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SA-Anon posted:I see the USD and Euro continuing to hold the lions share for the foreseeable future.  Can you qualify this, or help us understand your thinking better I seem to recall Australia getting bitchy when we did/did not share submarine secrets with them/not them/France. And I guess Boeing is building their "ghost bat" fighter drone... thing, in Australia, but I don't see Australia exporting just a whole lot besides uranium and maybe coal? The likelihood of AUD becoming a global currency seems about as likely as the Israeli Shekel, at least from my very limited viewpoint
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Apr 26, 2023 05:58
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Hadlock posted:
Australia is a stable democarcy. Can export LNG or Coal right to all the SE and Asian Markets with minimal delays. And Australia knows how to mine. Copper, possibly some rare earths.... Additionally... If it comes to fruition.... High Voltage DC Transmission is a thing and maybe power could be transmissioned from Australia over seas. Also exporting Ammonia is supposedly one of the next big things. (NH3 instead of CH4) Australia has the coast line and land mass to make those renewable energy exports happen. And the shipping times matches up with their advantages previously seen for coal / LNG. TLDR: Ya'll have the existing know how and existing geographical advantages for energy export. So its simply a matter of changing from one type of energy to another. Last I heard they were going to build a High Voltage DC Transmission line to Singapore. And if that happens... You could see quite a bit going on. SA-Anon fucked around with this message at 06:57 on Apr 26, 2023 |
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Apr 26, 2023 06:49
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https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) Honestly, 13th in the world is larger than I was expecting. Approximately on par with south korea. Incredible how bad Russia is doing. But by comparison, Australia's GDP is, roughly, a bit less than 7% that of the US. The sheer size of the US economy is one of the key factors keeping the US dollar the world's reserve currency, and while the EU as a total looks at a quick glance to be roughly similar and China is not far behind, the US represents nearly a quarter of the entire world's economy, and the US + EU is roughly half. e. California's GDP is estimated at ~$3.6T. Somewhere between the UK and India. Leperflesh fucked around with this message at 07:23 on Apr 26, 2023 |
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Apr 26, 2023 07:17
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a reserve currency needs to have three things: liquidity, liquidity, liquidity. euros are only liquid because of the ecb’s swap lines with the fed, so they can’t be a replacement reserve currency, though they can help supplement dollar liquidity as long as the us remains on top. the renminbi is closed and the dollarydoo, like sterling, yen, and won, is just too small of a market to serve as a global reserve frankly i can see why a lot of foreign countries think they want the usd to be replaced, but wishing won’t make it so. a basket currency managed by the imf is gonna run into the problems that the imf doesn’t want to do it and the us doesn’t want the imf to do it i’m also curious what connection sa-anon identifies between the security council and a reserve currency, and in particular, why changes in the imf-managed sdr would have anything to do with permanent security council seats
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Apr 26, 2023 11:02
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I liked the part about how the reason the Turkish Lira isn't a reserve currency is because of concerns about one party rule. 
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Apr 26, 2023 14:12
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The Lira is a great currency if you have a 30 year fixed rate mortgage ABITRE - Always be investing in Turkish real estate
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Apr 26, 2023 16:15
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The thing that really stands out is that you don't need some central committee to declare a reserve currency. The UN security council has about as much pull in that as I do, myself, personally. It just kinda happens with the currency that is the most convenient for 3rd parties to do business in because of a mix of ubiquity, utility (e.g. a desire to buy stuff from or otherwise trade with the issuing country), stability, and politics. Theoretically speaking it could be loving anything. Countries could decide tomorrow to do trades denominated in Bolivars, or ancient Roman denarii, or loving Alf pogs if they wanted to. Just, you know, they don't because that would be dumb, and there's really no pressure in the world that is going to force them to if some magically competent and muscular UN decides the global currency is yellow Starburst candies. A prime example of that is to look at countries that are in the middle of a currency collapse. There's a whoooooole lot of dollar-denominated trade going on inside Bolivia right now, despite the government's attempts to convince people the Boliviano is doing fine. edit: and none of this means it has to be the Dollar, forever. Once upon a time it as the British pound, but economics and history caught up with that. Could it be the RMB some day? Sure, it could be, but there are some obstacles for it to overcome on the way to that.
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Apr 26, 2023 17:42
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The point about liquidity extends from the point about GDP. The larger a country (or effective, for the EU)'s economy, the more total currency it needs to have in circulation, and that generally approximates liquidity all else being equal (which it definitely is not). The fact the US also runs its government at an enormous deficit and permits anyone in the world to buy US government debt is huge (over $31T). Yes, Americans (including the US government itself) still hold a large majority of American debt, but again, just the sheer size of the economy means there's a highly liquid market for US government securities. Which are denominated in dollars. If your reserve currency is dollars, you can buy US treasuries, and you will receive dollars as your yield, and you'll want to have a liquid market for using those dollars when you need them. The "world" cannot place its reserves in australian dollars in part because they're not attractive enough, but also in part because there simply aren't enough to go around. quote:Australian Government gross debt has increased from $534.4 billion in March 2019 to $894.9 billion as of 28 October 2022. The October 2022–23 Budget forecasts further increases in gross debt to $1.159 trillion (43.1% of GDP) by the end of the 2025–26 financial year This article projects a net increase in Australian borrowing of $AU264B in three years, or about $AU33B annually. Foreign countries hold $7.4T in US debt. They could buy 100% of australian debt for the next three years and it wouldn't make a dent.
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Apr 26, 2023 18:07
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one of the things that’s gotta be unwound before the dollar gets displaced is that a lot of foreign private companies are now issuing dollar-denominated debt. These are entities that are never going to be able to hold XDR or whatever “basket currency” instruments get hypothetically introduced, so as long as those positions are still being held, there will still be foreign demand for dollars requiring that foreign countries hold dollars in reserve.
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Apr 26, 2023 18:08
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A possible reserve currency alternative might be the Japanese yen. I would pick the Brazilian real ahead of AUD, or poo poo, the dreaded ruble, Russia is at least actually a net global mineral and oil exporter as much as I dislike their global politics
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Apr 26, 2023 18:23
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I thought of the Yen too, as the third largest economy. At Japan's economic peak in the 1980s, did anyone use it as a reserve currency?
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Apr 26, 2023 18:34
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Most countries hold at least a couple billion dollars each in various currencies for various reasons. It was a Really Big Deal in 2020-2021 when Japan liquidated something like half a trillion dollars (2/3 of their Brazilian real reserves? I forget). My guess is 1) diversify diversify diversify 2) helps stabilize currency values among the top ~25 economies, instills confidence in those economies etc 3) probably smooths over various international things if/when poo poo gets real 4) distant 4th deincentivizes conflict with those countries as your investment will probably lose value. A big deal if you have a trillion dollars in their currency and it loses half it's value
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Apr 26, 2023 18:45
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There's also like, money is useful for buying things, and can accumulate in one or another country due to trade imbalances, international purchasing agreements, and probably a whole host of other arcane reasons. You can't always just go to the international currency exchange and swap a few hundred million of your currency for another country's trivially with no costs whenever you suddenly want to procure some military poo poo from them or w/e.
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Apr 26, 2023 19:31
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drk posted:I thought of the Yen too, as the third largest economy. At Japan's economic peak in the 1980s, did anyone use it as a reserve currency? Yen is 3rd biggest as of 2022 but still a lot behind the dollar and euro: https://www.statista.com/statistics/233674/distribution-of-global-currency-reserves/ Edit: according to this the dollar is down to 47% of global reserves but it still sounds like the euro is the only one even remotely close at all: https://markets.businessinsider.com/news/currencies/dollar-dominance-global-reserves-china-euro-russia-ukraine-war-greenback-2023-4?op=1 LostCosmonaut fucked around with this message at 23:26 on Apr 26, 2023 |
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Apr 26, 2023 23:23
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Relevant shitpost: (USER WAS PUT ON PROBATION FOR THIS POST) E. Thought I was in another thread. Madre forgive me for I have sinned. Guest2553 fucked around with this message at 16:36 on Apr 28, 2023 |
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Apr 27, 2023 22:57
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No Twitter posts please, can you just edit your post and link to the article directly
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Apr 28, 2023 02:02
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https://www.reuters.com/world/asia-pacific/sri-lankan-activists-protest-proposal-export-monkeys-china-2023-04-18/ It's gross, but not really relevant. China wants monkeys for quote:"This is not a discussion between the Sri Lankan government and the Chinese government but with a Chinese company," Gunawardana told reporters at a weekly briefing, without naming the company. "The committee will evaluate the proposal."
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Apr 28, 2023 02:13
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https://www.reuters.com/business/finance/us-regulator-set-take-over-first-republic-source-2023-04-28/ First Republic is almost certainly dead, looks like it's getting taken over by the FDIC.
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Apr 28, 2023 22:09
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LostCosmonaut posted:https://www.reuters.com/business/finance/us-regulator-set-take-over-first-republic-source-2023-04-28/ I've been out of the loop for a few days. Any reputable sources describe why this is happening? Best I can find is they got credit downgraded in the SVB turmoil and it caused a run on the bank, but I don't get why every story is talking about the stock price.
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Apr 29, 2023 13:01
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They announced a huge fraction of their deposits had been withdrawn, which crashed their stock price, which made maintaining their capital requirements untenable. That’s what’s causing them to go into receivership - afaik there haven’t been problems with withdrawals yet, but they’ve likely run out of cash on hand, even with the fed’s new liquidity measures.
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Apr 29, 2023 13:17
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hypnophant posted:They announced a huge fraction of their deposits had been withdrawn, which crashed their stock price, which made maintaining their capital requirements untenable. The relation between stock price and capital requirements being that ostensibly they would issue more stock to raise capital?
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Apr 29, 2023 13:35
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Yes. That’s what killed SVB; the bank run started after they tried to issue a large amount of stock.
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Apr 29, 2023 14:14
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Read this in CSPAM and I found it helpful. From Matt Levine’s blog https://newsletterhunt.com/emails/29769quote:
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Apr 29, 2023 20:16
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I was going to send Matt Levine's summary - his writing is both accessible to people outside the industry and low key hilarious. He does similar writeups about major financial news and has authored a couple articles that became their own special editions of Bloomberg. I really enjoyed the crypto one.
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Apr 30, 2023 02:01
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Guest2553 posted:I was going to send Matt Levine's summary - his writing is both accessible to people outside the industry and low key hilarious. He does similar writeups about major financial news and has authored a couple articles that became their own special editions of Bloomberg. I really enjoyed the crypto one. The SPY kids one is my favorite.
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Apr 30, 2023 03:02
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Are we going to end up with a situation where the Fed opens up a new bank backed by the Fed, they then buy all mortgages under 4.5%, let it go under or simply liquidate it and the mortgages they're holding are then sold back to the banking sector at fire sale rates so the debt is profitable again? QE by way of giving low interest rate mortgages a haircut in valuation and letting the Fed swallow the loss and tossing it on the bonfire of Fed balance sheet? And/or just setup a mechanism where the Fed will buy back any mortgage at less than 4.5% for the October 2022 value and write it as part of their balance sheet Lending money at 2%-3.5% and then jacking rates up to 8% to match inflation, I don't know how else you handle that besides just forgiving the debt but forgiving debt, suddenly everyone has an extra $600-2500 in their pocket each month that would just throw fuel on the inflation fire Hadlock fucked around with this message at 08:08 on May 1, 2023 |
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May 1, 2023 08:03
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Hadlock posted:Are we going to end up with a situation where the Fed opens up a new bank backed by the Fed, they then buy all mortgages under 4.5%, let it go under or simply liquidate it and the mortgages they're holding are then sold back to the banking sector at fire sale rates so the debt is profitable again? QE by way of giving low interest rate mortgages a haircut in valuation and letting the Fed swallow the loss and tossing it on the bonfire of Fed balance sheet? My take on QE is that you should just think about it as a way to cut rates when rates are already at zero. For various reasons - good reasons IMO - the Fed, unlike ECB and BoJ, has been unwilling to implement negative interest rates to continue loose monetary policy below what’s now called the effective lower bound. QE = a rate cut. QT = a rate hike. Right now the Fed is tightening so we won’t see rate cuts in any form until at least the end of the year - see this timely twitter thread https://threadreaderapp.com/thread/1652776776370733057.html for an argument which puts it better than I can. The Fed ultimately does need to prevent bank runs, but they will turn to bank liquidity tools like the discount window or new Bank Term Funding Program rather than monetary policy tools to do so. The difference here is scale - QE pumped trillions of dollars into securities in order to shift the yield curve across the entire economy, while BTFP may see billions or even tens of billions of dollars of uptake, but not enough to shift macro conditions. Also they don’t need to save every bank, they just need to ensure systemic stability. Letting a couple outliers twist in the wind does not harm their credibility.
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May 1, 2023 15:24
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SVB and FSB going under and having the Fed / FDIC watch it happen while calmly saying “equity and management: get hosed; depositors: you’re okay… for now” is, imo, doing something. In a perfect world, a third bank would fail and they wouldn’t bail unsecured deposits. In a more perfect world, they would also sue management for criminal negligence. Alas.
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May 1, 2023 15:35
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DNK posted:....In a more perfect world, they would also sue management for criminal negligence. Alas. Wasn't there a lot of noise about that with svb? we'll see. There is a shareholder case, but that's kinda par for the course. https://www.reuters.com/legal/silicon-valley-bank-parent-ceo-cfo-are-sued-by-shareholder-fraud-2023-03-13/
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May 1, 2023 17:10
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DNK posted:a perfect world, a third bank would fail and they wouldn’t bail unsecured deposits we’re all in favor of techbros and venture capitalists getting their comeuppance, but you have to see that this significantly raises the risks of a cascade of failures as unsecured money flees to safety. Monetary policy is an hammer, not a scalpel, and if you want to use it to punish the deserving you can’t avoid crushing many of the undeserving as well
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May 1, 2023 17:12
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hypnophant posted:we’re all in favor of techbros and venture capitalists getting their comeuppance, but you have to see that this significantly raises the risks of a cascade of failures as unsecured money flees to safety. Monetary policy is an hammer, not a scalpel, and if you want to use it to punish the deserving you can’t avoid crushing many of the undeserving as well Yeah I’m on board with the depositor bailouts so far, but — at some point — the FDIC should follow their own extremely public and explicit guidance that “up to 250k” means “up to 250k” and not “an infinite backstop to all deposits”. The argument that the FDIC following its own rules-as-written-and-communicated-for-the-last-25-years will “crush the undeserving” as a means to bail out gamblers with no risk mitigation is farcical. How about this: all the uninsured depositors will be guaranteed a 30-year 0% loan for the amount that they lost. There you go — solves the short-term cashflow issues (like companies failing to make payroll) while not being an outright handout. I came up with that in all of five seconds. I figure some Fed lifer could do better.
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May 1, 2023 18:17
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I’m just saying a little bit of panic FOR PEOPLE WITH MORE THAN $250,000 IN A SINGLE BANK is good. Just a smidge. A tasty smack of paranoia that maybe you should pay attention to the company that holds all your money instead of popping a Xanax and crying to daddy government when you get hurt.
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May 1, 2023 18:40
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A big problem is that the central bank is paying attention to failures of some large banks, because of the systemic risks of more big bank runs they represent if these large uninsured depositors are not bailed out; but they have not been bailing out the small banks that fail nor their large >$250k depositors, over the last couple of decades. If they do this more, they are basically telling all depositors "never bank at small banks" and that will destroy small banks. They need to either just admit that we're guaranteeing large depositors now, across the board, at all banks... or not. Piecemeal poo poo that is just paying attention to the immediate problem this month is bad policymaking. More broadly, I am still seeing unqualified statements like in the above quoted article like "...and First Republic’s assets are mostly loans. Those loans tend to be pretty safe — they are mostly mortgages to rich people — but they are very exposed to interest-rate risk, so they have lost a lot of value. And it can’t use them to borrow from the BTFP." Who could have anticipated that taking on massive amounts of very low interest rate mortgage debt could lead to a problem if mortgage rates rose? Whoever could have anticipated that there was interest rate risk? Surely not... bankers? There is massive negligence here, and it's a failure to hedge against interest rate risk. The FED should not be bailing out the people who made this critically bad decision. So the correct answer, regardless of whether you do something to rescue uninsured depositors, is to let the directors of these banks and the shareholders that invested in them and empowered them, to go pound sand, financially. The SVB example is illustrative. First Republic should be taken over by the FDIC if it's insolvent. If we need to decide to raise the cap on insured deposits, fine, do it for everyone, but in no world should the bank managers who chose to take on large portfolios of unhedged low interest loans and did nothing about their exposure to interest rate risk get to keep their jobs, and if we want markets to function properly, investors are supposed to see the consequences of their risks as the counterbalance to the lucrative rewards they receive for taking on risks.
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May 1, 2023 18:41
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Leperflesh posted:A big problem is that the central bank is paying attention to failures of some large banks, because of the systemic risks of more big bank runs they represent if these large uninsured depositors are not bailed out; but they have not been bailing out the small banks that fail nor their large >$250k depositors, over the last couple of decades. If they do this more, they are basically telling all depositors "never bank at small banks" and that will destroy small banks. They need to either just admit that we're guaranteeing large depositors now, across the board, at all banks... or not. Piecemeal poo poo that is just paying attention to the immediate problem this month is bad policymaking. but the fed doesn't want banks to fully hedge interest rate risk, as shown by their coolness towards narrow bank applications. it's easy to say that the small banks are being negligent on interest rate risk, but at the end of the day any hedge is going to be a question of degree unless you want banks to stop holding any significant amount of long term loans on their books. svb definitely was a spectacular failure to manage risk, but if anything it was on the risks associated with almost exclusively catering to savvy depositors. i think part of the vague indecisiveness of the fed is due to them not wanting to create a moral hazard by backstopping all banking activity, while not wanting to publicly acknowledge that there are some inherent risks in tha banking system, as sound as it is. the interest rate risk will always be there as long as we keep our current system where banks borrow short to lend long. completely eliminating that risk seems like it would need a system in which short term deposits and long term debt are kept completely separate. i don't have the background in macroeconomics to guess at what the positive and negative ramifications of that kind of change would be though.
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May 1, 2023 22:00
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GhostofJohnMuir posted:the interest rate risk will always be there as long as we keep our current system where banks borrow short to lend long. completely eliminating that risk seems like it would need a system in which short term deposits and long term debt are kept completely separate. This would involve a complete rethinking and rewrite of the modern global banking system where private business was entirely funded by something looking a lot like VC. Seems unlikely. I would like to see a home mortgage system like the UK and Netherlands where first time owners get a 0 or 1% down mortgage with low or negative interest rates backed directly by the government though. Not sure if banks are involved in mortgages there or how that works but that sure seems like it would make home ownership more accessible. I wasn't able to buy a house in my 20s because home values grew faster than I could save the required 20% for one (08-09 didn't help any, either)
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May 1, 2023 22:18
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DNK posted:Yeah I’m on board with the depositor bailouts so far, but — at some point — the FDIC should follow their own extremely public and explicit guidance that “up to 250k” means “up to 250k” and not “an infinite backstop to all deposits”. FRC equity shares and corporate bonds are getting wiped out. Those were the gamblers. Hard to call random people living near a branch who used it to deposit paychecks or save for a house “gamblers.”. I’d go a little tougher on any business or VC bank deposits over the limit held there, they should know better.
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May 1, 2023 22:27
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pmchem posted:FRC equity shares and corporate bonds are getting wiped out. Those were the gamblers. Hard to call random people living near a branch who used it to deposit paychecks or save for a house “gamblers.”. I’d go a little tougher on any business or VC bank deposits over the limit held there, they should know better. randos aren’t depositing more than 250k into their checking accounts GhostofJohnMuir posted:but the fed doesn't want banks to fully hedge interest rate risk, as shown by their coolness towards narrow bank applications. even a fairly aggressive narrow banking proposal isn’t going to let you put a quarter million+ into a payment account, so it won’t protect anyone who isn’t already going to be made whole by the FDIC
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May 2, 2023 00:37
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hypnophant posted:even a fairly aggressive narrow banking proposal isn’t going to let you put a quarter million+ into a payment account, so it won’t protect anyone who isn’t already going to be made whole by the FDIC sure, they wouldn't have any special fdic protection, but if an institution is taking short term deposits and parking them in the fed's overnight then they've effectively eliminated interest rate risk (as long as you only categorize risk as the downside only). if the fed raises rates it has almost no impact on their assets at least historically the fed wasn't eager for such a bank to exist, although post 2008 this is effectively what many money market funds are
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May 2, 2023 00:50
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e: less snarky post when i can type it up
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May 2, 2023 01:11
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GhostofJohnMuir posted:but the fed doesn't want banks to fully hedge interest rate risk I don't believe it's necessary to "fully" hedge interest rate risk, as in, get the risk entirely off the books. Rather, banks need to "reasonably" hedge interest rate risk, by spending enough of their profits on hedging options to lower the risk to a point where a reasonable future projection of rising interest rates doesn't result in insolvency and bank failure. We can see this is already the case with the many banks that are not, presently, struggling to stay open. SVB and now First Republic represent the tail of a bell curve of banks that have over hedged, reasonably hedged, or under hedged their interest rate risk. But one or two big bank failures represents a systemic risk because of panic resulting in irrational withdrawals, not because all the other banks failed to hedge. So the Fed has to restore confidence, and they're contemplating doing it by bailing out the bank managers who took on unreasonably large amounts of interest rate risk. One of the ways I think you can hedge against interest rate risk on long-term loans you are holding is by having cash that you can lend at higher long-term rates when rates rise. But banks, of course, hate holding cash (or more broadly, assets, e.g, things that can always be sold for cash, e.g. not debts), which is why regulators have to force them to hold a minimum. And every time regulators relax the minimum securitization requirements a bunch of rear end in a top hat bankers go hog wild and a decade or two later it backfires. "Oh noes our mortgage portfolios are suddenly not worth what we thought, but we have no way of coping with losses on these portfolios" is not a new problem and it doesn't really demand novel solutions.
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May 2, 2023 01:33
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