the briefest of notes

I don't have words for how much I don't like what's going on in currencies. I really don't. I don't have a hugely good reason for it other than that given the circumstances - and only because of the circumstances - it feels hollow, like a blowoff rally. No data, sorry; I just... really don't like it.

Maybe more tomorrow if I have time. Maybe later tonight, if I'm up late. There's a lot going on that's really, seriously not to like.

Four data points

In reference to the immediate previous post about my... lack of sanguinity regarding actions in the currency markets, I provide three four data points:

1. People's Daily (China) calls for abandonment of US dollar as global trading currency. This is self-serving but they have a lot of power to make this happen if they want to.

2. Delivery failures plague Treasury market. The latest data from the Federal Reserve Bank of New York showed that cumulative failures hit a record $2.29 trillion as of Oct. 1... The outstanding U.S. public debt is $10.3 trillion... 'Current [fail] levels are at historic levels.'" Indeed they are.

3, or, more specifically, H.3. Nonborrowed banking system reserves at US$-363.529B, or about a third of a trillion dollars. Check monetary base growth, too.

4. Taiwan insurers ordered out of US agency MBS, which is really, really bad for the US if it starts a trend. Worse, and in addition, "[t]he FSC [Financial Supervisory Commission of Taiwan] says it cannot see how the United States will develop a valid mechanism to assess the credit quality of MBS issued by US federal housing loan agencies, namely Fannie Mae, Freddie Mac and Ginnie Mae. ... Such a ruling will be a blow to US Treasury authorities... The US financial system needs to maintain the willingness of Asian investors to buy its assets." This is nightmare fodder. You cannot float a deficit without either borrowing money or defaulting on your debt via old-fashioned paper-money printing.

I swear this whole thing is looking more and more like France 1720 every week. I need to read up on that crisis more, but the broad outlines have some similarities I don't like.

PS: Dr. Roubini says to be ready for a potential financial market shutdown of up to a week in duration.

eta: Elisa Parisi-Capone at RGE Monitor says actual Lehman CDS payout is already around US$200B, and will only grow, and shows her math. This is much higher than the commonly accepted estimate.