It is said that a tsunami announces itself when the ocean suddenly and for no apparent reason recedes back farther than anyone could imagine. Left stranded are everything from beachgoers to fishing vessels of all sizes and even marine wildlife suddenly exposed to the open air. The spectacle creates a dangerous curiosity which the naturally curious humankind has difficulty avoiding. There were many stories of similar behaviors in the biblically deadly 2004 Indian Ocean tsunami, as people at these beach destinations were stuck in place by the sheer nature of the event; to their own mortal peril.

This is admittedly at best a fitted analogy, but you get the point. There are times when so unnatural seems some occurrence that it overrides common sense. There is no logic to it, it is its own logic. That dangerous process is all the more so wherever the phenomenon stretches into symptoms or outbreaks that are unfamiliar even under benign circumstances. Such it is with this dollar “run.”

It has all the hallmarks of a bank run, only that there isn’t (maybe) the traditional features of convertibility that everyone heard about in their ancient economics textbooks laying blame upon gold. Currency elasticity in the form of central banks authorized with full discretion and flexibility was supposed to have relegated bank panic to the same past as those books. The events in 2008 put that notion to rest.

What was curious about the “run” in 2008 was that it wasn’t currency or money; it was wholesale of things like euro/dollars, repo collateral and credit default swaps. We are told, even today, that these are only “investments” but any close examination of the 2008 panic shows irrefutably otherwise. Repo is perhaps the easiest to understand since at the worst of the crisis UST collateral was “more valuable” than cash; thus the $5+ trillion in repo fails during the worst of it. It makes sense if you understand that the “run” at that time was an interbank run, not an external convertibility run, and thus the currency relevant to that run was not “cash” (itself in various forms) but collateral.

This one is different still, but the telltale signs are still there. Unlike 2008, however, there is historical precedent in this format as I described in some detail about 1969 and the ultimate end of Bretton Woods. It was then a dollar “run”, too, though the calibrated “direction” seemed to be opposite (the “rising dollar” then was actually falling exchange value into “inflation” vs. now where the “rising dollar” seems to be just that, and the world dropping into “deflation”). The direction doesn’t matter so much as the tremors of instability.