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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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To: muawiyah
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.

That would make this great news. Maybe enough people can spot Soros' MO at work that it's no longer effective.

141 posted on 02/16/2009 8:57:00 PM PST by Tellurian (Sanctity of life and sanctity of property ... define our free country. (Star Parker))
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To: PhiKapMom

Was cedardave one of them?

Then there’s davefromnevada...

I wasn’t on the thread, just throwing daves off...


142 posted on 02/16/2009 8:58:47 PM PST by txhurl (ralph)
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To: muawiyah

If only.........but the bad and evil seem to go on and on and on.....


143 posted on 02/16/2009 8:59:16 PM PST by cherry
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To: VeniVidiVici

LOL...good answer.


144 posted on 02/16/2009 8:59:50 PM PST by Ernest_at_the_Beach (No Burkas for my Grandaughters!)
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To: All

Just got off a chat with an Australian trading contact of mine. Nothing to see here folks. Just a bit of trading going on after the Bank of Japan discussions. Looks like market will be selling a bit but let’s all chill and see how we fare through the London session that opens in a few hours.


145 posted on 02/16/2009 9:00:46 PM PST by farlander (Sic Semper Tyrannis)
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To: PhiKapMom; CedarDave

ping.


146 posted on 02/16/2009 9:00:51 PM PST by Jet Jaguar (Atlas Shrugged Mode: ON)
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To: farlander

I bet that is what the Caption of the Titantic said as the ship was going down.


147 posted on 02/16/2009 9:01:19 PM PST by Orange1998
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To: LostInBayport

LostInBayport: IMHO, we are now in a deflationary period. When you see something you need that is at a price you can’t resist, buy it if you can afford it. Inflation is around the corner, but only God knows if it will be in 3, 6,12 or 24 months. My guess is sometime next year. This is a great time to have a kid’s coin collection; real silver dimes and quarters that aren’t in pristine condition. Much easier to get food with if things get that bad. And, if things DO get that bad with guns and ammo you can shoot something to eat or shoot someone that wants to rob you.


148 posted on 02/16/2009 9:01:49 PM PST by jdsteel (CONGRESS: Take it again in twenty ten.)
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To: montanajoe
bad deflation is equal to hyperinflation in that goods...the stuff you really need...will either be not available or too expensive.....

the sheeple will suffer...then again, they deserve what they want and they are going to get it good and hard.

149 posted on 02/16/2009 9:02:41 PM PST by cherry
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To: RobFromGa

ROFL....math solves all...


150 posted on 02/16/2009 9:03:09 PM PST by Ernest_at_the_Beach (No Burkas for my Grandaughters!)
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To: icwhatudo

I get it now. This is engineered so that the US can sell bonds to cover Porkulus. They must have been unsure, that’s why the panic. I think I’ll buy 500 pounds of rice tomorrow anyway.


151 posted on 02/16/2009 9:04:08 PM PST by lafroste (gravity is not a force. See my profile to read my novel absolutely free (I know, beyond shameless))
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To: dangermouse
FOREX-Euro Falls To 2-Month Low vs Dollar On Region Risk Worry

By Charlotte Cooper

TOKYO, Feb 17 (Reuters) - The euro fell to its lowest in more than two months against the dollar and tumbled against the yen on Tuesday, pressured by concerns about recession in eastern Europe and the knock-on effect on European banks.

Credit rating agency Moody's said the recession in emerging Europe was likely to be more severe than elsewhere and would put financial strength ratings of local banks and their Western parents under pressure, fuelling simmering investor jitters about the region.

"There's a lot of focus on this in Asia. We're seeing that develop into pressure on the euro," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.

"It's not new news, but it seems to be intensifying as a focus for Europe and the European institutions."

Moody's said the combination of higher provisions for bad debt, the rise in bank borrowing costs and falling currencies would weigh on banks' profitability and erode their capital base.

Western European banks led by UniCredit (CRDI.MI), Erste Group Bank (ERST.VI), Raiffeisen International (RIBH.VI) and Societe Generale (SOGN.PA) have bought up most of emerging Europe's banking sector in recent years to tap the rampant credit growth that fuelled the region's boom.

U.S. markets were closed for a holiday on Monday, when the euro lost about half a percent against the dollar and 0.8 percent against the yen as European equities fell.

Traders said a sudden bout of heavy selling forced the euro lower on Tuesday, triggering a series of sell orders and sending it down more than 1 percent to $1.2645 , its lowest since early December on trading platform EBS.

The euro fell 0.5 percent to 116.89 yen .

RISK JITTERS

The European currency was also under pressure from growing expectations for a deeper cut in interest rates by the European Central Bank in March. Many now expect rates to fall to a record low of 1.5 percent.

"So there are many reasons to point out the weakness of the euro," said Masafumi Yamamoto, head of FX strategy in Japan at Royal Bank of Scotland. Continued...

[snip]

152 posted on 02/16/2009 9:04:13 PM PST by blam
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To: farlander

Hang Seng is down 2.95% so far ~ actually, it opened that low and stayed. The other markets in East Asia are tanking too.


153 posted on 02/16/2009 9:04:15 PM PST by muawiyah
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To: celtic gal

Get a few fire proof boxes from Sam’s club, fire and water proof, $45. each.

You don’t want ammo cooking off or flooding in the event of a fire.


154 posted on 02/16/2009 9:04:47 PM PST by Sundog (Atlas Shrugged needs to be required reading . . . Which character are you?)
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To: PhiKapMom
Layman's language---Someone BIG needed a LOT of US dollars and liquidated holdings in virtually every currency to buy dollars. Could be a large bank, could be a country, or it could be a number of institutions.

Usually when the Euro has tanked, the Yen skyrocketted more than the $ but tonight the Yen dropped WITH the Euro. Even stranger is that gold went up a lot against the $ even with the $ strengtening against virtually every currency in the world. Could be loud noise--or it could be something big is starting to blowing up. If it continues into the night, expect the Fed Res to lend out dollars to other central banks.

155 posted on 02/16/2009 9:07:32 PM PST by rb22982
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To: farlander
Good, solid analysis, right out of a Kipling poem. Glad you came to our shores. We need more like you.

I don't follow Forex at all, but I would imagine a long sideways chart. No one is certain which direction to invest in.

I will say that banks have started to slash their REOs down to prices where investors can make great profits in RE. At least in my local market. For what that adds to your analysis.

Porkulus and Pelosi/Obama/Reid will make things worse, but not until September in my reckoning.

156 posted on 02/16/2009 9:07:34 PM PST by 1010RD (First Do No Harm)
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To: gidget7
Being who is in charge now, and who was in charge in Sept. at Treasury, I wouldn't doubt it.

Soros met with John Paulson, supposedly no relation to Henry Paulson (Sec. of Treasury), to discuss shorting strategies on mortgage swaps. John Paulson has made billions on the failures in the mortgage market. There's likely plenty of scalawags in government, if not Henry Paulson, riding on his coat tails.

157 posted on 02/16/2009 9:10:50 PM PST by Tellurian (Sanctity of life and sanctity of property ... define our free country. (Star Parker))
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To: jsh3180
About what this guy is saying.
Failure to save East Europe will lead to worldwide meltdown.
The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point.


He's always a bit apocalyptic even at the best of times so I dunno !
158 posted on 02/16/2009 9:11:16 PM PST by 1066AD
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To: PhiKapMom; Grampa Dave

Was one grampa dave?


159 posted on 02/16/2009 9:12:58 PM PST by tubebender (Why do they sterilize the needle for lethal injections?)
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To: Sundog

That is true. I have a huge fire proof armor plated vault in my house...it is actually a rifle case..but has our important papers and my jewelry in it..and some other goodies important to us but no one else.


160 posted on 02/16/2009 9:16:45 PM PST by celtic gal (I think the democRATs should change their logo from a jackass to a RAT with a long tail.)
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