So the main issues I've been able to gather are they weren't required to report the liabilities on the balance sheets which are where most formulas for policymakers get their data from, many are only reported only in the footnotes. Still working my way through it.
The obvious issue, and worry is financial contagion.
There are so many USD denominated swaps outstanding, that will need to be paid back in full plus interest in the same short time horizon with USDs (12 months), and the global amount of USDs available in circulation falls far short of the currency needed to fulfill the obligations.
Also, thanks to interest rate changes, you have it behaving in some respects like an underwater variable interest rate mortgage if they try to roll it forward, it acts in many respects similar to a naked options contract with exponential losses as we are already going into a global recession.
The worry, is the balance of payments crises that these will likely develop into if a default/liquidity issue occurs. Then there is also the matter of actually settling the issue as the amount exceeds what the dealers and swap banks would be able to absorb or cover.
The mechanics seem to be somewhat similar to what happened with the naked shorting on Gamestop above the float, you get a squeeze but on a much larger scale since its all US notes and dollars.
It can potentially lock the entire system up by depriving foreign markets of sufficient USDs needed to pay back their obligations in that time horizon (liquidity crisis).
The relative yield of the dollar to other currencies would skyrocket uncontrollably, and due to the energy sectors close ties with the petro-american dollar, those products would also likely skyrocket as well, unless OPEC nations decide to take a loss (they historically almost never have done that).
Exchange rates due to the shock would be un-affordable to most contries, and the USD for the global reserve currency could potentially be abandoned if rates become inequitable for an extended period for foreign trade.
Its a real knifes edge between maintaining the global reserve currency by printing enough to fulfill the obligations which could cause Weimar like inflation domestically, or abandoning the trade status, military bases, UN votes, and other leverage we commonly use which are largely derived from debt obligations after a unofficial default, which have been provided through various entities such as IMF and World bank investments.
I still have a lot more to dig into it, but just as a casual observation, it looks like some group of people are trying to create the economic factors described in Ayn Rand's book Atlas Shrugged.
The obvious issue, and worry is financial contagion.
There are so many USD denominated swaps outstanding, that will need to be paid back in full plus interest in the same short time horizon with USDs (12 months), and the global amount of USDs available in circulation falls far short of the currency needed to fulfill the obligations.
Also, thanks to interest rate changes, you have it behaving in some respects like an underwater variable interest rate mortgage if they try to roll it forward, it acts in many respects similar to a naked options contract with exponential losses as we are already going into a global recession.
The worry, is the balance of payments crises that these will likely develop into if a default/liquidity issue occurs. Then there is also the matter of actually settling the issue as the amount exceeds what the dealers and swap banks would be able to absorb or cover.
The mechanics seem to be somewhat similar to what happened with the naked shorting on Gamestop above the float, you get a squeeze but on a much larger scale since its all US notes and dollars.
It can potentially lock the entire system up by depriving foreign markets of sufficient USDs needed to pay back their obligations in that time horizon (liquidity crisis).
The relative yield of the dollar to other currencies would skyrocket uncontrollably, and due to the energy sectors close ties with the petro-american dollar, those products would also likely skyrocket as well, unless OPEC nations decide to take a loss (they historically almost never have done that).
Exchange rates due to the shock would be un-affordable to most contries, and the USD for the global reserve currency could potentially be abandoned if rates become inequitable for an extended period for foreign trade.
Its a real knifes edge between maintaining the global reserve currency by printing enough to fulfill the obligations which could cause Weimar like inflation domestically, or abandoning the trade status, military bases, UN votes, and other leverage we commonly use which are largely derived from debt obligations after a unofficial default, which have been provided through various entities such as IMF and World bank investments.
I still have a lot more to dig into it, but just as a casual observation, it looks like some group of people are trying to create the economic factors described in Ayn Rand's book Atlas Shrugged.