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Cash Glut in Eurozone Drives Dollar Demand

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Re: Cash Glut in Eurozone Drives Dollar Demand

#31

Post by dragonwriter »

Rexxar wrote: post #17
ummonk wrote: post #15

Earlier quoted context omitted.

In this case it seems more like the ECB that's shoveling free money to the Euro banks.

I don't think it's in this direction: negative interest rates means that banks lose money when they let their money on ECB account so they have to use it somewhere else. Here, they use it to buy dollars.

Negative interest rates mean that banks get extra money for taking short term loans to cover reserve shortfalls, which sounds a lot like having better-than-free money shoveled at them.

Re: Cash Glut in Eurozone Drives Dollar Demand

#32

Post by landemva »

pezzana wrote: post #27

> Cash-rich eurozone banks are rushing to change their euros into dollars by the end of the year, driving a key measure of demand for the greenback. > The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars. De…

I thought Treasury stopped issuing longer term notes some years ago. Can buy up to 10 years here https://www.treasurydirect.gov/indiv/products/prod_tnotes_gl...

Gold was captured and centralized in WW2. Formalized with Bretton Woods. Formally repudiated by Nixon in 1971. Gold and silver demonetization has been happening for decades and the gold bugs can't see it.

Fed hot air is stupid show and provides reporters something to publish.

Re: Cash Glut in Eurozone Drives Dollar Demand

#33

Post by splittingTimes »

pezzana wrote: post #27

> Cash-rich eurozone banks are rushing to change their euros into dollars by the end of the year, driving a key measure of demand for the greenback. > The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars. De…

The scandals if the last 5-10 years showed that

Libor - interest rates

ISDAfix - swaps

Platts - oil prices

WM/Reuters - FX

High-Frequency Trading - equities

Commodities - Gold, Silver Stock indices

Are all rigged. So these markets will not give you a truthful signal on what is going on.

Re: Cash Glut in Eurozone Drives Dollar Demand

#34

Post by pmorici »

pezzana wrote: post #27

> Cash-rich eurozone banks are rushing to change their euros into dollars by the end of the year, driving a key measure of demand for the greenback. > The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars. De…

"What gives is that the Fed isn't printing money and lacks the authority to do so. QE is not a printing press. It doesn't conjure money into being. QE can't cause inflation and its effects on long-term interest rates are questionable at best."

You can go to the feds website and see the dollar amount of bonds they are buying every month. Where exactly do you think this money comes from? They buy these bonds with newly created money. In the modern system they don't literally print paper money they do it through the expansion of credit. Their bond buying absolutely explains low bond yields.

https://www.newyorkfed.org/markets/domestic-market-operation...

Re: Cash Glut in Eurozone Drives Dollar Demand

#35

Post by lettergram »

landemva wrote: post #32
pezzana wrote: post #27

> Cash-rich eurozone banks are rushing to change their euros into dollars by the end of the year, driving a key measure of demand for the greenback. > The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars. De…

I thought Treasury stopped issuing longer term notes some years ago. Can buy up to 10 years here https://www.treasurydirect.gov/indiv/products/prod_tnotes_gl... Gold was captured and centralized in WW2. Formalized with Bretton Woods. Formally repudiated by Nixon in 1971. Gold and silver demonetization has been happening for decades and the gold bugs can't see it. Fed hot air is stupid show and provides reporters some…

I find it interesting Russia has 5x their reserves of gold since 2008

https://tradingeconomics.com/russia/gold-reserves

and appears to be divesting form the dollar

https://www.cnbc.com/2021/06/03/russia-to-remove-dollar-asse...

China has also 4x the reserved gold since 2008

https://tradingeconomics.com/china/gold-reserves

That being said, I generally agree the "gold standard" has been shattered. That said, the future is likely something like crypto that can be tracked and monitored closely.

Re: Cash Glut in Eurozone Drives Dollar Demand

#36

Post by granzymes »

janmo wrote: post #16
Archelaos wrote: post #5

The article explains the eurozone banks' rush from Euros to Dollars by the difference in interest rates. What puzzels me is that it should be the other way around when you take inflation into account: Euro central bank interest rates: -0.5 % [1] Euro inflation (Nov.): 4.9 % [2] This yealds a Euro netto interest rate of -4.95 % Dollar FED interest rates: +0.05 % [3] Dollar inflation (Nov.): 6.8 % [4] This yealds a Dol…

Inflation is calculated in a different way in the US and in the EU. If the calculation was the same, the inflation number would be quite similar.

You have that backwards, the gap actually increases. The Harmonized Index of Consumer Prices (EU-style inflation) for the US is sitting at 7.25% YoY.

https://fred.stlouisfed.org/series/CP0000USM086NEST

Re: Cash Glut in Eurozone Drives Dollar Demand

#37

Post by wsc981 »

splittingTimes wrote: post #33
pezzana wrote: post #27

> Cash-rich eurozone banks are rushing to change their euros into dollars by the end of the year, driving a key measure of demand for the greenback. > The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars. De…

The scandals if the last 5-10 years showed that Libor - interest rates ISDAfix - swaps Platts - oil prices WM/Reuters - FX High-Frequency Trading - equities Commodities - Gold, Silver Stock indices Are all rigged. So these markets will not give you a truthful signal on what is going on.

Yep ...

https://twitter.com/wmiddelkoop/status/1470997851052429320

These companies that manipulate the commodity prices, they occasionally settle or are forced to pay some (relatively) small amount of money as punishment and then they continue business as usual. Because apparently the benefits outweigh the costs ...

Re: Cash Glut in Eurozone Drives Dollar Demand

#38

Post by BozeWolf »

pmorici wrote: post #34
pezzana wrote: post #27

> Cash-rich eurozone banks are rushing to change their euros into dollars by the end of the year, driving a key measure of demand for the greenback. > The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars. De…

"What gives is that the Fed isn't printing money and lacks the authority to do so. QE is not a printing press. It doesn't conjure money into being. QE can't cause inflation and its effects on long-term interest rates are questionable at best." You can go to the feds website and see the dollar amount of bonds they are buying every month. Where exactly do you think this money comes from? They buy these bonds with newly…

Commercial Banks print money. Central banks dont do that. Commercial banks create money with loans. If you pay back a loan, your money is removed from the system.

Read this: https://themacrocompass.substack.com/p/tmc-6-all-they-told-y...

Banks wont lend (=print) more because of risk/reward ratios. Credit worthiness and yields.

I like the terminology “inside money” and “outside money” as well.

Re: Cash Glut in Eurozone Drives Dollar Demand

#39

Post by neilwilson »

pmorici wrote: post #34
pezzana wrote: post #27

> Cash-rich eurozone banks are rushing to change their euros into dollars by the end of the year, driving a key measure of demand for the greenback. > The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars. De…

"What gives is that the Fed isn't printing money and lacks the authority to do so. QE is not a printing press. It doesn't conjure money into being. QE can't cause inflation and its effects on long-term interest rates are questionable at best." You can go to the feds website and see the dollar amount of bonds they are buying every month. Where exactly do you think this money comes from? They buy these bonds with newly…

" They buy these bonds with newly created money. "

They buy the bonds with different bonds.

One bond is a (say) 25 year bond at 2.5%, the other is a perpetual bond at federal funds rate that can only be held by those with a Federal Reserve account.

And all that does is change the composition of the asset side of a bank meaning they get less free income.

Re: Cash Glut in Eurozone Drives Dollar Demand

#40

Post by lordnacho »

landemva wrote: post #7

The article says EU banks can borrow at up to -1%. The article also says, "put that cash into the Federal Reserve’s reverse repo facility, which allows banks to park cash for a return of 0.05%." They get paid to borrow and then paid to deposit what they just borrowed. Anyone see a problem with this risk-free infinite money mechanism?

That isn't risk free. Plenty of people have gotten stung getting a mortgage in a foreign currency.

Source: I used to do this trade for a fund.

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