CIBERGUERRA MUNDIAL (WORLDWIDE CYBERWAR (II))

Lehman weekend 2.0 Which brings us to the punchline of Pozsar's warning: "there is no difference between Lehman unable to pay back money funds because its tri-party clearing agent is unwilling to unwind o/n repo trades, and banks unable to receive and make payments because they are out of SWIFT." He then adds that the Herstatt risk – or settlement risk – owes its name to a mishap at a single bank, but "the risk in the current scenario involves an entire country’s banking system." And here comes Pozsar with another Lehman analogy: Banks’ inability to make payments due to their exclusion from SWIFT is the same as Lehman’s inability to make payments due to its clearing bank’s unwillingness to send payments on its behalf. History does not repeat itself, but it rhymes… The bottom line from Pozsar, and one which western leaders appears to have ignored in their pursuit of a unified statement against Russia, is that "the consequence of excluding banks from SWIFT is real, and so is the need for central banks to re-activate daily U.S. dollar funds supplying operations." And just to underscore the point of how serious it will get in the coming hours (not days), the Hungarian warns that "excess reserves and o/n RRP balances won’t be enough." Instead, we will see the Fed's most powerful stabilizing intervention in play: a spike in liquidity swaps, which are currently at zero As Pozsar concludes, it appears that the Ukraine war has translated into yet another Fed balance sheet-boosting crisis just like covid, and "so the Fed’s balance sheet might expand again before it contracts via QT – and not just because of the swap lines. The FIMA repo facility is also there to turn collateral into dollars – anonymously, away from the prying eye of dealers, if a central bank becomes a friendly correspondent for a sanctioned central bank turning gold into cash." That, or an unforeseen call on unwanted reserves in the o/n RRP facility as the correspondents flood the repo market with collateral before QT even began. And just like that we are back to square one: keep an eye on press releases from the Fed ahead of Monday's open announcing the central bank's readiness to keep the world flush with dollars as the Ukraine worst-case scenario is now reality.