# Balance sheets and commentary for: http://www.realclearmarkets.com/articles/2016/03/18/everywhere_you_look_theres_a_dollar_shortage_102070.html, by Jeffrey Snider "In November 2014, Apple sold about $3.5 billion in bonds that management claimed would be used for 'general corporate purposes', including the possibility of funding dividend payments and share repurchases. The antiquated, backward US tax code makes Apple's foreign profits and cash out of reach for any such objective, so the massive financial engines of Wall Street are needed to fulfill the apparent demand." Thus the folly of taxation: corporations are forever innovating devious ways around existing law. Better to let corporations and IRS employees focus on the General Welfare; make taxes voluntary, and create money for the budget, and basic income. "To repatriate the proceeds of the euro bond sales means a cross currency basis swap (perhaps a plain vanilla currency swap, but not as likely). In this arrangement (and probably structured as several individual trades pieced together) Apple will have engaged some counterparty to exchange notional values up front in promise to do so again in reverse at an agreed upon future date. The notional values are usually determined by the current spot exchange of the two currencies (perhaps forward currency rates on occasion), meaning that exchange risk is eliminated since both parties make the same principal payments only offset by time (I borrow $3.5 billion from you today and give you $3.5 billion next year; you give me E2.8 billion next year in exchange for the E2.8 billion I lend you today). The financial end comes in on the interest, meaning that what is swapped is really payment streams." I think he's talking about balance sheets that look something like: Apple assets | liabilities --------------------------------------------- E2.8 billion | E2.8 billion Bonds ---------- | ---------- $3.50 billion | E2.8 billion ---------- | ---------- Euribor+spread | Libor | Counterparty assets | liabilities ------------------------------------- E2.8 billion | $3.50 billion ---------- | ---------- Libor | Euribor+spread | # If the spread is negative, Apple pays Counterparty Euribor minus a spread that can be greater than Euribor; # thus Apple pays Libor + (Negative Spread - Euribor). "[...] in the 1990's the basis swap for Japanese banks (again, not companies) was structurally negative, meaning that they had to pay a premium to swap into dollar funding because of negative perceptions of creditworthiness. This is the legacy of the downside of the 'global dollar short', as Japanese banks had accumulated large dollar asset positions (long US$ assets, short US$ funding) leaving them susceptible to such vagaries in dollar funding, whether repo or basis swaps or anything else someone on Wall Street or in London might dream up that wasn't gold or actual cash." "[...] the real money is made in the basis swap itself since it now trades so highly negative. The very fact of that basis swap spread means a huge premium on spare dollars; which is another way of saying there is a 'dollar' shortage. Because of the shortage and its premium, you can swap into yen and invest in negative yielding JGB's in size and still make out handsomely." Japan assets | liabilities ----------------------------------- Yen | ---------- | ---------- Dollars | Yen ---------- | ---------- Yen r | Dollar r | Dealer assets | liabilities ----------------------------------- Dollars | ---------- | ---------- Yen | Dollars ---------- | ---------- Dollar r | Yen r | # Yen interest is added to a spread. When the spread is negative, Japan pays Dealer a netted cash flow. # Side-by-side: Dealer Japan assets | liabilities assets | liabilities ----------------------------- ----------------------------- Dollars | Yen | ---------- | ---------- ---------- | ---------- Yen | Dollars Dollars | Yen ---------- | ---------- ---------- | ---------- Dollar r | Yen r Yen r | Dollar r | | --- "Argentina, Nigeria, Brazil...China. And many more that have been kind of forgotten since the violence of a global dollar shortage has moved attention toward now the biggest participants. The world is synthetically short the dollar and was increasingly so especially from 1995 to 2007 (August 9, to be specific)." The problem with Weimar, Venezuela, Brazil, Greece etc. is an artificial imposed scarcity of US dollars. "Synthetically short", by policy, not necessity. Weimar was a case of too few dollars chasing too many goods.