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.

[Attention Surplus Disorder]

“Can you watch this overnight?”

You can watch one aspect, the futures market, here: www.cme.com

The “e-mini” indication, divide that by ten, that’s where the DJIA would open if it opened right now, eg, DJ -132.5 as I write this. Of course, the DJIA does NOT open “now”, it opens in about 10-1/2 hours.

[RaceBannon]

If this is true, it sounds like what that Pennsylvania rep was talkng about last Sep, Kanjorski? that there is a coordinated run on money systems, done intentionally, done with malice and forethought

for the purpose of bringing financial markets into chaos

[jiggyboy]

Another real-time observation from http://www.jsmineset.com:

“An unwind is taking form right now, this minute, (9:10PM ET) that may or may not be contained by international Central Bank action.

“Even if central Europe does not financially implode the world money system today, it is just around the corner.

“There are so many risks threatening us now that survival of any monetary status quo is doubtful.

“Protect yourself.

“It has hit the fan, right now, and all that is thanks to OTC derivative manufacturers and distributors.”

[Velveeta]

Haven’t ‘they’ been saying for a while that the Euro may not hold up anyway and that EU countries may revert back to their own currencies?

Sorry, I totally don’t understand any of this, but keep trying to read and learn.

[Batman11]

ping

[Ernest_at_the_Beach]

From marketwatch:

BOJ meets as economy in worst slump since 1970s********************EXCERPT**************************

Board of Japan's central bank likely to discuss extending loan scheme

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- The Bank of Japan's policy board will meet this week under pressure to come up with creative answers to the nation's deepening economic gloom, after the latest data revealed the country suffered its biggest quarterly contraction since 1974.

With most economists forecasting more deterioration ahead, the central bank is left with a dearth of conventional options.

"Effectively all the Bank of Japan can do is accelerate measures that have already been announced," said Glenn Maguire, SocGen's chief Asia economist in Hong Kong.

Preliminary data released Monday by the Cabinet Office showed Japanese gross domestic product shrank 12.7% on an annualized basis in the October-December period, or 3.3% from the previous quarter. The decline was the biggest since a 13.1% annualized contraction in the January-to-March period in 1974.

The contraction followed a 2.3% annualized drop in the July-September quarter, bringing the fall in activity to three quarters. That's the longest since the recession that ended in December 2001, which followed the collapse of the technology bubble. See full story on Japan's GDP contraction.

The BOJ's two-day policy board meeting is slated to begin Wednesday, and is expected to focus on actions geared towards easing corporate finance conditions.

[Velveeta]

Well, I’ll just wait here and if someone tells me to go buy water and canned goods, I’m on it.

[PhiKapMom]

Thanks! What a mess!

[Ernest_at_the_Beach]

See #46.

[SatinDoll]

Saw this and thought of you! Sounds kind of urgent.

[HangnJudge]

[farlander]

Will everyone just freaking calm down ? There is nothing extraordinary going on here from the size of the move, AND, the S&P futures looks like they’ve stabilized at only -13 and there seems to be some buying coming in.

Chill people the END is not (quite) neigh.

[Velveeta]

Thanks, I think. My eyes just glazed over.

How does the whole world’s economy tank at the same time?

Where’d the money go?

[steve86]

One can find ten scholarly articles every day saying that the Dollar(Euro) will Crash(Skyrocket). Take your pick. No one knows what the hell will happen because this global scenario has never been seen before, not even close.

[cmj328]

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

Someone please explain!

What's the likely long-term effect of this short-term dollar run on commodity prices?

[FlingWingFlyer]

Dollar to a donut that Soros is involved.

[HangnJudge]

[PhiKapMom]

MI>I suspect that if we dug deeper we'd find George Soros and his pack of jackals in there trying to run the banks in Korea AGAIN. This tactic may screw Soros.

I'd keep my eyes open for anything that links Soros with the bonds noted above.

I was just going to ask if somehow Soros is involved in all of this -- he has been responsible with his jackals of messing with the markets. Hope this one bites him big time because if it bites Soros, it bites ZERO!

[farlander]

Ok, there IS NO ‘run’. A 150 pip move is not a ‘run’.

[cmj328]

Protect yourself.

Uh, how?