Sun, 08 Nov 2009 14:22:46 +0000 http://fistfulofeuros.net/?p=6465#comment-27719 [...] The Dollar as a funding currency – A Fistful of Euros [...] [...] The Dollar as a funding currency – A Fistful of Euros [...]

]]> By: Dave http://fistfulofeuros.net/afoe/the-dollar-as-a-funding-currency/comment-page-1/#comment-27717 Dave Sun, 08 Nov 2009 12:45:32 +0000 http://fistfulofeuros.net/?p=6465#comment-27717 Thanks for the analysis. I consider it a brave bet to assume that the Fed will tighten monetary policy sooner than the ECB. As I see it, some of the ECB council members seem to be really uncomfortable with the exceptional measures and will press for an end. Thus I expect that "tightening by stealth", i.e. bringing eonia (0,3%) back to the official policy rate (1%), will start very soon. The dire situation in Spain will not detain the ECB council from arguing that tighter monetary policy is warranted given the "overall" economic conditions in the Eurozone. By contrast, the recent Fed statement with unchanged wording "exceptionally low, extended period" was clear in signalling not to expect any action in the short-term. However, the really interesting questions are those raised by Roubini and Munchau, among others: What kind of new "bubbles", distortions and one way bets have been created and what will the consequences be? Thanks for the analysis.

I consider it a brave bet to assume that the Fed will tighten monetary policy sooner than the ECB. As I see it, some of the ECB council members seem to be really uncomfortable with the exceptional measures and will press for an end. Thus I expect that “tightening by stealth”, i.e. bringing eonia (0,3%) back to the official policy rate (1%), will start very soon. The dire situation in Spain will not detain the ECB council from arguing that tighter monetary policy is warranted given the “overall” economic conditions in the Eurozone.

By contrast, the recent Fed statement with unchanged wording “exceptionally low, extended period” was clear in signalling not to expect any action in the short-term.

However, the really interesting questions are those raised by Roubini and Munchau, among others: What kind of new “bubbles”, distortions and one way bets have been created and what will the consequences be?

]]> By: shah8 http://fistfulofeuros.net/afoe/the-dollar-as-a-funding-currency/comment-page-1/#comment-27713 shah8 Fri, 06 Nov 2009 20:30:31 +0000 http://fistfulofeuros.net/?p=6465#comment-27713 As I see it, the issue is that people have been losing the right to control their financial destinies... Until rentseeking is tamped down, money is going to fail to reach lower end producers and consumers that generate much of the economic activity. I don't think we will see hyperinflation, I think we will see lowered faith in government-constructed norms. I think the chances of serious riots or wildcat strikes to be pretty good in about 2-3 years are good. As I see it, the issue is that people have been losing the right to control their financial destinies…

Until rentseeking is tamped down, money is going to fail to reach lower end producers and consumers that generate much of the economic activity.

I don’t think we will see hyperinflation, I think we will see lowered faith in government-constructed norms. I think the chances of serious riots or wildcat strikes to be pretty good in about 2-3 years are good.

]]> By: Henrik Holleufer http://fistfulofeuros.net/afoe/the-dollar-as-a-funding-currency/comment-page-1/#comment-27708 Henrik Holleufer Fri, 06 Nov 2009 10:05:49 +0000 http://fistfulofeuros.net/?p=6465#comment-27708 What an excellent and balanced piece, Edward. On the subject of exit strategies I recently read a very interesting piece from GAVEKAL, where they suggest a very innovative path the FED could take: Now that the FED has brought forward their paying of interest on deposits, which was supposed to have happened next year, it opens up for a possible change to the clearing system in US. Up to now the commercial banks have excelled in keeping as little liquidity available as possible for their clearing purposes, because they were paid no interest on excess reserves in their clearing accounts, and because they could avail themselves of FED's daylight lending facility, which is very cheap (as opposed to the o/n facility, which is expensive). GAVEKAL's idea is that FED could close the daylight window, which would accomplish two main things. 1. FED would no longer have large unsecured exposure on commercial banks through the window, and 2. the commercial banks would have to keep much more money in their clearing accounts. This would create a much greater need for liquidity in the system, but this is not problematic for the commercial banks, because they now earn interest on excess funds. All things being equal this would also increase the systemic holding of T-bills, since they can easily be used to raise funds through REPO's if required. So in other words FED would create a much larger need for both money and T-bills in the clearing system, and therefore the rolling back of excess liquidity would be much easier. What an excellent and balanced piece, Edward. On the subject of exit strategies I recently read a very interesting piece from GAVEKAL, where they suggest a very innovative path the FED could take: Now that the FED has brought forward their paying of interest on deposits, which was supposed to have happened next year, it opens up for a possible change to the clearing system in US. Up to now the commercial banks have excelled in keeping as little liquidity available as possible for their clearing purposes, because they were paid no interest on excess reserves in their clearing accounts, and because they could avail themselves of FED’s daylight lending facility, which is very cheap (as opposed to the o/n facility, which is expensive). GAVEKAL’s idea is that FED could close the daylight window, which would accomplish two main things. 1. FED would no longer have large unsecured exposure on commercial banks through the window, and 2. the commercial banks would have to keep much more money in their clearing accounts. This would create a much greater need for liquidity in the system, but this is not problematic for the commercial banks, because they now earn interest on excess funds. All things being equal this would also increase the systemic holding of T-bills, since they can easily be used to raise funds through REPO’s if required. So in other words FED would create a much larger need for both money and T-bills in the clearing system, and therefore the rolling back of excess liquidity would be much easier.

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