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Dollar Liquidity: The Euro Dollar Time Bomb No One Hears Ticking

Euro Dollar

Almost no one understands the dangers coming out of the Euro Dollar market and what the lack of liquidity (i.e. amount) of U.S. Dollars bodes for the future of our markets. For now, one thing is certain: The Fed is gonna need to print a lot more dollars which means we can expect tailwinds for a year-end rally in stocks.


There are just not enough dollars today to meet the fantastic array of nuanced and complex dollar demand in both U.S. and global markets. Of course, we’ve seen the first signs of this already in the cash-poor repo market.

This means big, big long-term trouble ahead – but more near-term money printing at full speed, which means rising markets.

How do we know? Well, we’ve seen this movie before-in fact, we’re part of the system that wrote the script.

Here’s what we mean, and it has everything to do with the Euro Dollar…

The First Tremors

Last week, we sifted through all the confusing minutia and noise behind the recent panic in the otherwise open-fraud scheme that is the U.S. repo market (i.e. private banks levering GSE deposits for guaranteed payouts from Uncle Sam which you fund as the taxpayer).

Despite all this noise, and despite being completely ignored by the headlines of an otherwise teenage-level savvy mainstream financial media, the entire repo story simply boiled down to this: There weren’t enough dollars to keep it going.

As a result, the Fed printed more dollars and dumped a $1 trillion rollover facility into the repo markets. And more will come.

After all, there’s nothing a money printer can’t temporarily solve.

Unfortunately, however, this little hiccup we recently observed in the repo markets was not an isolated event, but rather a symptom of a much larger and systemic problem that was equally responsible for the crisis of 2008.

In fact, it will be the key factor in the next financial crisis – namely a shortage of U.S. dollars – also known as a dollar liquidity crisis. As we’ll see below, this has a lot to do with the Euro Dollar market.

The Fed and the U.S. Treasury, of course, are the official and perceived overseers of U.S. dollar supply. Most investors thus assume that these institutions know what they are doing and are “in control.”

If only this were true…

Unfortunately, and as we’ll reveal below, the Fed does not know what it’s doing when it comes to U.S. dollar liquidity. More importantly, the Fed is not in fact in control of the supply of U.S. dollars, which are in fact controlled by the Euro Dollar markets.

Again, you won’t learn of Euro Dollar issues in the typical media headlines, nor even at the offices of the finest banks or fancy-diploma advisors. Almost no one gets the Euro Dollar “thing.” Almost no one sees it.

Now, however, YOU will.

The Insider Truth

My colleague and I founded Signals Matter because, as former bank, intel, finance, military, legal, and hedge fund insiders, we see and know more about market facts (rather than market spin) than most talking heads – and certainly more than most financial journalists.

We have access to bigger picture facts as well as knowledge of micro-level signals, which we share with real people, not other insiders. That, and we talk to lots of beltway and Wall Street folks – from the wise to the clueless.

Our primary mission here is to sift through this info and make sure that otherwise hidden facts are shared with Main Street Americans and not smugly hidden from site by small circles of self-appointed “elites.”

And what we hear and see between D.C. and London et al regarding the Euro Dollar deserves to be shared plainly with you, so that more and more real people can see and understand the obvious but otherwise hidden forces impacting their financial future.

So, what is the ticking time bomb that no one (from Fox to CNBC, Bloomberg Radio to NPR) is publicly touching upon?

What is the silent poison lurking beneath our national and global market system that no one at the Eccles Building, the White House, or the Treasury Department is discussing, let alone fully understanding?

Well, it all comes down to these two misunderstood words: Euro Dollars.

How the Euro Dollar System is Quietly Killing U.S. and Global Markets

So, what are Euro Dollars and just why in the heck is the Euro Dollar market so critical to the future of the U.S. and global economy over the next few years?

In basic terms, a Euro Dollar is just a U.S. dollar held on deposit anywhere (not just in the Eurozone) outside of the U.S.

Simple enough.

One can therefore think of foreign banks like SocGen or Deutsche Bank making simple, clean, and direct loans to foreign companies denominated in these “Euro” Dollars – i.e. U.S. dollars held overseas.

But nothing the big banks do ever stays simple, clean, or direct for very long. These banksters just can’t help themselves, and this includes what they’ve done with the Euro Dollar.

Sure, the Euro Dollars have been floating around the world in greater force since the mid-1950s, but banks (and bankers) can’t help but come up with clever ways to make simple Euro Dollar transactions complex, as they can easily hide all kinds of greed-satisfying and wealth-generating schemes behind such Euro Dollar complexity.

Thus, rather than foreign banks using U.S. dollars overseas (i.e. Euro Dollars) to make simple, direct loans to corporate borrowers that can be easily tracked and regulated on the asset and liability columns of offshore bank balance sheets, these same bankers have spent the last few decades getting more and more creative with the Euro Dollar – which is to say, more and more toxic and out of control.

Rather than using Euro Dollars for direct loans from Bank “X” to Borrower “Y,” offshore financial groups have been busy using these Euro Dollars for complex inter-bank borrowing, swap schemes, futures contracts, and levered derivative transactions.

These mind-numbingly complex Euro Dollar transactions have acted as extreme dollar multipliers entirely outside the purview or control of regulatory bodies like the Fed and now exist at what is essentially infinite leverage multiples.

That is, when U.S. banks like Bear Sterns or Lehman Brothers were leveraging U.S. dollars in subprime derivative landmines at leverage multiples of 60:1, it was a problem.

Well, what we are seeing overseas in the unregulated Euro Dollar market is a leverage ratio of U.S. dollars that is much, much, much higher – and makes the Bear Sterns of 2008 seem like child’s play by comparison today.

What this basically means is that the actual amount of U.S. dollars in overseas shadow banking Euro Dollar  transactions is massively beyond the pale of what the Fed thinks it is, and, more importantly, is massively beyond the pale of anything the Fed can control.

But wait, you’re probably asking: Matt you just warned there’s not enough dollars, but now you’re saying that such Euro Dollar schemes have dramatically increased the amount of dollars in circulation. What gives?

Well, stick with me.

You see, all those complex derivative deals in Euro Dollars increases their amount, but then tangles them up into so much non-liquid confusion that the end result is far fewer dollars in actual circulation. Crazy but true.

Thus, as Powell tinkers with adjusting interest rates or printing more money here in the U.S. to ostensibly “control” the amount and price of U.S. dollars, he is effectively chasing windmills, or playing chess as Rome burns.

There are now trillions in uncontrollable/unregulated U.S.-dollar liabilities floating around (and clogging up) an uber-complex international banking and Euro Dollar based derivatives system that is so interconnected and beyond the measures of complexity theory that trying to untie these Euro Dollar financial knots and counter-party complexities would be akin to untying the knots of 1,000,000,000 fly-fishermen all at once.

In other words, impossible.

With all these U.S. dollars (trading as “Euro dollars”) tied up in countless and unregulated banking schemes and derivatives instruments, the actual amount of available U.S. dollars is inextricably tied up in all these many “knots.”

In other words, there are simply less dollars available for use (including emergency use) in these over-levered/risk-high markets – which is what the fancy lads call a “liquidity squeeze.”

In fact, despite all the well-deserved attention subprime mortgages received for being the cause of the 2008 Great Financial Crisis, here’s a little secret from inside Wall Street: Sure, subprime instruments were the “patient zero” of the recent disaster, but the real killer in 2008 was a lack of dollar liquidity, much of which was tied up in these Gordian Euro Dollar knots of which almost no one understands, discusses or knows how to control.

That is a ticking time bomb. A Euro Dollar time bomb.

Defusing the Euro Dollar Liquidity Squeeze?

So how can we diffuse this ignored and misunderstood danger?

Well, even the grandfather of debt and money printing, John Maynard Keynes, warned about this in 1944; the head of the People’s Bank of China warned about this in 2011; and just this summer, Mark Carney, the Governor of the Bank of England, warned about this at the Fed’s little banker retreat in Jackson Hole.

What was the suggested option from the head of England’s central bank? Simple – we need to replace the U.S. dollar as the world’s reserve currency with a neutral, electronic currency to settle international payments with a new, floating system that replaces the dollar.

That’s a big deal. And yet it never made the headlines. Big shocker, eh?

The sad and hidden but otherwise undeniable truth of the matter is that the U.S. dollar is no longer under the control of an increasingly clueless Federal Reserve.

When the supply of dollars tightens/shortens, crisis always follows. Every time.

Again, we saw a brief taste of this dollar shortage in action last week during the repo scare.

But that was mere child’s play compared to what prior dollar liquidity shortages can and have done to markets, as we saw as recently as 2008, when our markets suffered over $2 trillion (!) in U.S. dollar shortages (aka “funding gap”).

How was this “gap” filled? You guessed it: money printing gone wild.

Going forward, and with the recent (and completely downplayed) tremors of the cash-poor repo market still in our rear-view mirror, the insiders in D.C. and Wall Street are bracing themselves for further dollar liquidity shocks – i.e. major market disasters driven by “funding gaps” – aka a lack of enough dollars.

The Fed knows this as well – just barely. They certainly are in no position today to simply release the U.S. Dollar from its global reserve status. That takes years.

This means that the only tool available to the Fed when the next dollar-liquidity crisis sends our markets and economy over yet another cliff will be more desperate and last-minute money printing.

Yep. That’s the only tool we have left. And I’m talking money printing like you can’t imagine. Full-on monetization of our debts.

Investing in the New Abnormal

Of course, such measures have nothing at all to do with capitalism or free markets. You can kiss all that goodbye now, if you haven’t already.

Today, we now live, invest, and trade in a centralized market in which central banks have and are losing control over the supply of the U.S. dollar in offshore shadow banking Euro Dollar schemes whose embedded and complex risks, dangers, and extremes are understood by only a handful of insiders and would frankly require hundreds of more pages here to fully unpack.

What YOU need to take away from all of this complexity is quite simple: Normal business cycles are now extinct, replaced instead by central bank liquidity cycles. That is supply and demand, including for dollars, has been replaced by money printing from the central banks.

More and more dollars will be printed down the road, not because I “think so,” but simply because there is literally no other way to keep this now totally rigged to fail system afloat.

As for market volatility and the safety and growth of your money in such a toxic and complex backdrop, we admit that it is becoming increasingly hard to rely upon old predictive measures of market risk or even recession timing to fully make sense of the Twilight Zone in which we now find our capital markets.

We truly are in uncharted and completely distorted waters, where risk outweighs reward at nearly every turn.

In such a distorted “new abnormal,” informed investors have to rely more on what the market is telling them than upon what their opinions or past beliefs might otherwise be whispering in their ears.

This is new terrain for all of us, even for market veterans like my colleague and I.

Rather than pontificate on predictions or timing recessions with perfection (no one can do this), we humbly stick to tracking those critical signals that we know offer the best guidance for you and ourselves. In the near-term, however, we can logically expect markets to rise on the tailwinds of the Q4 money printing to come.

Equally important to such signals is genuine market information, such as what has been discussed above with regard to the otherwise esoteric Eurodollar market, a topic that not one in 10,000 investors or “experts” even understands.

But now YOU understand.

You are increasingly becoming an informed investor – which is an essential precondition to making the right decisions for your own money and financial futures.

Very soon, we will be sharing more investment strategies and tips for navigating in such a “new abnormal.” In the interim, stay careful, stay patient, and stay informed.



Matt Piepenburg


13 responses to “The Ticking Time Bomb that Almost No One Sees Coming”

  1. Donald G. Haveysays:

It is very hard to understand but you are making some headway through my financial dim mind. I look forward to each of your emails. So please keep them coming!

  1. Mary St Johnsays:

Thank You, Mary

  1. Frank Gainessays:

Thanks for keeping us informed. As I have told several friends, 99% of “investors” have no clue what is going on with the fed or the central banks around the world. They all think the fed controls interest rates and all sorts of things when, in fact, that is a complete misunderstanding of what is going on. 99% of “investors” rely on their broker or “adviser” when they have no clue either. The advisers/brokers always say, “Stay the course. The market always comes back.” It only took 15 years for the market to get even after 1932. It took 12-13 years to get even after the market top of 2000. How long will it take this time?

  1. phil myerssays:

Have always worried about this part of the markets which no one seems to understand or controls with care. Always interested in your thoughts. Don’t trust wall street at all either.

  1. Keith Megilligansays:

Does the new “abnormal” Eurodollar thingy mean that gold and silver are the best tools in the basket of rotten currencies?

  1. Anthony Buccolasays:

Very interesting!

  1. william simmonssays:

it is important to note that Venezuela banks are once again gaining acceptance by issuing redeemable gold backed certificates .how long before a fully backed gold and silver currency emerges once again?

  1. David Fastsays:

SAD BUT TRUE! You would like to think that people learn from dumb mistakes but for some reason bankers & loan companies have a serious problem with that. They make all kinds of loans & such knowing that most of the loans will never be paid back for the simple reason with them knowing that the individual really isn’t qualified for the loan. The real sad part is they are using the peoples money and making very poor decisions & investments with it.

  1. Gary Rosssays:

Excellent article but still hard to digest. Where are the Lloyds of London, the CITI Group, or the international mega banks. Is a basket of precious metals the answer.

  1. glen kelleysays:

What are the odds of this world market collapsing into an economic depression?

  1. John Borger says:

This piece on the coming dollar liquidity panic is truly scary. My rudimentary understanding of money suggests to me that the scenario you predict – money printing by the Fed on a galactic scale – will inevitably lead to Venezuelan-like hyperinflation. I am 71, retired for 10 years and have been sitting out this final phase of financial excess entirely in cash since spring 2018 as I don’t care for the current risk/reward picture. (As of today, I am ahead of the stock market!) I am looking forward to a generational buying opportunity after the coming crash. I feel safe until I consider the possibility that a sudden rampant inflation could decimate my life savings. What can US investors who are trying to preserve their portfolios by sitting in cash or cash equivalents do? Open a Swiss bank account denominated in Swiss francs? Go 100% to gold? Also, I remember that one of the key concerns from the 2008 financial crisis was DEFLATION in the value of assets. Could you share your views on the relative risks of inflation versus deflation and what the average investor can do to protect life savings? I worked hard, saved and invested for 45 years to amass my savings. The thought of it being decimated in a few months truly sickens me. By the way, thank you for sharing your expertise without charging us! It greatly enhances your credibility.

  1. Charlessays:

More updates on the emerging Cannabis market and what stocks to buy + sell and when would be most beneficial

  1. Robert Tompkinssays:

Once again you have provided a throughly informative and astute guidance to what is really going on in our current global economic system. I had been wanting to ask you about why we see the near daily, and certainly weekly, ups and downs in stock market and gold/silver sentiment and prices. I understand that during unsettled economic times like these that volatility is to be expected. But I do find it hard to understand why the stock markets and gold/silver prices respond so apparently readily to some supposed “good” or “bad” news here and there (particularly the “good” news) on unemployment rates or other economic indicators. But you may have already answered that question with this article, in that even the heads of investment institutions are mostly clueless as to what is really going on underneath all the various economic measures reported daily or weekly. It just seems strange to me that all it takes is a statement from the Fed to make a noticeable difference in stocks, bonds, gold, silver, etc. I would think that the major players doing the buying and selling causing the ups or downs in the stock markets would be wise enough to see that things really are incredibly, dangerously on the brink of a horrific downfall and one would see somewhat less volatility, at least be less likely to move positively on such “good” news. It is as if many of the big players are looking for any “good” news and respond to such news as if everything was going to be just fine. But maybe someone as naive as I am about our current (and past) “market” dynamics does not understand how little most of the big players DON’T UNDERSTAND?
I have emailed my family and all of my friends some of your articles in the sincere hope that they will actually read them or watch that video you recently put out (listing all the reasons why a recession and crash are inevitable). I have also told people I work with to visit your site in the hopes that those who are not that far away from retirement will wake up and not lose everything they have worked for.
I am not sure that Chris Martenson or Adam Taggart of PeakProsperity have ever interviewed you, but if not I will try to alert them both that they should do that so their readers will learn of your website here and the incredibly useful knowledge you are trying to pass on. And it would be good to see if this particular article, which exposes truths about the Eurodollars, which I have NEVER read about before, could be posted on which I go to nearly every day.
You have my upmost admiration and appreciation for what you are communicating in these articles on your website.

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