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Tsunamis, Runs and Rubles
davidstockmanscontracorner.com / by Jeffrey P. Snider via ALHAMBRA PARTNERS /
This is admittedly at best a fitted analogy, but you get the point. There are times when so unnatural seems some occurrence that it overrides common sense. There is no logic to it; it is its own logic. That dangerous process is all the more so wherever the phenomenon stretches into symptoms or outbreaks that are unfamiliar even under benign circumstances. Such it is with this dollar “run.”
It has all the hallmarks of a bank run, only that there isn’t (maybe) the traditional features of convertibility that everyone heard about in their ancient economics textbooks laying blame upon gold. Currency elasticity in the form of central banks authorized with full discretion and flexibility was supposed to have relegated bank panic to the same past as those books. The events in 2008 put that notion to rest.
What was curious about the “run” in 2008 was that it wasn’t currency or money; it was wholesale of things like eurodollars, repo collateral and credit default swaps. We are told, even today, that these are only “investments” but any close examination of the 2008 panic shows irrefutably otherwise. Repo is perhaps the easiest to understand since at the worst of the crisis UST collateral was “more valuable” than cash; thus the $5+ trillion in repo failsduring the worst of it. It makes sense if you understand that the “run” at that time was an interbank run, not an external convertibility run, and thus the currency relevant to that run was not “cash” (itself in various forms) but collateral.
The post Tsunamis, Runs and Rubles appeared first on Silver For The People.
Source: http://silveristhenew.com/2016/01/24/tsunamis-runs-and-rubles/
