If you have the new Windows Vista I don’t think it works.

How do you make these triangle-like shapes? It looks really good.

swap line risks-

swap lines usually had short durations (3 months) and were used to buy money. Using my early example, if the FED sold the yen they had swapped for USD with the BoJ, they had to buy the yen back on the open market in time to swap the currencies again at the end of the swap term. This did not always work out so well, but never amounted to much.

When the $620bn swap lines were announced a couple of weeks ago, they had 3 or 4 month durations. That’s a lot of money to sell and then buy back in a short amount of time. They have since made the amounts unlimited which removes the time frame constraints and thereby some risk if they are going to use it for currency stabilization.

I originally thought they came up with the $620bn figure based on their assumptions about how much money was going to flee the US. But I’m not so sure now.

Like I said, swap lines have been used for decades. My guess is that the central banks are just using them now because the regulatory structure was already in place and there was no need to ask anyone (congress) for permission to use them for any reason, or for any amount of money.

Another reason for using the swap lines might be more hocus-pocus accounting illusions. I’m pretty sure both central banks can use the money they got in the swap without showing the deficit on their books. Viola! Unlimited spending on both ends of the swap with no oversight!

I am no expert on swap lines (or anything else). We need somebody in here that knows more about them and how they are actually being used right now.

If there is malfeasance going on, this may be the place to find it. I would check the super secret CPFF, too.

thanks for the update. i have friends in Michoacán so i know all about the drug wars…and the corruption…and the machismo playing itself out down there.

from your dire forecast, perhaps the only thing that might save the people from suffering from this for another generation and then some is the fulfillment of the mayan prophecies.

we'll shall see.

btw, very astute of you (and matt) to see this from the perspective of space & time.

in many ways, everything that we are experiencing right now might only be symptoms of a larger battle between these 2 perceptions.

what i wonder is whether there is a 3rd perception that encompasses both, and if so, how might that perception be modeled into reality and its systems (economic, political, social, etc).

I agree completely.

We’re talking here about space and about time. Space: The world is bigger than the West. Time: A trader, U.S. corporate chieftan or U.S. politician might think in terms of a day or a week or the next quarter; an investor like Buffet 5 or 10 years; but the leaders of China, Russia and Saudia Arabia think in terms of the next 20, 30 or 50 years.

Also, nine of China’s top ten leaders are engineers. And Putin, although he has a law degree from the University of Lenningrad, in 1997 defended the equivalent of a Ph.D. dissertation at Russia’s St. Petrsburg State Mining Institute.

Meanwhile back on the farm, the United States is led by a bunch of lawyers, financiers and economists.

Although the U.S. may win a skirmish here and there, it doesn’t take a rocket scientist to figure out who’s going to win the war.

The big problem now in Mexico is security. I don’t know if it’s made it into the papers in the U.S. or not, but it’s like a war down here between competing drug traffikers. Many innocent people are getting caught in the crossfire. Kidnappings are also on the increase. The Mexican criminal justice system–police, prosecutors, prisons, judges–is little more than a very well organized, state-sponsored (and with the Merida inititative, a U.S.-sponsored) criminal enterprise.

Layered on top and intertwined with this are the economic problems. Oil exports have dropped from 2 million BOPD in 2004 to 1 million BOPD this year, so that combined with the halving of oil prices in the past few months are leaving a big hole in the federal government’s budget. Tourism is bound to drop due to the troubled U.S. economy combined with the security problems cited above. (The police in Los Cabos beat an American tourist to death a couple months back.) The remesas, or money Mexicans working in the U.S. send back home, have dropped 12% from August 2007 to August 2008. Manufacturing will also be negatively impacted as Mexico’s #1 trade partner, the U.S., experiences more difficulties. So the only segment of the Mexican economy that is booming is the drug trade. America’s appetite for drugs seems to be unlimited and recession-proof.

As far as the man on the street, I don’t think it’s sunk in as to the tidal wave that’s about to hit him. When this wave hits, social unrest will surely escalate. I see a possible revolution in the cards, but almost without doubt a turn to a Chavesque type of government–radical, demogogic populist leftism. I suspect the ruling oligarchy, with the full support and cooperation of the U.S., will attempt 60s and 70s like social control and everything that implies–death squads, “disappearances”, jailing political dissidents, etc. So it could get very ugly. I live each day at a time, but understand I may have to leave here at any time.

In regards to the the U.S. banks, it would be interesting to see a breakdown of that $11 trillion that is owed them by businesses. How much is owed by U.S. businesses and how much by foreign businesses? How much is owed from each country?

The big problem now in Mexico is security. I don’t know if it’s made it into the papers in the U.S. or not, but it’s like a war down here between competing drug traffikers. Many innocent people are getting caught in the crossfire. Kidnappings are also on the increase. The Mexican criminal justice system–police, prosecutors, prisons, judges–is little more than a very well organized, state-sponsored (and with the Merida inititative, a U.S.-sponsored) criminal enterprise.

Layered on top and intertwined with this are the economic problems. Oil exports have dropped from 2 million BOPD in 2004 to 1 million BOPD this year, so that combined with the halving of oil prices in the past few months are leaving a big hole in the federal government’s budget. Tourism is bound to drop due to the troubled U.S. economy combined with the security problems cited above. (The police in Los Cabos beat an American tourist to death a couple months back.) The remesas, or money Mexicans working in the U.S. send back home, have dropped 12% from August 2007 to August 2008. Manufacturing will also be negatively impacted as Mexico’s #1 trade partner, the U.S., experiences more difficulties. So the only segment of the Mexican economy that is booming is the drug trade. America’s appetite for drugs seems to be unlimited and recession-proof.

As far as the man on the street, I don’t think it’s sunk in as to the tidal wave that’s about to hit him. When this wave hits, social unrest will surely escalate. I see a possible revolution in the cards, but almost without doubt a turn to a Chavesque type of government–radical, demogogic populist leftism. I suspect the ruling oligarchy, with the full support and cooperation of the U.S., will attempt 60s and 70s like social control and everything that implies–death squads, “disappearances”, jailing political dissidents, etc. So it could get very ugly. I live each day at a time, but understand I may have to leave here at any time.

In regards to the the U.S. banks, it would be interesting to see a breakdown of that $11 trillion that is owed them by businesses. How much is owed by U.S. businesses and how much by foreign businesses? How much is owed from each country?

There is no real reason for the Chinese would to “get in now”.

They already have “enormous sway”. It’s the US that is declining, not China. Why not let that trend accelerate (in their view)?

They are simply biding their time, waiting for things to get far, far worse.

They are interested in game changers, not two-bit handouts.

This is about empire, not about charity.

It’s about the decisive and grand sweep of history. It’s about drama. It’s the new narrative. They are writing history now, not the increasingly irrelevant 12% of the world’s population known as the “Western world”.

The gibberish about “The End of History” is over.

They will do it on their own terms. When they are good and ready.

Matt Dubuque

brad’s blog over at CFR has an interesting discussion regarding risk on the swap lines. the experts over there seem to think there is little to no risk for reasons similar to what you mentioned.

curious to know why you think there is a lot of risk regarding these swaps.

downsouth: excellent digging, amigo. you just identified another pink elephant in the room.

it’s gonna get ugly.

btw, how is it down in mexico right now? how are people down there reacting to the peso devaluation?

i love that country and it’s been in my thoughts much the last couple weeks.

The U.S. finance industry has a number of entities that owe it money including:

► Households
Mortgate Debt
Consumer Debt

► Businesses
U.S. owned
Foreign owned

► State and Local Governments

U.S. banks were making loans to foreign businessmen such as Russian oligarch Oleg Deripaska as recently as April of this year. I remember reading in the NY Times just a few days ago that he borrowed $4.5 billion from a syndicate of western banks led by Goldman Sachs and Morgan Stanley to buy a chunk of some Russian mining company in April. The collateral backing up that $4.5 billion loan is now worth only about $2.2 billion (from memory) according to the NY Times.

Also, according to the lead editorial in the NY Times, U.S. businesses are struggling to pay U.S. banks back the money they owe them. Businesses have much more leeway to defer payments than homeowners do, but the thrust of the editorial was that this only postpones the day of rekoning.

Since business debt at $11 trillion is actually slightly greater than household debt (according to FED statistice), doesn’t the potential default on this debt actually pose a greater potential threat than mortgage debt?

According to the NY Times editorial, a recent sampling of $2.6 trillion of that business debt held by U.S. banks showed (and this is from memory) over 13% of it non-performing.

That’s considerably higher than non-performing household debt, isn’t it?