Over the next few years, the #fed is going to have to expand their balance sheet to offset this liquidity crisis. That means, in my estimation, we will see it heading north of $12 trillion.
1/ Yes. When a system is short of liquidity, it contracts. Think of what happens if your paycheck was cut by 20%. It is the same with banks but lending. If they cant finance deals because they lack the capacity, rates mean nothing.
2/ So markets expand when there is more liquidity to offset a shortage. The #fed cannot really inject money directly into these markets so it has to foreshadow what it is doing and let the markets take over.
The only answer for the #fed is to start easing. It will give the markets the perception they are doing something which will bring liquidity. Lowering rates will also push bond prices up which will help the bal sht capacity.
Not really money printing, at least not currency. That is where people get it wrong: the Fed isnt printing dollars. That is controlled by the commercial banks.
And how do they "offset this liquidity crisis"?
With expanded balance sheets, banks can then lend on the offshore market, providing the liquidity required.
And that will lead into a bull market?
1/ Yes. When a system is short of liquidity, it contracts. Think of what happens if your paycheck was cut by 20%. It is the same with banks but lending. If they cant finance deals because they lack the capacity, rates mean nothing.
Thanks so much as always for educating us uneducated.
2/ So markets expand when there is more liquidity to offset a shortage. The #fed cannot really inject money directly into these markets so it has to foreshadow what it is doing and let the markets take over.
3/ when risk on sentiment hits, people start buying, pulling money into different markets.
The only answer for the #fed is to start easing. It will give the markets the perception they are doing something which will bring liquidity. Lowering rates will also push bond prices up which will help the bal sht capacity.
Thanks for educating me as always my friend.
Professor Task.
When do I get tenure.
You already do in my eyes. Prof. Task for here on out!
You are a sweetheart...no matter what your wife says about you.
Hahahahaha Hahahahaha Hahahahaha 🤣 😂 I started reading that and thought, what the fracking happened to Prof. Task. Then I got tonthe end.
Bring the printer
Not really money printing, at least not currency. That is where people get it wrong: the Fed isnt printing dollars. That is controlled by the commercial banks.
I think it all comes down to an expansion of the balance sheet. When (not if) that happens it's all to the moon