The Dearth of Safe Banking Collateral in the Euro, US Dollar

A chart that few are looking at explains the concept of the dearth or shrinkage of so called safe collateral in the Euro and USD. The reason is that the Fed and other central banks hold much of it, or it is now encumbered via direct bilateral funding agreements or by sitting at the central bank drawing liquidity. At the same time a large chunk of sovereign debt has been downgraded. The end result is that the banking system holds more and more junk assets and less in acceptable securities to use as collateral. Even more incredible is that most