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Urjit Patel And The Dollar Liquidity Shortage Debate

The "double whammy" problem.

Listen, the RBI's Urjit Patel is concerned about dollar liquidity, but really, he's concerned that the Fed didn't adequately account for Trump's lunatic plunge into late-cycle fiscal stimulus. Patel wrote an Op-Ed for FT on Sunday which is getting a fair amount of play hopefully because of who wrote it and not because of what it says, because anyone who has been following along over the past eight months could have written it themselves in the space of about 15 minutes. That's not to disparage the piece - not at all. In fact, it's to do exactly the opposite. That is, it's just to say that what he writes is so obviously important and the dynamics he describes so self-evidently perilous, that one certainly imagines he was somewhat surprised that he needed to spell it out for folks. If you really wanted to, you could try and cram his assessment into a narrative about intermittent dollar liquidity shortages and that's useful to a point, but the overarching message isn't complicated: the Fed's balance sheet rundown is colliding with the deluge of Treasury supply Mnuchin unleashed to fund Trump's tax cuts and that setup is going to end up choking off dollar funding. To wit: Dollar f
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1 comment on “Urjit Patel And The Dollar Liquidity Shortage Debate

  1. […] it out and for those interested in the full discussion of that Op-Ed, there’s a ton more here, including some excerpts and charts from a great Nedbank […]

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