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Run on one bank → credit event → contagion → imminent financial system collapse → QE infinity

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What do you think about the hawkishness from the Fed being used to kill LIBOR and gain the ability for the Fed to independently set US interest rates again with SOFR and officially kill the eurodollar control?

That they are removing the eurodollar from the CME is definitely interesting. I'm very curious how long this has to go on and whether they care enough about credit markets locally or if Powell is more interested in destroying London's power over our markets. 🤔

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Discussion

James Lavish 2y ago

Honestly, we used a U.S. LIBOR rate when I set derivative pricing. London is not as in control as you may imagine. And Eurodollars are just US denominated debt in foreign banks. = more USD demand.

SOFR is happening because of bad LIBOR actors.

I would say, don’t overthink the Fed intent. They know they MUST tame inflation first. Even if it means they have to print their way out of a recession later.

Hyperinflation is not an option. Period.