21st Century Bank Runs are Runs on Treasury Bills, Not Dollars

Jeffrey Snider explains their role as the new prime financial collateral, here, and why Quantitative Easing slowed the velocity of this new money by reducing their supply:

It is operationally no different than a 1930's bank experiencing a run on its stock of national currency. The lower that level of real money gets, the shakier the perception of the bank becomes, the more counterparties continue the cycle of real money removal - physical dollars in 1930, rehypothecated collateral in 2011. The perception of risk becomes reality, and this may be exactly what is playing out today as banks with questionable exposures to PIIGS have seen their abilities to operate in wholesale money markets dwindle into this current crisis.

America's Chief and Most Deadly Export Has Been The Credit Bubble

Few have wanted to talk about it, but it is one of the chief consequences of decade-long Federal Reserve policy mistakes as mediated through the world's reserve currency, the dollar:

When the financial system collapsed in 2008, the eurodollar market was its epicenter. Banks in Germany and Holland failed because of overpriced real estate in Florida and California, yet hardly anyone questions the link between these incongruent geographical realities. For the most part, there was no housing bubble in Bavaria or Amsterdam, yet long established banking concerns were stricken, and then failed by one a world away.

For the most part, bank risk managers will prudently match their asset structure to their liability structure to the best of their abilities. In addition to managing overall durations and interest rate spreads, this also means a sensible policy of matching asset and liability denominations. So large funding exposures denominated in dollars leads to pointed acquisitions of dollar-denominated credit assets.

. . . [T]his explains the global spread of a dollar-based credit bubble . . .

Jeffrey Snider goes on to explain, here, how once stalwart Switzerland has become our latest victim.

The Increasing Quantity of Money is the Problem, Not the Solution

Because the last thing we need is more debt when we haven't settled the bad debt we've already got. 

Jeffrey Snider here rips the monetarists at two bastions of liberal opinion, The New York Times and National Review Magazine:

There is a definite quality of absurdity to all this intervention. Besides the fact that every method of intervention or monetary "solution" guarantees ongoing crisis and instability, what else has to be said about a condition where increasing cash for the banking system actually creates a liquidity crisis. Whatever rabbit hole exists for central banks and economic experts, they have widened and deepened it, inviting the rest of the world to follow them down it.

For once someone actually explains in macroeconomic terms why there isn't a dime's worth of difference between the Democrats and the Republicans.