The Monetary System is Broken

Published on
October 7th, 2019
Duration
32 minutes

The Monetary System is Broken

The Expert View ·
Featuring Jeff Snider

Published on: October 7th, 2019 • Duration: 32 minutes

Jeff Snider, head of global research at Alhambra Investment Partners, has been covering the repo market breakdown since May 2018. With the recent spike in repo rates, it seems like the rest of the market has finally started to take notice. Snider explains why this problem is not coming up out of the blue and breaks down why he views recent market moves as a sign that the banks are telegraphing their knowledge of major threats to the monetary system. Filmed on September 27, 2019 in New York.

Comments

Transcript

  • GR
    Grant R.
    13 October 2019 @ 21:30
    Very interesting information. I look forward to hearing from this person again. Agree music is bad, so is hidden voice.
  • dp
    david p.
    12 October 2019 @ 18:50
    If no one knows why, Shouldn't someone ask the banks why they are doing what they're doing?
  • PJ
    Paul J.
    12 October 2019 @ 18:18
    That fu*king theme music drives me mad
    • MF
      Michae F.
      12 October 2019 @ 20:28
      Agreed, are you the target demographic RV has in mind though? (as opposed to actual)
  • WM
    Will M.
    11 October 2019 @ 14:35
    Excellent conversation with Mr Synder. I do believe he is one of the few experts who understand the system. I was a bit surprised about his expression about why the banking dealer system is doing what it is doing regarding REPO and the related interest rate spikes as I felt sure he would have a strong view. Nonetheless, I admire Jeff for actually saying that he doesn't know whats behind the curtain (I would have thought he could have asked some well place folks why they acting the way they are). Finally, I do not disagree with David R (Oct 8 0500 below) on his comment about the US dollar. But its all a question of time. Ultimately "bad for the US dollar" yes. However in the short to medium term it feels the US dollar could see rapid appreciation because what else can you choose... the Euro? There is simply not enough liquidity in anything else. No-one is going to flood into the Swiss Franc or sterling or the Yen. There is not enough gold or silver. So initially it "feels" like there will be an influx into the dollar. I am solidly with Martin Armstrong (and others) on this. It feels like the dollar will soar as "everybody" flees to the last financial system left standing...the USA and the worlds reserve currency. That flight and the soaring dollar will be the last straw for the last vestiges of Bretton Woods, the system will break. What comes out of it? Who cares.....because the fallout will be worse than 2008, globally. I feel sure that many financial assets will likely be trashed. Ownership of real assets may be the only option to maintain wealth, though there is likely to be a predatory environment against the "rich".
  • MZ
    Martin Z.
    10 October 2019 @ 08:59
    The underlying assumption here is that the players are all acting rationally based on having a reasonably clear overview of what is going on in the game - at least in each in their own little part of the sandbox - and if we could just get everybody together at the same table somebody really smart could figure out a solution. But it seems quite possible to me that the system has grown and evolved into something far too complicated and chaotic for ANYONE to understand on a macro level, even the insiders who are most positioned to profit from it. Everyone is viewing it from their own limited vantage point, circumscribed by their position, experience, self-interest and known and unknown biases. And that suggests that if the "spinning top" is indeed growing increasingly unstable - as evidenced by wobbles increasing in both frequency and severity - then maybe no one (least of all the blinkered, ideologically-bound central bankers) is capable of acting proactively to prevent its eventual falling over catastrophically. And even assuming they could somehow sort out what needed to be done, would they have the courage to act on that knowledge - knowing (or perhaps worse, not knowing) the consequences?
  • AR
    Anthony R.
    9 October 2019 @ 19:00
    One thing not clear to me is that based on this analysis, it appears that Treasuries should be pristine for collateral, but in other places, the burgeoning US debt is blamed as the reason.  Does this mean that cash purchasing US debt is taken from the system and there is not enough cash around to meet reserve requirements?  And since there are apparently excess reserves because the Fed is lowering IOER why wouldn't a bank accept US treasuries as collateral if it can get 10 percent in the repo market?  Is it that you won't get collateral if another bank goes under or there is a fear that US treasuries are no longer acceptable collateral?
  • VP
    Vincent P.
    9 October 2019 @ 17:47
    I wanna short HYG so bad but,,,,,,,,I can't!!!! Talk about trust, don't trust the the casino, at least not yet. The money gambit still has legs.
  • MT
    Morgan T.
    9 October 2019 @ 09:38
    Great stuff! However I feel like I need cartoon visuals to map this thing out... kindergarten pedagogy I guess😊
  • LB
    Louis B.
    9 October 2019 @ 01:51
    Jeff is very smart and a lone voice in the world of finance, it seems. As he says, who understands the monetary system today? Nobody! Not even the central bankers. It's all based on faith or beliefs. There is no system as such. But there is a lot of fiat paper, whether that's money or other financial securities such as collateral that keep the fiat architecture standing, for now. But cracks are clearly appearing at the seams.
  • TC
    Thomas C.
    8 October 2019 @ 21:21
    Excellent, just when we all were told and belived what happened in the repo market was technical ! Jeff raised excellent points, excellent questions and opens up a discuission on what's really is happening in the credit based markets. Will the repo issue and we-work failed IPO be seen as a red flag down the line ?
  • PW
    Phil W.
    8 October 2019 @ 21:06
    Watched yesterday.................and low-and -behold the FED is jumping in with both feet! Thanks RV and Jeff Snider for the interview
  • JL
    Jack L.
    8 October 2019 @ 18:04
    Hey Jay...give this man a job...your job
    • BM
      Bryan M.
      10 October 2019 @ 04:38
      LOLOL!!!
  • EL
    Edward L.
    8 October 2019 @ 16:18
    Jeff is uniquely qualified to discuss global currency and it is obvious so many thought leaders including the Fed have no clue.
  • EN
    Eric N.
    8 October 2019 @ 13:33
    I have waited so long for this guy to come back, more than anyone honestly, brilliant as always. Please have him on a schedule on RV.
    • EW
      Evan W.
      9 October 2019 @ 13:13
      He is interviewed regularly on the MacroVoices podcast with Erik Townsend. At least once or twice a month.
  • TS
    Taranvir S.
    8 October 2019 @ 13:08
    Brilliant guy!
  • sm
    sam m.
    8 October 2019 @ 06:19
    In my experience this was (probably) caused by bond trading desks simply arbitraging the difference between physical and futures. This would explain why it prevailed for a very short time. I traded Australian bonds/futures and not the USA. But if this is right (https://www.cmegroup.com/trading/interest-rates/stir/eurodollar_contract_specifications.html) then the eurodollar contract settles on "Second London bank business day before 3rd Wednesday of the contract month. Trading in expiring contracts terminates at 11:00 a.m. London time on the last trading day." When was the 3rd Wednesday of October? It was 16 October ... What was reported as an issue from around 16 September ... (https://www.bloomberg.com/news/articles/2019-09-19/the-repo-market-s-a-mess-what-s-the-repo-market-quicktake) ... "In the week of Sept. 16, a lot of cash flowed out of the repo pipes just as more securities were flowing in -- meaning that suddenly there wasn’t enough cash for those who needed it. " Are futures over-sold (Raoul would have it that way) and are bonds cheap versus futures? TBH I haven't looked as I am not currently trading (more money in property development but ymmv) ... but this would 100% explain what has happened. Further ... I was a graduate employee at my country's central bank ... and one of my fellow grad's jobs was to estimate the amount of Open Market Operations to target that day's cash rate ... i.e. targetting the overnight cash rate is a graduate level job with no experience and it is not important that it is not hit on a given day. The fact that there might be an arbitrage versus futures that a few dealers are taking a big position on is not news. And it doesn't signal the loss of control of anything. If bonds were cheap versus futures then 10% for 1-2 days wouldn't prise those bonds out of my cold dead hands. And it wouldn't signify any broader problems in the markets. I might be wrong ... I don't really care but I can see a very obvious set of facts that would befuddle anyone that hasn't sat on a desk.
    • sm
      sam m.
      8 October 2019 @ 06:23
      And the argument is probably 180 degrees to what I wrote ... I haven't looked at whether bonds or futures were cheap v expensive. But the dates suggest one or more bond desks bringing the 2 markets back in line at settlement.
    • sm
      sam m.
      8 October 2019 @ 06:46
      If the rates were circa 8-10 pct then it was bonds that were expensive to borrow to cover short physical by a trading desk - not that there is a shortage of USD etc ... I think they have the wrong end of the stick. I always thought of the repo market as the marginal demand/supply of bonds from trading desks. it is not right to think of this as a surplus or shortage of USD cash ... this market is driven by the physical ... and ultimately it is arbitraged away at settlement dates of futures contracts.
    • sm
      sam m.
      8 October 2019 @ 06:53
      if it was expensive to borrow $ and lend bonds ... too many bonds to lend ... so bonds are cheap v futures ... so desks are buying bonds and selling futures... and then they want to lend bonds and borrow cash explains what has happened. back to my glass of Barossa Shiraz.
    • sm
      sam m.
      8 October 2019 @ 06:55
      in my first post I meant September not October 😋
    • sm
      sam m.
      8 October 2019 @ 07:05
      maybe we can pick a 3 or 10 year futures contract a day before maturity and the yields of the bonds and we can price up if bonds or futures were cheap and needed to be brought in line. maybe RV has been too successful and subscribers are selling Eurodollar futures beyond their fair value... fits the narrative.
  • IA
    Ibrahim A.
    8 October 2019 @ 04:45
    How does what Jeff is saying of a shortage of collateral reconcile with Zoltan Pozsar's (CS) argument that it there is too much collateral and too literal reserves that is what is causing the spikes? And that a full allotment RP facility would address the issue, which Jeff says would not address the issue. Would be great if RV could bring on ZP to discuss this topic.
    • IA
      Ibrahim A.
      8 October 2019 @ 04:49
      Too little reserves!
  • AE
    Anders E.
    8 October 2019 @ 03:59
    One of the best pieces in RealVision TV history. Getting what Jeff is saying, is like discovering the Earth is not flat.
    • JS
      Johannes S.
      8 October 2019 @ 06:44
      Really? His main message is “Something’s going on, but we don’t know what it is. Repo was just a symptom of a much deeper issue, but we don’t know what the deeper issue is”. How is that insightful by any measure?
    • EN
      Eric N.
      8 October 2019 @ 13:41
      Asking the right questions or seeing the problem correctly is infinitely more valuable to me than all these answers you can get anywhere from anyone, which in the end are just a bunch of opinions. What Jeff says is measurable, falsifiable, because he starts at the beginning, and doesn't continue until he has that right. You want an opinion on what to buy or sell? Go on construction and do the opposite of what the workers tell you. Cheers.
  • ly
    lena y.
    8 October 2019 @ 01:45
    Macrovoices has a great discussion about the monetary system back in Dec 2018. Its free! Anyone who is interested can register and check it out: the Eurodollar system by Jeff Snyder, Erik Townsend, Mark Yusko and Luke Gromen https://www.macrovoices.com/aia/344-anatomy-of-the-u-s-dollar-end-game
    • DR
      David R.
      8 October 2019 @ 05:00
      They also had an update with the three of them back on again last month. The US cannot finance its unprecedented profligate spending and the worst-ever government finances/deficits in human history. This is the core of the problem in the US treasury and repo. The Fed is "financing" the US gov't now as it was forced to, Weimar style. Bad for the dollar.
  • BN
    Barrett N.
    8 October 2019 @ 00:23
    Absolutely Great interview on the sorcery of the bank repo market. Thank you very much. Here’s an IMF Working Paper Proposal on Enabling Deep Negative Interest Rates from April 2019. Proposed while C Lagarde was head of IMF, currently head of ECB. https://www.imf.org/~/media/Files/Publications/WP/2019/WPIEA2019084.ashx
  • NL
    Nicolas L.
    7 October 2019 @ 23:43
    You cannot be interviewed on a topic as expert and your message is that we don’t know what’s going on. 1/ banks don’t choose to hoard treasuries, treasuries or cash reserves qualify equally to meet their liquidity coverage ratios (how much high quality assets they must own versus their liabilities) 2/ spikes in primary dealer inventories correspond to times when foreign central bank have to liquidate their US Treasuries because they need cash and their USD reserves are dropping (2011, 2015), or when the pace of Treasury issuance picks up rapidly (2018/2019) 3/ Banks don’t engage in repo because of SLR, new regulations dramatically reduced velocity of collateral as well as make it uneconomic to lend inter-bank when money market dislocations occur 4/ Fed’s QT is what drove liquidity level low enough that limitations on collateral velocity reached a tipping point Jeff deserves credit for focusing on the plumbing of the system which clearly many, including as he pointed out some central bankers, haven’t been. However the argument that “banks know something we don’t That is really scary out there” is simply not true. In fact there is plenty of bank research which has forecasted that this repo rate spike would occur, and why. It is an important topic, but there would have been many much more qualified professionals with concrete answers to interview and give viewers answer to all the questions raised and left unanswered.
    • DS
      David S.
      8 October 2019 @ 03:14
      Thanks for your comment. Mr. Snider should interview someone from the banking system who believes he knows what is going on. We could all learn knowing more of the story. Mr. Snider is doing a great deal of good discussing it and bringing it to our attention. He may still be correct. DLS
    • SP
      Stephane P.
      8 October 2019 @ 06:40
      You are right, this is scaring the sh*t out of me. Should we sell all our investments, and do like China, Poland, and Russian Central Banks, who accumulate Gold like Hell ?
    • SP
      Stephane P.
      8 October 2019 @ 06:46
      And by the way, Gold shoot up dramatically after this date Jeff keep on mentioning, of 2019 May 29th.....so there is REALLY something going on.
    • DR
      David R.
      8 October 2019 @ 08:52
      David, yeahbut the someone we need from the banking system would be a lead trader, not the suits or managers or PR who they send out to talk instead (because the trader might "say something" lol). Stephane, yes load up on gold on the dips (real gold not the ETF's) just as the CB's are. Because per this video's title, the monetary system is broken, and the banking system in all major regions are fubar'd and it only takes one to collapse 'em all like dominoes via contagion. If you hold a financial investment, hold it only in certificate or direct registration form. But real assets might be the better class over the next decade as Ray Dalio has explained at length lately.
    • HC
      Hugh C.
      9 October 2019 @ 00:35
      where do we go to get the reports on offshore baking activities that would answer the question of "we don't know" ? do these shadow bankers have to report their shadow banking activities? That wouldn't be very shadow like. But for our $100 RV subscription Snider is supposed to tell us all?
    • BS
      Ben S.
      9 October 2019 @ 07:50
      @Stephane P.: No. 1st, it was May 29, 2018 (not 2019), where Gold was around 1300 and actually decreased to a low at around 1000. 2nd, if you were referring to March 20, 2019 - well, Gold was around 1300 at the time as well, and remained around that level until early June, when the hike begun which lasted until early September. So, on the contrary, Gold was not reacting at all, and even if, not to a recognizable extent
  • AS
    Anthony S.
    7 October 2019 @ 23:06
    I think a great quote from Jeff's talk would be: "there's a lack of curiosity of the global monetary system" referring to people in gov. I think. Certainly a 'live' interviewer like [imagine] Luke Gromen ;) would be awesome
  • AH
    Ali H.
    7 October 2019 @ 22:57
    My question after watching this was what happened on May 29th 2018? A quick search yielded... (https://www.nytimes.com/issue/todayspaper/2018/05/30/todays-new-york-times). Wonder which of those headlines might have been it.
    • EC
      Earl C.
      8 October 2019 @ 00:29
      I see gold hit it's low for 2018 on that date & begin's it's upward march/
  • PD
    Patrick D.
    7 October 2019 @ 22:27
    Can anyone recommend a book that would serve as a primer to this detailed material ?
    • AM
      Andrew M.
      8 October 2019 @ 09:04
      Anything by Zoltan, although he can be quite heavy going: GMN 1 - https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&document_id=1048167391&source_id=emrna&serialid=ePoMbkNQvD3cFmVQrLOs4uunEOqBY8SRTC%2bV613VP5c%3d GMN 23 - REVENGE OF THE PLUMBING https://www.finanzaonline.com/forum/attachments/obbligazioni-titoli-di-stato/2622433d1566390308-btp-thread-dedicato-operativita-trading-e-cassetto-vol-108-verso-la-soluzione-finale-revenge-ofthe-plumbing.pdf There is a good breakdown of recent events here: https://www.theinstitutionalriskanalyst.com/single-post/2019/09/28/Eisenbeis-Repos-And-Reverse-Repos St Louis Fed have also done some good work: https://www.stlouisfed.org/on-the-economy/2019/march/why-fed-create-standing-repo-facility There's not really many books, plus the last few years would have thrown a lot of those conventional theories on their head anyway.
  • DS
    David S.
    7 October 2019 @ 21:03
    Excellent discussion. Does this melt down to a crisis in counterparty risk - no one trust anyone else? If banks cannot use this mechanism is there another current system, or would a new system need to be developed? Banks are not the only financial corporations that need daily counterparty integrity as we saw in 2008. Is this the next effect as the counterparty risk goes financial market wide? This should drive the US treasuries down as they can always print less valuable currency and gold. DLS
  • us
    ujjwal s.
    7 October 2019 @ 20:42
    Feel like liquidity shortage is mostly due to upcoming fed funds rate cut, that would make bond more valuable. All the liquidity has pretty much flown to Treasury bills and banks holding to them dearly as they would get good return on investment from falling yield next few month and expanding cycle in Q1 2020.
  • RK
    Roger K.
    7 October 2019 @ 19:55
    Can someone care to explain the issue here; 1. Dealer A is not willing to lend his cash to Dealer B because Dealer A thinks that the collateral ( UST) is not worth the money he is lending ? But Jeff mentioned that everybody's hoarding USTs . I am bit confused. Unless collateral could be like junk bonds, HYG corporate bonds, MBS ( not valid any more) etc.... 2. When the FED does the REPO operation, could they accept any collateral other than UST ?
    • EC
      Earl C.
      8 October 2019 @ 01:05
      Just taking a stab in the dark here but it was 6 months after POTUS signed the 2017 TCJA into law that something again broke. Is it possible that the bean counters discovered that the $US tax would not reach on a level unlike ever before?
    • BT
      Brett T.
      8 October 2019 @ 04:17
      Banks will have taken a view that the economy is turning down and will now be demanding better collateral or be compensated for taking the additional risk on their balance sheet. The repo counterparty has probably been using non-govt collateral for funding up until now without much problem but find themselves stuck for funding options (obviously not having committed USD funding lines - which tells you something). Its the unintended consequences of post-GFC banking regulation. BIS bank capital, funding & liquidity regulations have made banks more robust but in so doing have made capital, funding & liquidity markets less stable by constraining the main player (the market maker) in those markets. Bank balance sheets used to be Grand Central - everything passed through there. Now it's like gaining access to a top secret military facility. Additionally, other regulators (CBs) are setting negative interest rates or engaging in QE (taking collateral out of the market) to encourage risk taking in markets. In the chase for (positive) yield (especially if you have to cover currency hedging costs), securities are being purchased that do not make for attractive repo collateral which banks will give a big haircut to for liquidity purposes then charge a punitive capital risk weighting on the face value for the pleasure of taking space on their balance sheet. The Fed can take whatever collateral they want but will probably apply BIS-like rules. As an example, Repo Counterparty needs $100m but only has security that is of marginal credit quality. The Bank says 'for me to hold that I'll give it a 50% haircut for LIQUIDITY requirements', which means they will actually to receive face value of $200m of the security. Then for CAPITAL requirements they may say 'I want to disincentivise you using my balance sheet for short-term funding so I will charge you a 300% risk-weighting on this asset' so that's $200m (yes, the face value) x 8% regulatory capital x 300% risk-weighting x 15% return on capital = $7.2m, which is 7.2% O/N funding cost on the original $100m funding requirement of Repo Counterparty. This is how the repo rate can get to 10% when Fed Funds is 2%. Additionally, banks were coming up to quarter end so they will charge even more to ensure their window dressing is just right for regulatory & reporting purposes.
  • JB
    Joris B.
    7 October 2019 @ 19:44
    Isn't this liquidity problem due to IOER set on the upper bound of the Fed Fund rate post 2008 explained by George Selgin in his paper Floored? George Selgin should most definitely be interviewed on this topic.
  • PG
    Philippe G.
    7 October 2019 @ 18:50
    Excellent. Appreciate these more educational segments on niche topics like the repo market!
  • WW
    William W.
    7 October 2019 @ 18:49
    Thanks for this interview! Jeff has been talking about this for as long as I can remember and he always seems to be well ahead of the curve in pointing to oncoming stresses. Seems as though his comments merit more discussion and debate on RV.
    • EC
      Earl C.
      8 October 2019 @ 00:38
      Being serious here Jeff reminds so much of the tv character Radar O'Rielly in how they both have a better grasp of the innard workings of the system than the folks in charge. Wished he lived in my neighborhood!
  • JG
    Judith G.
    7 October 2019 @ 18:17
    Hurrah! Hooray! Jeff Snider on Real Vision. I haven't even listened yet but know it will be interesting and helpful for my macro thought process.
  • RA
    Robert A.
    7 October 2019 @ 17:50
    RV once again illustrates their “Curation” ability by getting a great guest to us on this timely “Repo” topic...which apparently goes much deeper into the Global financial system than most think. John Burbank has been sniffing some of this out in his Euro dollar trade/position and Raoul has been banging on a potential US $ shortage for a long time. I would be really curious to hear Raoul’s reaction to Jeff’s presentation (when he gets back from his honeymoon, of course).
  • MS
    Mark S.
    7 October 2019 @ 16:11
    I appreciate these talks on Repo etc. An area I find a bit confusing. More would be appreciated moving forward. Thanks for doing this and the one with AK
  • PJ
    Peter J.
    7 October 2019 @ 16:07
    IMO probably the most important message from any VID on RVTV to date. Jeff, has done a whole series of podcast presentations with slides on the Eurodollar on the Macrovoices site in conjunction with Erik Townsend that covers Repo. There are a couple of hours worth of presentations in total, but well worth the listen IMO. It really opened up eyes to the potential impact of the Eurodollar system on global macro.
  • SG
    Sven G.
    7 October 2019 @ 15:55
    very interesting... Could listen to him for hours... clearly, know his chosen area of speciality back to front and inside out. Pity he doesn't run the Fed... ha ha
  • US
    Ursha S.
    7 October 2019 @ 15:34
    Milton please interview a dealer to explain why they are not doing anymore what they used to do? What exactly is worrying them? Why are they keeping the collateral? It's strange they are not selling it at a profit? Is collateral just treasuries and therefore with expectations of Interest rates going lower they think they will sell it at a higher profit? Is this how they always behaved - keeping the trade on longer when conviction is high? Or they used to rinse and repeat pretty much daily in the past over and over again and they abruptly stopped doing this recently?
    • VR
      Vladimir R.
      7 October 2019 @ 17:59
      Haha yeah I am screaming at the monitor here. Why is nobody asking the dealers what the problem is? How come we are just sitting here for weeks and we can't get a simple answer?
    • EK
      Emil K.
      7 October 2019 @ 18:16
      These articles might be a good start. Maybe they don't want to do it is because they've been burned thrice in 12 years while at the same time central banks have been saying everything is fine. https://www.alhambrapartners.com/2019/04/02/the-real-legacy-of-bear-global-means-global/ https://www.alhambrapartners.com/2019/06/19/powell-surrenders-i-told-you-last-year-it-was-a-lie-or-heres-almost-the-whole-of-it/
    • WW
      William W.
      7 October 2019 @ 18:26
      If Jeff is correct, it seems highly unlikely that a PD would admit to something so systemically negative. So, perhaps let Jeff interview a PD. That would be spectacular!
  • BD
    Bruce D.
    7 October 2019 @ 12:46
    Milton. Please get Luke Groman back, as he has an additional explanation that makes this easier to understand.....Jeff Snider understands the plumbing, Luke understands the bigger picture. Together they provide the whole story......
    • SB
      Salvatore B.
      7 October 2019 @ 13:25
      just listen to Luke gromens constant appearances on macro voices
    • DK
      Dennis K.
      7 October 2019 @ 15:30
      I hear dollar shortage (that’s hard to grasp anyway).... but i hope i understand the reasoning behind it. How can others (luke gromen f.i. ) think the dollar will fall ......
    • TS
      Thomas S.
      12 October 2019 @ 04:30
      Actually Luke Groman be correct, but he has the worst case of confirmation bias I've ever seen
  • TJ
    Terry J.
    7 October 2019 @ 11:57
    Thanks for bringing Jeff back. I love his global macro analysis and unique understanding of the eurodollar system that will probably be the catalyst for the next global market collapse. Reading his daily blogs has become an absolute necessity over the last few years! Somebody should suggest Jerome and his colleagues at the Fed read them too, or the repo scare of last month will be far from the last!
  • DS
    Dusko S.
    7 October 2019 @ 08:53
    The big omission on the part of the interviewer is failing to discuss with Jeff repercussions of the liquidity / repo collateral shortage on the long eurodollar trade.
    • EK
      Emil K.
      7 October 2019 @ 18:07
      I don't believe you'll find trade ideas / discussions in 99% of Jeff's writing. So, perhaps the interviewer did ask but it's just not what Jeff writes or speaks to (in public at least, as far as I can tell).
    • DS
      Dusko S.
      7 October 2019 @ 18:16
      Possibly, but he extensively covers ED/Libor issues on his Alhambra blog.
  • DF
    David F.
    7 October 2019 @ 07:21
    Thanks you Jeff Snider. I agree that 2008 wasn't a one-off event but most probably a systemic warning that didn't get addressed as we all witnessed. I am a bit confused because it seems to me that all currencies are stuck in some sorts of financial assets and not "needed" in the economy. In the end there is no "real" exponential growth of any kind as we are leaving the exponential growth phase and entered the transitional phase of a more sigmoid growth a long ago . As a consequence, the credit creation mechanisms became ill-suited as well as the risk management methods. My intuition would be that the economic engine is experiencing a violent slowdown in front of our eyes, and that historically, the repo market is kind of a leading indicator of systemic risks. The losing probability for the big players just grew exponentially overnight because of a sudden convergence. Although you said not knowing what is/are the cause(s), I assume you probably have few hypothesis ? What is the weakest point in the plumbing of the international banking system ? What is your thesis ? Thank you again
    • EK
      Emil K.
      7 October 2019 @ 18:05
      If I was to hazard a guess I would say that JPS would say the weakest points in the plumbing of the international banking system are the central banks. Many of them believe that they are the most-educated, most-qualified and best-connected technocrats to manage the system. To believe that they are not central would be to destroy the comforting illusion of control. Thus it is always extenuating circumstances, transitory factors or trade wars. That's plausible for a few years, but it has been over a decade. By refusing to look too closely - so as to protect themselves from what they would find - we are forced to continue on with a malfunctioning monetary order. At least, that's what I think.