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(Yahoo)   If you happen to find the $65 trillion in missing U.S. Dollar debt, please contact Chairman Jay Powell so he can set it on fire before anyone finds out   (finance.yahoo.com) divider line
    More: Scary, Currency, Debt, Foreign exchange market, Federal Reserve System, Finance, dollar debt, United States dollar, Dollar  
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1067 clicks; posted to Business » and Main » on 05 Dec 2022 at 1:22 PM (8 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



21 Comments     (+0 »)
View Voting Results: Smartest and Funniest
 
2022-12-05 12:37:01 PM  
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2022-12-05 12:47:45 PM  
Last I heard, the Pentagon already burned it.
 
2022-12-05 1:34:10 PM  
I wouldn't say I am missing it, Bob.
 
2022-12-05 1:43:23 PM  
It's like letting Chuck E. Cheese token traders and unregulated currency swap morons operate in the dark was a bad idea......
 
2022-12-05 2:03:07 PM  
Can someone translate what would have to happen to make that $65T do bad things?  Pretend for a moment that I don't know anything about finance, economics, or banking, and just tell me what the hell is going on.
 
2022-12-05 2:11:11 PM  
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2022-12-05 2:14:32 PM  

sleze: Can someone translate what would have to happen to make that $65T do bad things?  Pretend for a moment that I don't know anything about finance, economics, or banking, and just tell me what the hell is going on.


Well, what I can tell you is that you are as well informed as the author of the article.

Someone added up the outstanding derivative positions and forgot that there's a counterparty in every one of those contracts.  You would have to unwind every contract to see if there was some institution that was overleveraged in such a way that unwinding all those contracts at once would result in that institution going bankrupt.  That's also ignoring the fact that most of those contracts don't expire all at the same time.  In other words, someone added a bunch of numbers and got a scary number that they then waved around shouting "OGABOOGA!"
 
2022-12-05 2:17:14 PM  

sleze: Can someone translate what would have to happen to make that $65T do bad things? .


Not exactly. And neither can the people whose job is to prevent these "bad things." That's the problem, and that's why they are worried.
 
2022-12-05 2:21:14 PM  
Now, how much money is there in the world?
 
2022-12-05 2:23:35 PM  

sleze: Can someone translate what would have to happen to make that $65T do bad things?  Pretend for a moment that I don't know anything about finance, economics, or banking, and just tell me what the hell is going on.


It sounds like it's creating Fear, Uncertainty, and Doubt in government issued money that you can use to pay your taxes, car registration, hooker fees, etc.

So you should secure your future by gambling investing in 13 milligrams of gold souvenir coins splitting 8's in blackjack cryptocurrency.
 
2022-12-05 2:29:17 PM  
To be sure, the debt is backed by an equivalent amount of hard currency. To understand how the system works, consider a Dutch pension fund buying assets in the US. As part of the transaction, it will often use a foreign-currency swap to exchange euros for dollars. Then, when it's closed out, the fund will repay dollars and receives euros. For the length of the trade, the payment obligation is recorded off-balance sheet, which the BIS calls a "blind spot" in the financial system.

TFA does a poor job of explaining the actual risk.  Yes it mentions settlement risk but I'm a dummy and I need this stuff spelled out for me.  Are they suggesting that some swaps will fail to be settled as some parties won't have enough USD if the underlying asset value drops significantly right before it is sold?

/luckily USD usually increases in value during financial crises
 
2022-12-05 2:44:35 PM  

Minor Catastrophe: sleze: Can someone translate what would have to happen to make that $65T do bad things?  Pretend for a moment that I don't know anything about finance, economics, or banking, and just tell me what the hell is going on.

It sounds like it's creating Fear, Uncertainty, and Doubt in government issued money that you can use to pay your taxes, car registration, hooker fees, etc.

So you should secure your future by gambling investing in 13 milligrams of gold souvenir coins splitting 8's in blackjack cryptocurrency.


Waste your money if you want. I'm buying cocaine.
 
2022-12-05 2:45:37 PM  
Anyone check Dick Cheney's couch cushions?
 
2022-12-05 3:29:55 PM  
Personally, if I had a $65 tillion debt out there, I'd hope the creditors lost it in any way they pleased.
 
2022-12-05 4:01:47 PM  

D135: To be sure, the debt is backed by an equivalent amount of hard currency. To understand how the system works, consider a Dutch pension fund buying assets in the US. As part of the transaction, it will often use a foreign-currency swap to exchange euros for dollars. Then, when it's closed out, the fund will repay dollars and receives euros. For the length of the trade, the payment obligation is recorded off-balance sheet, which the BIS calls a "blind spot" in the financial system.

TFA does a poor job of explaining the actual risk.  Yes it mentions settlement risk but I'm a dummy and I need this stuff spelled out for me.  Are they suggesting that some swaps will fail to be settled as some parties won't have enough USD if the underlying asset value drops significantly right before it is sold?

/luckily USD usually increases in value during financial crises


Honestly, I can't see much in the way of risk since in most scenarios this "debt" is part of a swap for a largely equal value in another currency so each company involved should have an asset that offsets the liability.

The risk at best would be that one of the companies involved goes under and their assets aren't enough to repay the debt swap which leaves the other company the only option but to cancel out the liability and asset on their end leaving them holding foreign currency they had planned to swap back and as a result they are exposed to currency exchanges and the rates they are currently at instead of a predetermined exchange.

At least that's how I understand foreign currency swap. Essentially you have 100 USD and need 100 EURO while I have 100 Euro and need 100 USD. You give me your USD so I can invest in McDonald's McRib sandwich's and I give you 100 Euro to invest in ammo to fire at Russians. We then set a repayment schedule with interest rates largely based on the risk that the currencies could fluctuate and at the end of the term you've repaid my 100 Euro plus any interest and I've repaid your 100 USD plus any interest. If you go broke the next day after making the swap I might not get my euros back but I am still holding your 100 USD which I can use to wipe out your Euro debt but then I'd have to take that to an exchange to get my Euros back but might not get enough since euros might be down (or up, hence the risk of just using exchanges).

So unless I'm missing something this article is a bunch of alarmist bullshiat.
 
2022-12-05 4:22:10 PM  

keldaria: So unless I'm missing something this article is a bunch of alarmist bullshiat.


Nope, you're not missing anything.  Some form of this article is always being brought up by the financial panic crowd.
 
2022-12-05 6:14:22 PM  

Phil McKraken: Minor Catastrophe: sleze: Can someone translate what would have to happen to make that $65T do bad things?  Pretend for a moment that I don't know anything about finance, economics, or banking, and just tell me what the hell is going on.

It sounds like it's creating Fear, Uncertainty, and Doubt in government issued money that you can use to pay your taxes, car registration, hooker fees, etc.

So you should secure your future by gambling investing in 13 milligrams of gold souvenir coins splitting 8's in blackjack cryptocurrency.

Waste your money if you want. I'm buying cocaine.


I'm looking for a reliable source of hookers and blow for when my foolproof plan to hit the lottery comes to fruition.

I'll pay a generous mark-up to an internet stranger on a squirrely website for half my desire.

Keep the cocaine. Pencil me in your mom's appointment book for 12/22/23 (22/12/23 if you are unamerican)
 
2022-12-05 6:23:49 PM  

Minor Catastrophe: Phil McKraken: Minor Catastrophe: sleze: Can someone translate what would have to happen to make that $65T do bad things?  Pretend for a moment that I don't know anything about finance, economics, or banking, and just tell me what the hell is going on.

It sounds like it's creating Fear, Uncertainty, and Doubt in government issued money that you can use to pay your taxes, car registration, hooker fees, etc.

So you should secure your future by gambling investing in 13 milligrams of gold souvenir coins splitting 8's in blackjack cryptocurrency.

Waste your money if you want. I'm buying cocaine.

I'm looking for a reliable source of hookers and blow for when my foolproof plan to hit the lottery comes to fruition.

I'll pay a generous mark-up to an internet stranger on a squirrely website for half my desire.

Keep the cocaine. Pencil me in your mom's appointment book for 12/22/23 (22/12/23 if you are unamerican)


My mother isn't performing castrations until January, but there are plenty of do-it-yourself options available.
 
2022-12-05 7:30:17 PM  

sleze: Can someone translate what would have to happen to make that $65T do bad things?  Pretend for a moment that I don't know anything about finance, economics, or banking, and just tell me what the hell is going on.


Imagine, for a moment, each of those dollars were a soldier pointing a rifle at you. You'd be quite nervous then, wouldn't you?
 
2022-12-05 10:55:05 PM  

keldaria: If you go broke the next day after making the swap I might not get my euros back but I am still holding your 100 USD which I can use to wipe out your Euro debt but then I'd have to take that to an exchange to get my Euros back but might not get enough since euros might be down (or up, hence the risk of just using exchanges).


I think that's a great description of the settlement risk.

A business or pension fund will enter into a currency swap to hedge their currency risk but if the counterparty to the swap doesn't fulfil their obligation then, well... here's hoping you're holding USD and not the Euro or Yen otherwise you could take a significant loss depending on when the transaction was initiated.

But I guess a headline like "FX swaps at all-time highs" isn't click-baity enough.
 
2022-12-05 11:38:31 PM  
This is an anxiety bait article. First, we know that people get all puckery when people bring up options, derivatives, swaps, strategies, products, or whatever sounds confusing to an investor who uses RobinHood to trade.

But we also know that this "huge debt overhang" is the fault of all those unscrupulous and unqualified traders in other countries who are just "not as good at this stuff as we are." After all, they have to borrow in dollars because they are operating with unstable conditions in their own currency.

In about the mid 1980s, there was EURODOLLAR hysteria. There were so many dollar deposits being lent out in Europe that regulators became concerned that borrowing and lending in them overseas was going to get bigger than what the Fed could control. What we have today is much much more of the same. We had then, and basically have now, a situation where foreign holdings have to be considered when the Fed makes policy.

Dollars aren't "owned" by Americans alone, and they never have been.
 
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