The Squeeze Continues

Jeffrey P. Snider has a brilliant analysis of certain aspects of the "dollar" squeeze and contraction in monetary flows I have also been Nattering about… and why its only going to get much worse. Key snippets below…

"The PBOC is not intervening by "selling UST" in order to "prop up the yuan" at all, but rather trying to maintain a steady supply of global currency for its own point of access – the credit-based reserve "dollar" currency. The central bank is attempting to fill a void of created by a foreign, market imbalance. 

Again, if China was under threat and action of "outflows", where are they? They should have shown up somewhere by now, and since this "outflow" has not been limited to just China, that's a lot of "currency" that is supremely missing. Instead, "deflation" has gripped the globe as has the increasing occurrence of recession and recession-like levels of activity; as if the global "money supply" has been contracting.

That is the main point about China, namely that in a credit-based reserve currency system global money can be destroyed rather than being redeployed somewhere else. In fact, dependent upon balance sheet conditions in the aggregate, the credit-based reserve dollar can just disappear at a moment's notice if balance sheets so contract themselves. Given the plethora of indications that big banks, the actual eurodollar supply, have been doing just that, none of this should truly be misunderstood let alone surprising."

King Dollar is the form of the destructor and the global "dollar" contraction continues.