Global markets facing $12 Trillion dollar margin call
Markets are facing another massive margin call due to a giant dollar shortage.
As highlighted by JP Morgan at several occasions, there is a $12 trillion demand for dollars (safe haven) coming from overseas and there is currently no lender of last resort to match emergency needs.
Hence the biggest 7-day gain for the US Dollar since Black Wednesday in 1992 (when George Soros "broke The Bank of England") and another margin call on all asset classes which are crashing again today.
According to a CS research, the Federal Reserve needs to set up swap FX lines with other central banks to provide dollars to them (so they can lend them to their banks). On Sunday night, the Fed did set up a swap line with ECB, SNB, BoE, BoJ and BoC. But this is not enough and it needs to be extended to Scandinavia, China and other emerging market countries.
It looks like the faster they act the better. As shown on the chart below, the dollar shortage is much larger now than in 2008.
Charles-Henry Monchau CFA, CMT, CAIA is the Managing Director - CIO & Head of Investments at Al Mal Capital (a subsidiary of Dubai Investments)