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Illya Gerasymchuk
Entrepreneur / Engineer

⬇️ My Thoughts ⬇️

User Illya Gerasymchuk -

2025-08-16 15:28

Bank of International Settlements (BIS) has a lot of interesting papers, articles and data on global liquidity and financial system it's bank-focused, but connected to the broader scope, like the non-bank financial institution (NBFI) credit flows i posted about earlier

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User Illya Gerasymchuk -

2025-08-16 13:01

i wrote a thread explaining why weaker USD means more credit/loans issued in USD, thus driving up global liquidity you can read it here: https://illya.sh/threads/@1755216337-1.html

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USD cross-border bank credit grew by $800 billion in Q1 2025 expect further increases for Q2 2025, due to the weak US dollar

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User Illya Gerasymchuk -

2025-08-16 12:44

it's not just the governments and financial institutions who are dependent on debt refinancing - the private non-financial sector as well remember than more than 70% of credit issuance is for servicing/refinancing of existing debt

User

credit continues to expand in the non-financial sector as well the attached graph also shows a turning point in 2008 - that's how the GFC was handled - by issuing more credit 😁 you can also see a steeper increase during COVID

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User Illya Gerasymchuk -

2025-08-16 12:44

credit continues to expand in the non-financial sector as well the attached graph also shows a turning point in 2008 - that's how the GFC was handled - by issuing more credit 😁 you can also see a steeper increase during COVID

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User Illya Gerasymchuk -

2025-08-16 12:42

USD cross-border bank credit grew by $800 billion in Q1 2025 expect further increases for Q2 2025, due to the weak US dollar

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User Illya Gerasymchuk -

2025-08-16 12:39

renminbi has become dominant in credit growth since 2022 a move from US dollar & Euro denominated credit to Chinese Yuan-denominated credit

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User Illya Gerasymchuk -

2025-08-16 12:37

USD dominates in cross-border bank credit to non-bank financial institutions in 2025

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User Illya Gerasymchuk -

2025-08-16 12:30

in Russia, besides the Bank of Russia there's also the National Wealth Fund (NWF), which is operated by the Ministry of Finance in China, there's policy banks, such as China Development Bank which are supported by PBoC's facilities

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this collateral (US Treasury bonds) can then be used on wholesale debt markets to issue more credit moreover, this collateral can be leveraged/rehypothecated, thus increasing liquidity still, in the USA the Fed continues to dominate in importance

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User Illya Gerasymchuk -

2025-08-16 11:44

this collateral (US Treasury bonds) can then be used on wholesale debt markets to issue more credit moreover, this collateral can be leveraged/rehypothecated, thus increasing liquidity still, in the USA the Fed continues to dominate in importance

User

so it may not only be central bank setting the rates and affecting liquidity for example, when US Treasury auctions bonds, they're both, temporarily reducing the effective amount of USD in circulation and providing more high-quanlity collateral

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User Illya Gerasymchuk -

2025-08-16 11:43

so it may not only be central bank setting the rates and affecting liquidity for example, when US Treasury auctions bonds, they're both, temporarily reducing the effective amount of USD in circulation and providing more high-quanlity collateral

User

by "central bank" I'm frequently referring to the broader set of the legal framework behind the macro monetary policy in most countries central banks plays a key role, but they frequently co-exist in a larger network of institutions

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User Illya Gerasymchuk -

2025-08-16 11:41

by "central bank" I'm frequently referring to the broader set of the legal framework behind the macro monetary policy in most countries central banks plays a key role, but they frequently co-exist in a larger network of institutions

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User Illya Gerasymchuk -

2025-08-15 21:39

bank credit continues to grow, and it will continue to grow it will almost certainly break the 7% annual growth resistance central banks will expand balance sheets and lower interest rates to refinance the existing public and private debt data source: BIS

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outstanding cross-border bank credit reached a record of $34.7 trillion the latest increase was driven by increased lending to non-bank financial institutions (NBIFs), with most of the credit being issued in USD or EUR

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User Illya Gerasymchuk -

2025-08-15 21:35

outstanding cross-border bank credit reached a record of $34.7 trillion the latest increase was driven by increased lending to non-bank financial institutions (NBIFs), with most of the credit being issued in USD or EUR

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User Illya Gerasymchuk -

2025-08-15 14:45

so a weaker US dollar tends to increase global USD liquidity in the SVAR, one standard deviation of US dollar's appreciation leads to a fall in cross-border USD lending. it reaches its bottom after 6 months and then eventually recovers after 2.5 years if no new shocks arrive

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bank's leverage ratios improve due to collateral appreciation, thus allowing them to borrow more USD collateral here is the non-USD local currency, such as Yuan

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User Illya Gerasymchuk -

2025-08-15 01:09

bank's leverage ratios improve due to collateral appreciation, thus allowing them to borrow more USD collateral here is the non-USD local currency, such as Yuan

User

weaker US dollar means more USD credit issuance abroad - here's why foreign banks frequently borrow USD through wholesale markets with a local currency denominated collateral when USD depreciates against a local currency, offshore USD credit now has a reduced debt service

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User Illya Gerasymchuk -

2025-08-15 01:05

weaker US dollar means more USD credit issuance abroad - here's why foreign banks frequently borrow USD through wholesale markets with a local currency denominated collateral when USD depreciates against a local currency, offshore USD credit now has a reduced debt service

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User Illya Gerasymchuk -

2025-08-15 00:25

offsetting losses with future profits is explicitly allowed under Article 33 of Statute of ESCB & ECB ESCB = ECB + EU National Central Banks (NCBs) so this applies to both, the European Central Bank, and all EU National Central Banks

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equity is the residual claim on assets after all liabilities are paid equity = assets - liabilities so the ECB just covers the loss with their equity. this equity reduction is carried forward to be offset by future profits

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User Illya Gerasymchuk -

2025-08-15 00:11

i wrote a thread about what it means for the US dollar to be the reserve currency from the perspective of demand and liquidity you can read it here: https://illya.sh/threads/@1754940239-1.html

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this is nothing unusual though - many governments do this, and it's mostly towards stabilizing the exchange rate with USD to a large extent this is a result US dollar's reserve currency status and its dominance in use for all sorts of financial transactions

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User Illya Gerasymchuk -

2025-08-14 21:00

equity is the residual claim on assets after all liabilities are paid equity = assets - liabilities so the ECB just covers the loss with their equity. this equity reduction is carried forward to be offset by future profits

User

ECB says that the loss will remain on the balance sheet and will be offset by future profits the loss happened because ECB spent more than earned. they did so by using cash, selling assets or increasing liabilities the net effect is the same: reduction in equity

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User Illya Gerasymchuk -

2025-08-14 20:58

ECB says that the loss will remain on the balance sheet and will be offset by future profits the loss happened because ECB spent more than earned. they did so by using cash, selling assets or increasing liabilities the net effect is the same: reduction in equity

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πŸ‡ͺπŸ‡Ί ECB's "business model" is as follows: βž• income: ECB creates money and invests it into financial assets (e.g.: FX, bonds, funds) βž–expenses, such as operational expanses (e.g. staff), facility and open market operation expenses (e.g. TARGET) profit/loss = income - expenses

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User Illya Gerasymchuk -

2025-08-14 20:55

πŸ‡ͺπŸ‡Ί ECB's "business model" is as follows: βž• income: ECB creates money and invests it into financial assets (e.g.: FX, bonds, funds) βž–expenses, such as operational expanses (e.g. staff), facility and open market operation expenses (e.g. TARGET) profit/loss = income - expenses

User

ECB recorded an €8 billion loss in 2024 - what happens in that case? that's a balance sheet question. to understand what happens we need to look into the operational or "business" model of the European Central Bank

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User Illya Gerasymchuk -

2025-08-14 20:53

ECB recorded an €8 billion loss in 2024 - what happens in that case? that's a balance sheet question. to understand what happens we need to look into the operational or "business" model of the European Central Bank

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User Illya Gerasymchuk -

2025-08-14 20:28

this is nothing unusual though - many governments do this, and it's mostly towards stabilizing the exchange rate with USD to a large extent this is a result US dollar's reserve currency status and its dominance in use for all sorts of financial transactions

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πŸ‡―πŸ‡΅ Yen's exchange rate stabilization is a responsibility of the Minister of Finance (MoF) MoF is also the holder of Japan's international reserves - not the Bank of Japan so in Japan the government has significant responsibility for USD/JPY

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User Illya Gerasymchuk -

2025-08-14 20:21

πŸ‡―πŸ‡΅ Yen's exchange rate stabilization is a responsibility of the Minister of Finance (MoF) MoF is also the holder of Japan's international reserves - not the Bank of Japan so in Japan the government has significant responsibility for USD/JPY

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User Illya Gerasymchuk -

2025-08-14 11:23

and there it is - a new BTC all time high in Euro πŸ‡ͺπŸ‡ΊπŸ₯³

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and soon the Eurozone will join the new BTC all time high party πŸ‡ͺπŸ‡ΊπŸ₯³ Bitcoin still hasn't seen a new high in EUR since January 2025 this happened to due the relative appreciation apprtetiation of Euro against US dollar

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