Liquidity means lower volatility, and computerized bets to
short it (through options selling; this is how WS makes
money), which, in turn, leads to higher markets and lower
dollar. Lack of liquidity means computers lack buying power,
and are taken out in "crashes" since they are extremely
leveraged. You know the numbers, 700 Trillion notional and
stuff, which was 30 Trillion REAL value of contracts as of
December 2008... equal to global stock market cap, but
of course leveraged to a mind boggling degree.
You are right, T-bonds represent the biggest
risk. Not only that, but due to interest rates being by far
the most leveraged market. So, a black swan in bonds will
topple the derivative pyramid, short circuit WS computers,
and the crash law will apply. It is impossible to time this
event, and for now the Fed sure patched things up. At some
point it will all hit the fan, although I suspect the Fed
will print as much as needed to prevent it, causing
hyperinflation, cause the beast will need more and more.
Thus my bets.
At some point when inflation resulting from all this
becomes a grave concern, we the people will can the Fed,
nationalize and break up "too big to fail" manipulative
banks tied to them, etc.
But we are not there yet |
