RED ALERT: FX Dislocation In Process

Market Ticker ^ | 2-16-2009 | Karl Denninger

[dangermouse]

8:17 CT

I do not know what is going on here, and I don't think I want to.

Someone, apparently someone in Asia, wants dollars. A LOT of dollars. There is a forced-liquidation event underway that is massive, it is against all asset classes and it is spreading.

It originated at approximately 7:15 CT this evening and originated out of Asia somewhere. All of the primary currency crosses got hit at once - Euro, Pound, Yen - all weakened dramatically against the dollar and it is still going on. The Asian stock markets got walloped at the same time in coordinated waves of forced selling.

At the same time the US futures markets got nailed as well, down some six handles on the /ES in a near-vertical drop. While this sounds "not that big" to move these markets in a coordinated fashion like this is a trillion-dollar enterprise - this is not some small company that went bankrupt, or even a large company.

There is no news coverage at the present time identifying the source of this but it is not small and contrary to some reports it is not "automatic selling"; this is forced liquidation.

Folks, if this translates into Eastern Europe where there are severe instabilities already brewing literally everything in the financial world could come apart "all at once."

The worse news is that if this happens Bernanke will have killed us (in the US) by extending those swap lines all over the planet during the last six months. These will become utterly uncollectable and they are massive, in the many hundreds of billions of dollars.

To those who are reading this, I hope if you're in the markets you are prepared for extreme levels of violence. You must expect that the authorities will try to arrest the destruction if they are able, but you must also be prepared for the possibility that we have reached a "critical mass" point beyond which "duck and cover" is the only winning strategy.

Unfortunately.

I hope I'm wrong; this is going to be a long night.

[RegulatorCountry]

Two Dave’s are always right on top of things and explain very well what is happening and yet I cannot remember their screen names. This time I am writing them down.

One of them would be NVDave, PKM. Sorry I conked out on you without any goodnights or anything, but it was midnight here, and I had/have an early day.

[Squantos]

If ya didn’t already have yer pocket fifth of everclear and candy bar it’s too late Bert !!........:o)

[101voodoo]

Are you saying that if we actually enter a depression, the FDIC insurance on the CD’s won’t be honored?

Please explain this as I believe if the government fails to live up to it’s insurance obligations re the banks, then all faith in the banks AND the government will be lost for a good long time if not permanently. It would seem at that time if it gets here, we would have anarchy.

Is this your position also?

[101voodoo]

“A French state-controlled agency is looking to US investors for the first time to help raise several billion dollars of bail-out funding for the country’s banks.

Amazing how the the Euro sh*ts loathe us until they find themselves up against it. Then we suddenly become their newest best friends.

Slimy, pretentious, elitist bastards, the whole freakin lot of them.

[autumnraine]

Just like on Sept 11, 2008. $550 billion in 2 hours?

[autumnraine]

I’d do it now. I’ve been buying for several weeks and stocking up. You don’t want to wait until everyone else is.

[Orange1998]

EMU defaulting members is like California defaulting in the Union, No?

[SE Mom]

What I find so alarming is how easily this is happening ..our freedom is vanishing before our eyes.

[khnyny]

bump for later read.

[Malsua]

Just for a point of reference. I captured this today at 8 am eastern. It'll be interesting to see what it is at close today. Certainly the dollar is strengthening across the board vs all the major currencies.

[ConservativeMan55]

bttt

[FromLori]

http://www.bloomberg.com/?b=0&Intro=intro3

Stocks Drop Around Globe, Led by Banks, as Euro Declines, Treasuries Rise

[OB1kNOb]

Japan has announced it is officially in depression, tanking the Yen.

Do you have an article/source I could use? Thanks.

[FromLori]

Me too and yes it is that was the plan all along.

http://www.newswithviews.com/Cuddy/dennis148.htm

[FReepaholic]

Update: Russia Exchanges Closed

[RegulatorCountry]

I was quoting a reply I’d seen on one of the financial boards. As far as a link, here’s one:

http://www.theage.com.au/national/japan-plunges-into-depression-20090216-899i.html

[PhiKapMom]

No problem — I appreciated your explanations so I could understand what was happening. I was on the phone for some time and came back to check in to see what was going on and then went to bed.

[SAJ]

Not at all. Remember, a **lot** of the Euro nations joined both EU and EMU without popular consent. There is shortly going to be an enormous exit, voluntary or involuntary, of asssorted nations' politicians. Maybe bureaucrats, too. Maybe courtesy of the business end of a rhetorical pitchfork.

EU, in theory, acts as super-guarantor of the solvency of its member states. The US is under no Constitutional obligation whatever to bail out any given state, although Osamabama will probably rush to do so. Jackass.

[OB1kNOb]

Thanks for the link, RC.

[GOPJ]

We have an open financial system designed for basically honest people to trade. Might be time to put up a metaphorical firewall...