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RED ALERT: FX Dislocation In Process
Market Ticker ^ | 2-16-2009 | Karl Denninger

Posted on 02/16/2009 7:47:40 PM PST by dangermouse

8:17 CT

I do not know what is going on here, and I don't think I want to.

Someone, apparently someone in Asia, wants dollars. A LOT of dollars. There is a forced-liquidation event underway that is massive, it is against all asset classes and it is spreading.

It originated at approximately 7:15 CT this evening and originated out of Asia somewhere. All of the primary currency crosses got hit at once - Euro, Pound, Yen - all weakened dramatically against the dollar and it is still going on. The Asian stock markets got walloped at the same time in coordinated waves of forced selling.

At the same time the US futures markets got nailed as well, down some six handles on the /ES in a near-vertical drop. While this sounds "not that big" to move these markets in a coordinated fashion like this is a trillion-dollar enterprise - this is not some small company that went bankrupt, or even a large company.

There is no news coverage at the present time identifying the source of this but it is not small and contrary to some reports it is not "automatic selling"; this is forced liquidation.

Folks, if this translates into Eastern Europe where there are severe instabilities already brewing literally everything in the financial world could come apart "all at once."

The worse news is that if this happens Bernanke will have killed us (in the US) by extending those swap lines all over the planet during the last six months. These will become utterly uncollectable and they are massive, in the many hundreds of billions of dollars.

To those who are reading this, I hope if you're in the markets you are prepared for extreme levels of violence. You must expect that the authorities will try to arrest the destruction if they are able, but you must also be prepared for the possibility that we have reached a "critical mass" point beyond which "duck and cover" is the only winning strategy.

Unfortunately.

I hope I'm wrong; this is going to be a long night.


TOPICS: Business/Economy; Foreign Affairs; Japan; News/Current Events
KEYWORDS: asia; currency; denninger; dollar; economy; tm; yen
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I don't know too much about FOREX, but Karl seems to know what he's talking about most of the time.
1 posted on 02/16/2009 7:47:40 PM PST by dangermouse
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To: dangermouse; TigerLikesRooster

Ping for your input.


2 posted on 02/16/2009 7:48:59 PM PST by Jet Jaguar (Atlas Shrugged Mode: ON)
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To: dangermouse

Yikes!

I have no idea what all this means but I sorta read: BAD BAD BAD


3 posted on 02/16/2009 7:49:01 PM PST by freedumb2003 (Communism comes to America: 1/20/2009. Keep your powder dry, folks.)
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To: dangermouse

I agree ! What is up with the nuclear bomb montage?


4 posted on 02/16/2009 7:49:51 PM PST by free from tyranny
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To: Squantos

ping!


5 posted on 02/16/2009 7:50:32 PM PST by hiredhand (Understand the CRA and why we're facing economic collapse - see my about page.)
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To: dangermouse
Link to a discussion forum on this topic:

http://www.tickerforum.org/cgi-ticker/akcs-www?post=83465

6 posted on 02/16/2009 7:50:44 PM PST by FReepaholic (Diversity = .45 .357 .223 .38 ...)
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To: dangermouse

Welcome to flights to quality...and deflation.


7 posted on 02/16/2009 7:51:17 PM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: dangermouse

Just posted it on this thread:

http://www.freerepublic.com/focus/news/2187175/posts?page=34


8 posted on 02/16/2009 7:51:29 PM PST by Quix (POL BOSSES say fm1900 2 presnt: http://www.freerepublic.com/focus/religion/2130557/posts?page=81#81)
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To: dangermouse

U.S. Futures heading way down. Gold and Silver up big... something is going on. Thanks for the info.


9 posted on 02/16/2009 7:53:54 PM PST by Sleeping Freeper
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To: dangermouse

Would you mind putting this extremely bad news in layman’s language so we can understand?


10 posted on 02/16/2009 7:54:18 PM PST by PhiKapMom ( BOOMER SOONER! Sam Bradford Heisman! LetsGetThisRight.com RED STATE Oklahoma Republican)
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To: All

http://www.freerepublic.com/focus/chat/2136635/posts
“Are you looking for a job?”

Note: This thread is updated on a regular basis.


11 posted on 02/16/2009 7:55:29 PM PST by Cindy
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To: dangermouse

One thing that is going on in Asia is the buggest run on a currency in history - the Ruble.

Another is almost $2 trillion in short term debt to Western Europe from West Asia and Eastern Europe and its really not clear they can pay.

This will put some large European banks and even countries at risk.

Gonna be a heck of a ride and the U.S. is better off than most others. Thus the flight to dollars.


12 posted on 02/16/2009 7:55:31 PM PST by gondramB (Preach the Gospel at all times, and when necessary, use words.)
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To: dangermouse

Oh, come on. Obama and the Democrats eat “hundreds of billions” of dollars for breakfast. Trillion is no longer a insurmountable sum. Have no fear, the Obamassiah’s gonna save us.


13 posted on 02/16/2009 7:55:35 PM PST by Jim Robinson
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To: LucyT

ping


14 posted on 02/16/2009 7:55:38 PM PST by Velveeta
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To: hiredhand; Travis McGee

Got it......damn !


15 posted on 02/16/2009 7:55:49 PM PST by Squantos (Be polite. Be professional. But have a plan to kill everyone you meet)
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To: dangermouse

From what I understand, Poland is about to default on debt. Same with Ireland. The Euro is tanking on this news, dollar soaring, temporarily at least. Big worry is that counterparty risk through derivatives will cause the defaults in Europe to “jump the pond” and the whole ball of wax starts melting down.


16 posted on 02/16/2009 7:57:00 PM PST by jsh3180
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To: dangermouse

Yikes bump for look tomorrow morning!


17 posted on 02/16/2009 7:57:30 PM PST by bushwon
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To: dangermouse
Streaming FOREX rates

http://www.fxstreet.com/rates-charts/forex-rates/

EURO dropping fast
18 posted on 02/16/2009 7:57:57 PM PST by HangnJudge
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To: dangermouse

Korea Bank Funding Costs Rise to Record on Woori Woes (Update1)

http://www.bloomberg.com/apps/news?pid=20601080&sid=asIynTA6wD48&refer=asia


19 posted on 02/16/2009 7:58:06 PM PST by Jet Jaguar (Atlas Shrugged Mode: ON)
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To: dangermouse

Soros?


20 posted on 02/16/2009 7:58:15 PM PST by Anti-Bubba182
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To: jsh3180

So when does the rioting and looting start?


21 posted on 02/16/2009 7:58:22 PM PST by randomhero97 ("First you want to kill me, now you want to kiss me. Blow!" - Ash)
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To: Jim Robinson

Oh the sweet irony if the world markets completely tank on Zero’s Signing Day.


22 posted on 02/16/2009 7:58:35 PM PST by thecabal (Keep The Change)
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To: dangermouse; All

I’m not so sure it’s a panic level movement.

EURUSD is down 150 pips. USDJPY is up 100. GBPUSD is down 100. USDCAD up 70. AUDUSD down 70.

There’s definitely some buying going on. But if you only go back a little while on the chart, say, the 11th of Jan, you find a 400 pip drop on the EURUSD within 2 hours.

And, the ES futures, while down a bit (10pts), are not signaling anything out of the ordinary at this time.


23 posted on 02/16/2009 7:58:44 PM PST by farlander (Sic Semper Tyrannis)
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To: Sleeping Freeper

I could feel this coming...IMO it is tied to Obama signing that cursed bailout bill in Colorado tomorrow.


24 posted on 02/16/2009 7:58:48 PM PST by madison10
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To: dangermouse
I am an amateur here. Does this mean currency insolvency?
25 posted on 02/16/2009 8:00:21 PM PST by aliquando (A Scout is T, L, H, F, C, K, O, C, T, B, C, and R.)
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To: PhiKapMom

I agree, layman’s language would be great.
I’m feeling like I should panic - but I don’t know why. ;-)


26 posted on 02/16/2009 8:01:21 PM PST by Velveeta
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To: nnn0jeh

Can you watch this overnight?


27 posted on 02/16/2009 8:01:31 PM PST by kalee (01/20/13 The end of an error.... Obama even worse than Carter.)
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To: aliquando

bump for later


28 posted on 02/16/2009 8:02:24 PM PST by goodnesswins (Conservative and fighting for freedom and liberty....whether you like it or not.)
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To: dangermouse; All; sickoflibs; rabscuttle385; NormsRevenge; Grampa Dave; SierraWasp; Marine_Uncle; ..

Alert ping!


29 posted on 02/16/2009 8:02:27 PM PST by Ernest_at_the_Beach (No Burkas for my Grandaughters!)
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To: dangermouse

We’ll all be poor together.


30 posted on 02/16/2009 8:02:43 PM PST by divine_moment_of_facts
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To: aliquando

It doesn’t mean ANYTHING. Someone is buying some USD. Big deal. If anyone was going to be running around with their hair on fire I think a few days in Oct and Dec would have been it. There’s NOTHING here I can see that is catastrophic or out of the ordinary. The S&P500 futures are down a bit but nothing to signal any kind of a market meltdown. And trust me, Oct-Nov-Dec-Jan I’ve seen plenty of things that would make your hair stand up.


31 posted on 02/16/2009 8:03:49 PM PST by farlander (Sic Semper Tyrannis)
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To: Ernest_at_the_Beach

"Here we go!"

32 posted on 02/16/2009 8:03:55 PM PST by Diogenesis (Quis custodiet ipsos custodes?)
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To: dangermouse

I have a house in the mountains...really just a shed ....Should I start packing?


33 posted on 02/16/2009 8:03:58 PM PST by Dallas59 ("You know the one with the big ears? He might be yours, but he ain't my president.")
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To: Velveeta

here’s more here from just a few minutes ago:
______________________________________________
Things in Eastern Europe are going from bad to worse and are dragging neighboring countries into the hole. Moody’s just announced that Austrian, Swedish and other banks with Eastern European subsidiaries may face rating downgrades due to deteriorating economic conditions.

East European banks, which are mainly subsidiaries of financial institutions such as Raiffeisen Zentralbank Oesterreich AG and Swedbank AB, are likely to come under “downward pressure” which may also weaken their parent companies, Moody’s wrote in a report released today in London.

Zero Hedge previously discussed the extensive exposure that banks have in Eastern Europe, which according to estimates could amount to a total of €1.3 trillion. Banks from Austria, Italy, France, Belgium, Germany and Sweden account for 84% of Western European bank loans in Eastern Europe.

According to Bloomberg, “the downturn in eastern Europe will be more severe as a consequence of many countries’ dependence” on capital flows from west Europe banks, Moody’s analysts led by Reynold Leegerstee wrote in the report.
Of European countries, Austria is by far the most threatened:

Austria, whose banking system is “most exposed” to central and eastern Europe, has two of the biggest lenders in the region. RZB made 79 percent of its 2007 pretax profits in eastern Europe, including Russia and Ukraine through its Raiffeisen International Bank Holding AG unit, and Erste Group Bank AG earned 65 percent of its pretax profits in countries including Romania, the Czech Republic and Slovakia.

Erste, which said last week that full-year profit probably slumped about 26 percent, is in talks with the Austrian government to get 2.7 billion euros ($3.4 billion) in state aid. RZB, which owns a 69 percent stake in Raiffeisen International, which is active in 18 eastern European countries, is also in talks with the Austrian state and has asked for 1.75 billion euros.

It has been foolish to assume that the convergence that “Western” and “Eastern” European countries have been undergoing over the past 20 years, could be hidden under the rug to prevent all the ugly side effects of convergence from spilling over (LTCM deja vu anyone? yes, it is a stretch, but oddly ironic nonetheless). This is merely yet another glaring example of what happens when all the good things about globalization, that conventional wisdom takes for granted, go terribly wrong.


34 posted on 02/16/2009 8:04:15 PM PST by jsh3180
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To: Velveeta

I thought maybe it was me but after reading it twice, I figured I would ask. Like you I felt I should panic but didn’t have a clue why either!


35 posted on 02/16/2009 8:04:17 PM PST by PhiKapMom ( BOOMER SOONER! Sam Bradford Heisman! LetsGetThisRight.com RED STATE Oklahoma Republican)
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To: PhiKapMom

It’s just that holders of other currencies are panicking into US dollars tonight.

Euro gapped down and kept falling.

Whether it is bad news or not depends on your book.

The move may be temporary and overdone anyway — has happened several times lately.

We’ll have to see if the Dollar double tops around 88. Not far to go.


36 posted on 02/16/2009 8:04:19 PM PST by steve86 (Acerbic by nature, not nurture)
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To: PhiKapMom

As best I am able to tell, downgrades pertaining to Eastern Europe are tanking the euro. Japan has announced it is officially in depression, tanking the Yen. Panic flight to dollars, belated flight to gold, although dollar strength is making it much less obvious to us. Very obvious in other currency.


37 posted on 02/16/2009 8:04:37 PM PST by RegulatorCountry
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To: steve86

Not about currencies but option expiration weeks have been BAD for stocks the last few months. This is an OpEx week (shortened).


38 posted on 02/16/2009 8:06:59 PM PST by steve86 (Acerbic by nature, not nurture)
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To: Sleeping Freeper
Saw this story ~ several different ways in a variety of online publications: "The Korean bank (Woo Ri) said that “adverse market conditions” made it cheaper to pay the penalty coupon rate on its bonds than to refinance them in spite of widespread expectations that the junior bonds would still be repaid at the first opportunity. "

All it means is this bank took a look at the situation and decided it was better to husband resources in the short run than tend to long-term investment strategies.

The amount involved is not all that great but financial analysts are concerned that "other banks" will come up with the same idea!

I suspect that if we dug deeper we'd find George Soros and his pack of jackals in there trying to run the banks in Korea AGAIN. This tactic may screw Soros.

I'd keep my eyes open for anything that links Soros with the bonds noted above.

39 posted on 02/16/2009 8:07:46 PM PST by muawiyah
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To: dangermouse
The socialist scheme of the Cloward-Piven Strategy maybe a factor.
40 posted on 02/16/2009 8:08:06 PM PST by Man50D (Fair Tax, you earn it, you keep it!)
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To: kalee

“Can you watch this overnight?”

You can watch one aspect, the futures market, here: www.cme.com

The “e-mini” indication, divide that by ten, that’s where the DJIA would open if it opened right now, eg, DJ -132.5 as I write this. Of course, the DJIA does NOT open “now”, it opens in about 10-1/2 hours.


41 posted on 02/16/2009 8:08:12 PM PST by Attention Surplus Disorder (Mr. Bernanke, have you started working on your book about the second GREATER depression?")
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To: PhiKapMom

If this is true, it sounds like what that Pennsylvania rep was talkng about last Sep, Kanjorski? that there is a coordinated run on money systems, done intentionally, done with malice and forethought

for the purpose of bringing financial markets into chaos


42 posted on 02/16/2009 8:08:21 PM PST by RaceBannon (We have sown the wind, but we will reap the whirlwind. NObama. Not my president.)
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To: dangermouse

Another real-time observation from http://www.jsmineset.com:

“An unwind is taking form right now, this minute, (9:10PM ET) that may or may not be contained by international Central Bank action.

“Even if central Europe does not financially implode the world money system today, it is just around the corner.

“There are so many risks threatening us now that survival of any monetary status quo is doubtful.

“Protect yourself.

“It has hit the fan, right now, and all that is thanks to OTC derivative manufacturers and distributors.”


43 posted on 02/16/2009 8:09:23 PM PST by jiggyboy (Ten per cent of poll respondents are either lying or insane)
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To: steve86

Haven’t ‘they’ been saying for a while that the Euro may not hold up anyway and that EU countries may revert back to their own currencies?

Sorry, I totally don’t understand any of this, but keep trying to read and learn.


44 posted on 02/16/2009 8:10:07 PM PST by Velveeta
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To: Ernest_at_the_Beach

ping


45 posted on 02/16/2009 8:10:30 PM PST by Batman11 ("Big ears isn't my President!")
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To: All
From marketwatch:

BOJ meets as economy in worst slump since 1970s********************EXCERPT**************************

Board of Japan's central bank likely to discuss extending loan scheme

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- The Bank of Japan's policy board will meet this week under pressure to come up with creative answers to the nation's deepening economic gloom, after the latest data revealed the country suffered its biggest quarterly contraction since 1974.

With most economists forecasting more deterioration ahead, the central bank is left with a dearth of conventional options.

"Effectively all the Bank of Japan can do is accelerate measures that have already been announced," said Glenn Maguire, SocGen's chief Asia economist in Hong Kong.
Preliminary data released Monday by the Cabinet Office showed Japanese gross domestic product shrank 12.7% on an annualized basis in the October-December period, or 3.3% from the previous quarter. The decline was the biggest since a 13.1% annualized contraction in the January-to-March period in 1974.
The contraction followed a 2.3% annualized drop in the July-September quarter, bringing the fall in activity to three quarters. That's the longest since the recession that ended in December 2001, which followed the collapse of the technology bubble. See full story on Japan's GDP contraction.
The BOJ's two-day policy board meeting is slated to begin Wednesday, and is expected to focus on actions geared towards easing corporate finance conditions.

46 posted on 02/16/2009 8:10:51 PM PST by Ernest_at_the_Beach (No Burkas for my Grandaughters!)
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To: PhiKapMom

Well, I’ll just wait here and if someone tells me to go buy water and canned goods, I’m on it.


47 posted on 02/16/2009 8:11:14 PM PST by Velveeta
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To: RegulatorCountry; steve86

Thanks! What a mess!


48 posted on 02/16/2009 8:11:17 PM PST by PhiKapMom ( BOOMER SOONER! Sam Bradford Heisman! LetsGetThisRight.com RED STATE Oklahoma Republican)
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To: dangermouse

See #46.


49 posted on 02/16/2009 8:11:27 PM PST by Ernest_at_the_Beach (No Burkas for my Grandaughters!)
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To: Candor7

Saw this and thought of you! Sounds kind of urgent.


50 posted on 02/16/2009 8:11:33 PM PST by SatinDoll (NO FOREIGN NATIONALS AS OUR PRESIDENT!!)
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