FedUpUSA

Archive for the ‘funding’ Category

As everyone is engrossed by assorted groundless Christmas (and other ongoing bear market) rallies, and oblivious to the debt monsters hiding in both the closet and under the bed, Zero Hedge has decided it is about time to present the ugliest truth faced by our ‘intellectual superiors’ and their Wall Street henchman who succeeded in pulling off Goal #1 for 2009 – the biggest ever bonus season (forget record bonuses in 2010… in fact, scratch any bonuses next year if what is likely to transpire in the upcoming 12 months does in fact occur).

If someone asks you what happened in 2009, the answer is simple – two things. There was a huge credit and liquidity crunch, and then there was Quantitative Easing. The last is the Fed’s equivalent of band-aiding a zombied and ponzied corpse, better known as the US economy. It worked for a while, but now the zombie is about to go back into critical, followed by comatose, and lastly, undead (and 401(k)-depleting) condition.

In 2009, total supply of all USD denominated fixed income, net of maturities, declined by $300 billion from $2.05 trillion to $1.75 trillion. This makes sense: the abovementioned crunches stopped the flow of credit from January until well into April, and generally firms were unwilling to demonstrate to the market how clothless they are by hitting the capital markets until well into Q2 if not Q3. What happened was a move so drastic by the Fed, that into November, the worst of the worst High Yield names were freely upsizing dividend recap deals (see CCU) – the very same greed and stupidity that brought us here. Luckily, so far securitization and CDOs have not made a dramatic entrance. They likely will, at which point it will be time to buy a one-way ticket for either our southern or northern neighbor, both of which, in the supremest of ironies, transact in a currency that will survive long after the dollar is dead and buried.

Back to the math… And here is the kicker. Accounting for securities purchased by the Fed, which effectively made the market in the Treasury, the agency and MBS arenas, but also served to “drain duration” from the broader US$ fixed income market, the stunning result is that net issuance in 2009 was only $200 billion. Take a second to digest that.

And while you are lamenting the death of private debt markets, here is precisely what the Fed, the Treasury, and all bank CEOs are doing all their best to keep hidden until they are safely on their private jets heading toward warmer climes: in 2010, the total estimated net issuance across all US$ denominated fixed income classes is expected to increase by 27%, from $1.75 trillion to $2.22 trillion. The culprit: Treasury issuance to keep funding an impossible budget. And, yes, we use the term impossible in its most technical sense. As everyone who has taken First Grade math knows, there is no way that the ludicrous deficit spending the US has embarked on makes any sense at all… none. But the administration can sure pretend it does, until everything falls apart and blaming everyone else for its fiscal imprudence is no longer an option.

Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating  demand. To sum up: $200 billion in 2009; $2.1 trillion in 2010. Good luck.

As we pointed, the number one reason why 2010 is set to be a truly “interesting” year is a result of the upcoming explosion in US Treasury issuance. Fiscal 2010 gross coupon issuance is expected to hit $2.55 trillion, a $700 billion increase from 2009, which in turn was  $1.1 trillion increase from 2008. For those of you needing a primer on the exponential function, click here. But wait, there is a light in the tunnel: in 2011, gross issuance is expected to decline… to $1.9 trillion.

And while things are hair-raising in “gross” country (not Bill…at least not yet), they are not much better in netville either. Net of maturities, 2010 coupon issuance will be about $1.8 trillion, a 45% increase from the $1.3 trillion in FY 2009 (and the paltry $255 billion in 2008).

Now everyone knows that the average maturity of the UST curve has become a big problem for Tim Geithner: nearly 40% of all marketable debt matures within a year (a percentage that has kept on growing). In fact, the Treasury provided guidance in its November 2009 refunding, in which it stated that it intends “to focus on increasing the average maturity” of its debt after relying heavily on Bill issuance in H2. Once again, we wish Tim the best of luck.

Why our generous best intentions to the US Treasury? Because unless the US consumer decides to forgo the purchase of the 4th sequential Kindle and buy some Treasuries (and not just any: 30 Year Bonds or bust), the presumption that the Bond printer will have the option of finding vast foreign appetite for its spewage is a very myopic one. We already know that China is a major question mark, and will aggressively be looking at pumping capital into its own economy instead of that of Uncle Sam’s – at some point the return on investment in its own middle class will surpass that of funding the rapidly disappearing US middle class. That tipping point could be as soon as 2010.

As for Japan – the country has plunged into its n^th consecutive deflationary period. Whether or not the finance minister announces yet another affair with the Quantitative Easing whore on any given day, depends merely on what side of the bed he wakes up on. The country will have its hands full monetizing its own sovereign issuance, let alone ours.

Lastly, the UK – well, with the country set to have zero bankers left in a few months, we don’t think the traditionally third largest purchaser of US debt will be doing much purchasing any time soon.

None of this is merely speculation: October TIC data confirmed these preliminary observations. It will only become more pronounced in upcoming months.

How about that great globalization dynamo: emerging markets? Alas, they have their hands full with issuing their own record amounts of both sovereign and corporate debt as well: in 2009 gross EM debt issuance reached an astounding $217 billion, $29 billion higher than the previous record in 2007. Gross EM issuance was particularly high in the last quarter at $73 billion, with October breaking the record for the largest ever monthly gross issuance of emerging market global bonds at $38 billion (January is traditionally the busiest month of the year.) With $81 billion, 2009 was notably a record year for sovereign bonds, while gross issuance of corporate bonds amounted to $136 billion, the second highest level after that of 2007 with $155 billion.

Bottom line: everyone has major problems at home, and is more focused on the supply than the demand side of the equation.

What options does this leave for the administration? Very few, and all of them are ugly. As we stated earlier on, the options for the Fed are threefold:

1. Announce a new iteration of Quantitative Easing. This will be met with major disapproval across all voting classes (at least those whose residential zip codes do not start with 10xxx or 068xx), creating major headaches for Obama and the democrats which are already struggling with collapsing polls.
2. Prepare for a major increase in interest rates. While on the surface this would be very welcome for a Fed that keeps hinting that deflation is the biggest concern for the economy, Bernanke’s complete lack of preparation from a monetary standpoint (we are surprised the Fed’s $200 million reverse repos have not made the late night comedy circuit yet) to a forced interest rate increase, would likely result in runaway inflation almost overnight. The result would be a huge blow to a still deteriorating economy.
3. Engineer a stock market collapse. Recently investors have, rightfully, realized there is no more risk in equities, not because the assets backing the stockholder equity are actually creating greater cash flow (as we demonstrated recently, that is not the case), but simply because taxpayers have involuntarily become safekeepers for the entire stock market, due to Bernanke’s forced intervention in bond and equity markets. Yet the President’s Working Group is fully aware that when the time comes to hitting the “reverse” button, it will do so. Will the resultant rush into safe assets be sufficient to generate the needed endogenous demand for Treasuries is unknown. It will likely be correlated to the size of the equity market drop.

If the Fed decides on option three, we fully believe a 30% drop (or greater) in equities is very probable as the new supply/demand regime in fixed income becomes apparent. We hope mainstream media takes the ideas presented here and processes them for broader consumption as indeed the Fed is caught in a very fragile dilemma, and the sooner its hand is pushed, the less disastrous the final outcome for investors. Then again, as Eric Sprott has been pointing out for quite some time, it could very well be that the US economy has become merely one huge Ponzi, and as such, its expansion or reduction on the margin is uncontrollable. We very well may have passed into the stage where blind growth is the only alternative to a complete collapse. We hope that is not the case.

Merry Christmas and Happy Holidays to all readers.

Submitted by Leo Kolivakis, publisher of Pension Pulse.

Henny Sender of the FT reports that top hedge funds bet on big rise in yields:

The
recent rise in long-term US interest rates comes as good news for
several leading hedge fund managers, including John Paulson, who have
positioned their trading books to benefit from higher yields on US
Treasury securities.

 

Mr Paulson, who
made big gains earlier this decade by betting against the subprime
mortgage market and whose firm, Paulson & Co, manages $33bn, has
said he believes that government stimulus efforts would inevitably lead
to higher inflation and a corresponding rise in rates.

 

“It will
be difficult for the government to withdraw the economic stimulus,” Mr
Paulson said in a speech. “An increase in the monetary base leads to an
increase in the money supply, which leads to inflation.”

Bond
prices fall as yields rise, and Mr Paulson told the Financial Times
last week that he has been hoping to benefit in the Treasury market by
buying options that would become profitable if rates headed higher.
TPG-Axon’s Dinakar Singh has been making similar options trades,
according to a person familiar with the matter.

Julian Robertson,
the hedge fund manager, has pursued a related strategy, hoping to
benefit from a bigger difference between short-term and long-term
interest rates, known as a steeper yield curve, a person familiar with
his trades said.

The yield on the 10-year Treasury, which hit a
crisis low of 2.055 per cent last year, has moved from 3.2 per cent
last month to 3.75 per cent on Tuesday.

Hedge fund managers,
however, have been hesitant to engage in short sales of Treasury bonds
to profit from the rising yields – and falling prices – because of the
Federal Reserve’s heavy involvement in the market. This has led some to
buy options – dubbed “high strike receivers” – that would enable them
to profit from sharply higher Treasury yields, hedge fund managers say.
These trades, which are relatively cheap to execute because they are so
out of the money, are based on the thesis that yields could hit 7 or 8
per cent.

“If they are right, and the world ends, they will make
a fortune,” said one fund manager who is sceptical of the idea. “If
they are wrong, they haven’t lost much.”

Some traders are
cautious because many peers lost large sums betting that rates would
rise in Japan in the 1990s – as yields fell to less than half a
percentage point. The trade was termed the “black widow” because it left so many victims.

“Nobody
understood the extent of deflation and economic weakness in Japan,”
said Dino Kos of Portales Partners, a research consultancy, who was
then a Fed official. “More money was lost on that trade than on any
other single trade. Everyone piled in when rates were at 3 per cent and
then at 2.5 per cent and then at 2 per cent.”

So
is it time to place big bets on rising yields? I could easily see a
backup in yields in the near term as economic reports surprise to the
upside, but I don’t believe that bonds have entered a long-term secular
bear market. I think the hedgies are right, best to play interest rate
directional calls though options.

Also, given the increase in
liability-driven investing by pension funds worried about their funding
status, there is an upper cap on bond yields. I don’t know what the
exact magic number is, but at a certain level (say 7%), you’ll have
pensions scambling to lock in rates. Bond bears tend to ignore this
when predicting doom and gloom on bonds. All they do is focus on the
“pending collapse” of the US dollar, which won’t happen .

Adam Smith, Charles Darwin and George Washington are not only rolling in their graves, they are dancing the macarena. A new study by the UMich School of Business has found what everyone has known since the crisis began, if not centuries prior: that the biggest, crappiest banks were guaranteed to get more bailout funding the more political ties they had (and more kickbacks they had offered). Is this sufficient to claim that capitalism in its purest sense has been corrupted beyond repair, courtesy of political intervention and constant pandering? Probably not, but it sure makes a damn good argument. In any case, the data is sufficient for all bears to start keeping a track of which banks are increasing their lobbying efforts and funding: those are the ones where the greatest weakness is likely still to be uncovered (if it hasn’t already). And while the political relationship probably is not a big surprise to any realistic readers, another finding of the study makes a solid case for abolition of the “apolitical” Federal Reserve:

A new study by Ross professors Ran Duchin and Denis Sosyura found that
banks with connections to members of congressional finance committees
and banks whose executives served on Federal Reserve boards were more
likely to receive funds from the Troubled Asset Relief Program, the
federal government’s program to purchase assets and equity from
financial institutions to strengthen its financial sector.

The unsupervised Federal Reserve gets to make or break banks, presumably under the gun of its one and only master, Goldman Sachs, which has already destroyed its major historical competitors: Bear Stearns and Lehman Brothers. This is a sufficient condition to not only audit the central bank but to immediately seek its abolition, and also to commence anti-trust proceedings against Goldman Sachs which is not only a monopoly, but by extension has veto power over the very regulatory mechanism that is supposed to keep it “fair and honest.” The system is truly broken.

More findings from the study:

Further, their research shows that TARP investment amounts were
positively related to banks’ political contributions and lobbying
expenditures, and that, overall, the effect of political influence was
strongest for poorly performing banks.

Can someone reminds us what the core premise of capitalism is again, and why we pretend to live in anything other than a hard core socialist society?

One of the professors of the study had this to say:

“Our results show that political connections play an important role in
a firm’s access to capital. The effects of political ties on federal capital investment
are strongest for companies with weaker fundamentals, lower liquidity
and poorer performance — which suggests that political ties shift
capital allocation towards underperforming institutions.”

The US financial system now need a new four letter acronym: everyone knows TBTF. We hereby annoint the Too Blatantly Briby To Fail (TB²TF) category of financial institutions. We posit that in 5 years there will be two banks in the former group: JP Morgan and Goldman Sachs, while every single other bank will make up the latter.

Among the specific data findings:

The researchers used four variables to measure political influence: 1)
seats held by bank executives on the board of directors at any of the
12 Federal Reserve banks or their branches (the Federal Reserve is
involved in the initial review of CPP applications from the majority of
qualified banks); 2) banks with headquarters located in the district of
a U.S. House member serving on the Congressional Committee on Financial
Services or its subcommittees on Financial Institutions and Capital
Markets (which played a major role in the development of TARP and its
amendments); 3) banks’ campaign contributions to congressional
candidates; and 4) banks’ lobbying expenditures.

They found that a board seat at a Federal Reserve Bank was
associated with a 31 percent increase in the likelihood of receiving
CPP funds, while a bank’s connection to a House member on key finance
committees was associated with a 26 percent increase, controlling for
other bank characteristics such as size and various financial
indicators.

The last data point is truly troubling: while it is one thing to pander to corrupt politicians, at least when their transgressions are made public they can and will be booted out. Yet what checks and balances exist to punish current and former Fed staffers who endorse near-bankrupt companies, in self-evident conflict of interest acts, for enhanced survival? As the Fed is accountable to nothing and nobody, save Goldman Sachs, one can argue that Goldman decides the fate of the very core of the US financial system: which firms get the thumbs up and down treatment. This is an unbelievalbe travesty of both the constitutional and the tenets of capitalism and must be rectified immediately. It certainly helps that the president, being a Constitutional law professor, will surely get right on it.

“Our findings also suggest that qualified financial institutions were
more likely to receive an investment from CPP if they were bigger and
had lower earnings and lower capital,” said Duchin, U-M assistant
professor of finance. “This is consistent with an investment strategy
seeking to support systematically important institutions experiencing
financial distress.”

If this study’s finding are confirmed and repeated independently by other research teams, it is safe to say that any pretense America has to being an efficient capitalism system (where those who can no longer compete, disappear) can be used to wipe the nation’s collective backside. Between this, and a choice of US dollars and Treasuries, Cottonelle is starting to see some serious competition.

h/t Geoffrey Batt

Good morning, worker drones: This Week in Mayhem

by Project Mayhem

Project Censored releases top censored news stories of 2009, Market Skeptics highlights catastrophic fall in global food production, gold bounces off $1100, Copenhagen succeeds in building global governance framework, Pakistan and Yemen sink further into chaos..

LAST WEEK IN MAYHEM

Project Censored releases list of 25 censored news stories of the past year

* 1. US Congress Sells Out to Wall Street
* 2. US Schools are More Segregated Today than in the 1950s
* 3. Toxic Waste Behind Somali Pirates
* 4. Nuclear Waste Pools in North Carolina
* 5. Europe Blocks US Toxic Products
* 6. Lobbyists Buy Congress
* 7. Obama’s Military Appointments Have Corrupt Past
* 8. Bailed out Banks and America’s Wealthiest Cheat IRS Out of Billions
* 9. US Arms Used for War Crimes in Gaza
* 10. Ecuador Declares Foreign Debt Illegitimate
* 11. Private Corporations Profit from the Occupation of Palestine
* 12. Mysterious Death of Mike Connell—Karl Rove’s Election Thief
* 13. Katrina’s Hidden Race War
* 14. Congress Invested in Defense Contracts
* 15. World Bank’s Carbon Trade Fiasco

http://www.projectcensored.org/top-stories/category/two-thousand-and-ten-book/

2010 Food Crisis for Dummies

The countries that make up two thirds of the world’s agricultural output are experiencing drought conditions.

The following article is HIGHLY recommended for anyone trading in the commodities futures markets or interested in possible future outcomes in 2010.

“If you read any economic, financial, or political analysis for 2010 that doesn’t mention the food shortage looming next year, throw it in the trash, as it is worthless. There is overwhelming, undeniable evidence that the world will run out of food next year. When this happens, the resulting triple digit food inflation will lead panicking central banks around the world to dump their foreign reserves to appreciate their currencies and lower the cost of food imports, causing the collapse of the dollar, the treasury market, derivative markets, and the global financial system. The US will experience economic disintegration.

So far the crisis has been driven by the slow and steady increase in defaults on mortgages and other loans. This is about to change. What will drive the financial crisis in 2010 will be panic about food supplies and the dollar’s plunging value. Things will start moving fast.”

http://www.marketskeptics.com/2009/12/2010-food-crisis-for-dummies.html

Gold bounces off $1100

Gold has bounced off $1100, as expected, but the question  is whether this level will hold.  This is almost impossible to predict…what we do know is that gold is going much higher intermediate-term.  Short-term, we could see pricing pressures on gold until we get a new leg down in the economic crisis and/or war in Central Asia.  Things are heating up around the world, particularly in Yemen and Pakistan.  Regardless, we expect a hard floor for the gold price in the range of $1000-1050.  We will watch carefully for the next two business weeks leading into Jan 1st, as this will involve year-end mark-to-market for gold on many balance sheets so expect volatility.  In terms of the next year (2010) we are expecting a dollar crisis so it would be wise to own gold under such circumstances.

Tarpley – Hyperinflation possible in 2010
http://eclipptv.com/viewVideo.php?video_id=9059

Gerald Celente – 2010 – Prepare for the Worse
http://eclipptv.com/viewVideo.php?video_id=9060

Copenhagen Treaty yields start of Global Governance

The Copenhagen treaty was a success despite the massive scientific scandal; the global bankster-gangsters got precisely what they wanted.  The objective was to establish the framework for a world government, which is often called ‘global governance’ in policy planning circles. The seeds of this were successfully planted.  There were two main accomplishments at Copenhagen:  1) agreement on a global transaction tax on GDP, paid to the World Bank  and 2) agreement on preliminary funding for global governance, conservatively $100bn by 2020 but we believe this number will be much much higher (probably in trillions).

“In 2004, it was less than $300 million. But in 2005, the trade really started to soar, ending the year with $10.8 billion-worth of transactions. A year later, in 2006, the “carbon” market had grown to $31 billion. In 2007, again it more than doubled its turnover, to $64 billion. Last year, it did it again, reaching a colossal $126 billion. By 2020, some estimates suggest the annual value will reach $2 trillion.”

http://eureferendum.blogspot.com/2009/12/protecting-big-carbon.html

“This is the biggest heist in history. As they poured carbon over snow-covered Denmark from their gas-guzzling jets, world leaders were congratulating themselves on securing a deal which will make their backers and financiers a trillion pounds a year. These riches will come from buying and selling permits, the so-called ‘carbon credits’ which allow industry and electricity generators in developed countries to emit carbon dioxide.

The frenzied negotiations we have just seen were never about ‘saving the planet’. They were always about money.”

http://www.dailymail.co.uk/debate/article-1237235/ANALYSIS-Saved–trillion-pound-trade-carbon.html

Copenhagen accord keeps Big Carbon in business

“The part played at Copenhagen by all the tree-huggers, abetted by the BBC and their media allies, was to keep hysteria over warming at fever pitch while the politicians haggled over the real prize, to keep the Kyoto system in place.

The only tree they were concerned with hugging was the money tree and all the vast political apparatus that now supports it, allowing governments to tax and regulate us into handing over ever more of our money, largely without realising it, every time we drive a car, fly in a plane, pay our electricity bill or carry out any of a vast range of activities that involve the emission of CO2. ”

http://www.telegraph.co.uk/comment/columnists/christopherbooker/6845686/Copenhagen-accord-keeps-Big-Carbon-in-business.html

Saudis rain missiles down on Yemen

Saudi warplanes rain ’1,011 missiles’ on Yemen
“Houthi fighters say Saudi warplanes have fired some 1,011 missiles on the borderline with Yemen where the Shia population is already under heavy state-led and US-aided bombardment. “

http://www.presstv.ir/detail.aspx?id=114162&sectionid=351020206

US air raids kill 63 civilians in Yemen
“Yemen’s Houthi fighters say scores of civilians, including many children, have been killed in US air-raids in the southeast of the war-stricken Arab country.”
http://dprogram.net/2009/12/19/us-air-raids-kill-63-civilians-in-yemen/

Obama Ordered U.S. Military Strike on Yemen Terrorists
“The Yemen attacks by the U.S. military represent a major escalation of the Obama administration’s campaign against al Qaeda.”

Pakistan on brink ;  Obama feigns surprise

Internally displaced Pakistani women and children, aka alQueda

Pakistan continues to deteriorate, as we have been expected since the election of Obama.  There is definitely a new war brewing in the region.  The most likely conflict is either an event justifying going into Pakistan, or an event justifying going into Iran.  In either case, doing so would land us in deep deep trouble, and would escalate into a regional war.  Pakistan is a nuclear-armed country, with ballistic and cruise missiles, and Iran has advanced Russian weaponry.  War in either country would be a big mistake with catastrophic consequences for the world, but our fearless leaders do not seem to care about the people of the world or their lives.  Regardless, the CIA and ISI are doing an excellent job of destabilizing Pakistan, which seems to be the policy objectiive.

Pakistan political crisis deepens

“THE political crisis in Pakistan has deepened after the Government’s anti-corruption agency sought a warrant for the arrest of the country’s Interior Minister.”

http://www.theage.com.au/world/pakistan-in-crisis-as-creeping-coup-unfolds-20091219-l6lf.html

Symptom of a Deeper Malady Pakistan’s Refugee Disaster

In the meantime, with the winter months fast approaching, hundreds of thousands of “unintegrated” refugees who do not find more durable shelter, even as military sweeps continue, could face exposure and starvation. Some aid groups are demanding that the United States pressure Pakistan to respect international humanitarian law and allow independent access to the refugees.

THIS WEEK IN MAYHEM

source: cmegroup

Not much happening this week due to the Christmas holiday. Tuesday brings us the GDP number and existing home sales, Wednesday is new home sales, and Thursday is durable goods orders and jobless claims.  This week we are watching Yemen and Pakistan.

Have a great week and Merry Christmas

Project Mayhem Research (PMR) is a DC/Baltimore-based grassroots think tank dedicated to exposing corruption worldwide. PMR is affiliated with Zerohedge.com, a popular and growing anti-corruption site, through contribution of free articles for the public. Topics include the politics of war and weapons systems, unexpected applications of cybernetics, the growing international surveillance state, global warming ‘deindustrialization’ economics, broad systemic international corruption , in-depth policy analysis of studies from bank and military funded research groups, genetic analysis and surveillance of pandemic influenza, corruption in the international gold market, the power structure and history of the global elite, and analysis of their political objectives expressed through monopolistic international finance capital (read: powerful banks) between now and 2050.

Sign up for free news updates and future subscription information–

* Required

Could the next black/green/dark gray swan be so obvious that it has avoided everyone? Well, except for the deputy governor of the Bank of China, who just gave the world a startling reminder of economics 101, when he said that it is “getting harder for governments to buy United States Treasuries because
the US’s shrinking current-account gap is reducing the supply of dollars
overseas.” Oops.

The funny thing about natural (and economic) systems: they can only be pushed so far before they snap back to default state. With the entire world embarking on an unprecedented spree of domestic bubble blowing to mask the collapse in global GDP, everyone forgot to trade. Zero Hedge has long emphasized that the drop in world trade can only sustain for so long before it brings the current destabilized system back to some form of equilibrium. Because with every country intent on merely printing more of its own currency, whether it is to build bridges or to make the stock of electronic book fads trade at 100x earnings, said countries ran out of non-domestic cash. Alas, this is most critical for the United States, now that Treasury monetization is over, as the US needs to constantly find foreign buyers of its debt to fund unsustainable deficits. Foreign buyers who have US dollars. And according to Shanghai Daily, this could be a big, big problem.

Here is what the BOC’s Zhu Min said earlier:

“The United States cannot force foreign governments to increase their
holdings of Treasuries,” Zhu said, according to an audio recording of
his remarks. “Double the holdings? It is definitely impossible.”

“The
US current account deficit is falling as residents’ savings increase,
so its trade turnover is falling, which means the US is supplying fewer
dollars to the rest of the world,” he added. “The world does not have
so much money to buy more US Treasuries.”

In a nutshell, in printing trillions of assorted securities, the Treasury has soaked up the world’s dollars, which due to US banks not lending, is sitting and collecting dust in the form of bank excess reserves. These excess reserves can not be used to buy Treasuries and MBS as that would be literal monetization (as opposed to the figurative one which is what QE has been). And the world is running out of dollars with which to buy Treasuries.

Does this mean that the “world” will be forced to buy dollars, and thus spike the value of the greenback? Not necessarily:

In a discussion on the global role of the dollar, Zhu told an academic
audience that it was inevitable that the dollar would continue to fall
in value because Washington continued to issue more Treasuries to
finance its deficit spending.