RED ALERT: FX Dislocation In Process

Market Ticker ^ | 2-16-2009 | Karl Denninger

[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.

[abigailsmybaby]

No, but from the looks of her there might be a run on hair gel and pancake makeup.

[LostInBayport]

Have to admit this thread has told me that I don’t have a clue about what is going on in the world financial markets. Layman’s language would be nice.

You're not alone, PhiKapMom...I've read a lot of the great articles posted on here by fellow FReepers, and I think I've learned a hell of a lot more about economics than I did in school. But just when I think I have a grasp on things...I am quickly reminded that I don't.

I want to do something...awaiting a firearm permit, stocking up on food a bit here and there...but financially...well, I have some money in savings and a tad in mutual funds. Inflation, deflation, stagflation, Obamanation...not sure what to expect!

[Sleeping Freeper]

“Ok, there IS NO ‘run’. A 150 pip move is not a ‘run’.”

Thanks for bringing some sanity to this post. I’m with you on this one. But absolutely nothing would surprise me right now...

[PhiKapMom]

Five letter word — SOROS!

[the crow]

bump for tomorrow.

Thanks for the post.

[cherry]

well, I bought extra dish soap and salt today...I am stocked on plastic wrap,many spices, paper plates and napkins,hand soap,liquor,plastic zip lock bags,canned goods,sugar,oil,rice,personal items,etc...hubby has the ammo....wood is cut and stacked....now if we just had some money...

[celtic gal]

Buy both..and lots and lots of ammo.

[PhiKapMom]

I am with you 100% — thought I had things figured out and then got caught up in this thread. Usually I read something once and understand — second time through the original post and I still didn’t have a clue.

[VeniVidiVici]

Markets are always such confusing things....

That's why Democrats like 5-year plans. That way you only have to worry once every 5-years.

[gidget7]

Thanks you two!

[conservative cat]

I rooting for the S. Koreans because this Country would be a lot better off and ZERO would lose his benefactor.

Me, too. I have this vision of a Korean 007 taking out Soros the bad guy.

[VeniVidiVici]

Hey, I did my part.

I bought a Polish canned ham yesterday at the supermarket.

You all can thank me tomorrow.

[bruinbirdman]

"There’s definitely some buying going on. But if you only go back a little while "

Yeah. Bloomberg doesn't have a panic signal.

Euro is at $1.26+, down 120+/-. Been looking for parity at $1.20 since the flight to foreign currency ended in 2007.

Sterling at $1.42+, down 49, looking for a historical conversion at $1.40.

Someone who likes gold also likes red lights?

yitbos

[gidget7]

I know!! And he has been messing with our govt and economy for years. This slime needs to be taken down!I hope S. Korea gets him.

[hoosiermama]

WHo were the two Daves tha taught us so much the other evening?

[PhiKapMom]

From your comments, it sounds like a lot of people in charge were clueless and didn’t stick with what works. I can remember when Rubin was using the Federal Thrift Savings money to prop up the market so it wouldn’t correct under Clinton so he could have everything on the rise. I was appalled but it sounds like it is even worse with the “innovations” in finance. Stupid people, media, and voters who buy into all of this and give us people with no experience like ZERO.

Cannot even fathom $16T to $27T in US dollars. What were they smoking?

[Gritty]

I noticed this happening at the time because I was holding a temporary short position in the USDollar/CanadianDollar, and the trade went exactly the wrong way I expected it to go, and it did it very quickly. It was a dramatic shift across most major currencies and I couldn't account for it from any of the usual sources. It puzzled me, but this seems to explain it.

The currency markets have been quite hinky lately. Something is happening below the surface. The markets have quieted down now but who knows what tomorrow will bring?

[PhiKapMom]

I have been sitting here trying to remember. I think I am getting closer to figuring out what they are talking about thanks to Regulator Country and RaceBannon. Two Dave’s are always right on top of things and explain very well what is happening and yet I cannot remember their screen names. This time I am writing them down.

[PhiKapMom]

That would make a very good movie!

[montanajoe]

This is another indication that deflation not inflation is the major threat to the world and US economies. As banks and countries fail the value of hard assets will decline. This particular event seems to be over-hyped a bit but IMO any light at the end of the tunnel at this point is the train to a deflationary spiral and worldwide depression..hope I'm wrong.