Dollar Liquidity Is "Abundant". Everyone Is Waiting For The Federal Reserve To Wake Up.

Because the Fed has just announced that the dollar liquidity in the financial market is "abundant".

This is not the case.

Other countries around the world will be put on a stranded state. Everyone is waiting for the Federal Reserve to wake up and watch the change of US dollar liquidity.

The shortage of dollars has threatened the whole world.

And (slowly) threatens the tightening cycle of the dollar itself.

The outside world may want to see some economists or journalists sitting with the chairman of the Federal Reserve, Janet Yellen, asking her about the dollar financing market.

Now, the CCBS base of the Japanese yen against the US dollar has dropped 81.75 points in 3 months, a record low.

This trend suggests that the structural shortage of US dollar is gradually deteriorating.

Mylchreest's article traces the issue of the dollar shortage to the first depreciation of the renminbi in February 2014.

He said one thing that needs to be pointed out is the central bank's struggle for control over liquidity.

For example, considering the impact of the Swiss Franc (Swiss bank) on the arbitrage trade and the impact of the Japanese yen (BoJ), as well as the serious weaknesses seen in the Renminbi (the people's Bank of China).

In fact, all of this reflects a "significant omission" in the global financial market, that is, the failure of the Federal Reserve to reach a US dollar swap agreement with the PBC.

Last month, economist Carmen Reinhardt (Carmen Reinhart) raised the question of "dollar shortage".

Bloomberg also quoted a report by Zoltan Pozsar, a former Federal Reserve economist, which summed up the "dollar shortage" that the media has been discussing for many years.

In Zoltan Bao's latest report entitled "Global Money Notes", the economist from Credit Suisse said in an article entitled "from privilege to survival dilemma": the decision of the Federal Open Market Committee (FOMC) to return to normal interest rates will give them no choice but to become the last dealer in the foreign exchange swap market, and can only provide the euro area quantitative easing (QEE) policy through the US dollar swap volume for the rest of the world.

According to Zoltan Baltz, Basel Agreement III and the world

The reform has exacerbated the "survival dilemma" in the US dollar financing market.

"For the Fed, it is impossible for banks to limit their balance sheets.

It can only set a parity exchange rate between the US dollar and the euro, and a domestic market oriented monetary policy.

For the Fed, some policies must be made: either the basis of cross currency swap, or the foreign exchange price or interest rate cycle of the US dollar, or the regulation and monetary objectives of the Federal Reserve, or the control of the size of the Federal Reserve's balance sheet.

No matter quantity or price... "

For cross currency basis point swap (CCBS) problem, Zoltan Baltz predicted: "before the US Federal Reserve takes measures, cross currency base point swap will become more negative. The three month US dollar against Japanese yen base point by 150 basis points is not impossible," this trend may lead to a more significant weakening of the yen.

At present, the three month exchange rate of the US dollar against the euro has dropped to -43.9 basis points, and is close to its recent record low -58.8 base point.

Two months ago, due to the panic caused by the deutsche bank crisis, the index fell sharply and created a new record.

By the way, this worry about European banks still raises worries about the liquidity of the US dollar and gives people a feeling of deja vu.

Economists such as Zoltan Baltz and Mylchreest have repeatedly stressed how the US dollar capital crisis exacerbated the tightening of monetary policy in other parts of the world, and may even allow the renminbi to accelerate its so-called "tightening supply of financial services to all parts of the world".

Conversely, if tightened

The slowing down of supply conditions will not speed up the pace of global economic growth.

Because foreign banks will pass on their high cost to their customers, and even more overly practices: for example, deleveraging their debts.

If the Fed wants to be able to play a mediating role in the minimum dollar demand of all countries, it needs to constrain the balance sheets of major US banks.

Offshore financial conditions may tighten, and the dollar may also rise to a new strong position, which is no longer consistent with the path expected by the fund's interest rate, and the subsequent devaluation of the renminbi will not help to normalize interest rates.