| Yesterday we talked about the suppression of crude prices across the globe. The primary culprit of this was of course our very dear ally Saudi Arabia. The Saudi's did not get to where they are because they are stupid. They saw the risk that US shale oil posed to their petro-empire and so they drove the price of crude into the ground in an effort to bankrupt shale producers and their surrounding businesses. They know they have the oil, the cheap means to get it out of the ground and they also know that they are done with if a more viable alternative becomes available. Well done Saudi Arabia! This scenario is just one domino in this stack of dominoes. Mr. Durden of zerohedge explains: "The accumulation of USD assets held as FX reserves across the emerging world served as a source of liquidity and kept a bid under things like US Treasurys. This is the environment into which China is now dumping its own reserves and indeed, the PBoC's rapid liquidation of USTs over the past two weeks has added fuel to the fire and effectively boxed the Fed in. Deutsche Bank has coined the phrase "Quantitative Tightening". From Deutsche: "China will liquidate as much as $1 trillion in US paper, which, as we noted on Thursday evening, would effectively negate 60% of QE3 and put somewhere in the neighborhood of 200bps worth of upward pressure on 10Y yields " China's actions have essentially amounted to a synthetic tightening for US Dollar denominated assets. Also remember that this is just China. This does not even address the emerging markets following suit. George Saravelos of Deutsche Bank: "The potential for more China outflows is huge: set against 3.6 trio of reserves, China has around 2 trillion of "non-sticky" liabilities including speculative carry trades, debt and equity inflows, deposits by and loans from foreigners that could be a source of outflows (chart 2). The bottom line is that markets may fear that QT has much more to go. What could turn sentiment more positive? The first is other central banks coming in to fill the gap that the PBoC is leaving. China's QT would need to be replaced by higher QE elsewhere, with the ECB and BoJ being the most notable candidates... Either way, it is hard to become very optimistic on global risk appetite until a solution is found to China's evolving QT." So, get your tickets right now for QE4 and beyond. Great seats still available! Trade well and follow the trend, not the perma-bull OR perma-bear "experts." Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | 
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