⬇️ My Thoughts ⬇️
i covered more this aspect of QE in my thread about how to use yield spreads to reason about future Bitcoin price and cycles you can read it here: https://illya.sh/threads/@1755595543-1.html
once Fed does QE, reserve account balances increase, thus directly increasing base money broad money either increases indirectly or directly if the Fed credits a non-bank institution
once Fed does QE, reserve account balances increase, thus directly increasing base money broad money either increases indirectly or directly if the Fed credits a non-bank institution
once Fed cuts interest rates, more borrowing will occur, thus expanding broad money it will also lower T-bill yields short-term, as the prices are bid up due to a lower risk-free rate
once Fed cuts interest rates, more borrowing will occur, thus expanding broad money it will also lower T-bill yields short-term, as the prices are bid up due to a lower risk-free rate
a lot of these US treasury purchases will be financed with short-term rolling debt (e.g. repo) the treasury themselves will be used as collateral to borrow cash, many times over via rehypothecation
a lot of these US treasury purchases will be financed with short-term rolling debt (e.g. repo) the treasury themselves will be used as collateral to borrow cash, many times over via rehypothecation
it's NOT yet the top of the cycle for equities, cryptocurrencies and other risk assets. here’s why 1️⃣ US Treasury is issuing more debt 2️⃣ in the next months I expect the Fed to cut rates and/or introduce some form of QE 3️⃣ weaker USD means more cross-border USD credit
it's NOT yet the top of the cycle for equities, cryptocurrencies and other risk assets. here’s why 1️⃣ US Treasury is issuing more debt 2️⃣ in the next months I expect the Fed to cut rates and/or introduce some form of QE 3️⃣ weaker USD means more cross-border USD credit
it's NOT the top yet - i'll post a thread with an explanation soon stay tuned 👀
cryptocurrency prices perform well when yield spreads are low/decreasing and bad when yield spreads are high/increasing this is specifically true when you analyze it at a higher timeframe - think monthly timescale instead of daily one. and the larger the spike/change
eventually this carry trade unwinds, and yield spreads soar. balance sheet constrains, existing positions get too expensive too roll-over/re-finance that’s where you get the big(er) financial crisis and then you get more QE/lower rates to address that
eventually this carry trade unwinds, and yield spreads soar. balance sheet constrains, existing positions get too expensive too roll-over/re-finance that’s where you get the big(er) financial crisis and then you get more QE/lower rates to address that
US Treasury debt is likely to be among the assets purchased by those same banks that received QE funds from the central bank. so central bank's QE injection may be used to purchase US Treasury debt at auctions, thus effectively monetizing the government debt 😁
US Treasury debt is likely to be among the assets purchased by those same banks that received QE funds from the central bank. so central bank's QE injection may be used to purchase US Treasury debt at auctions, thus effectively monetizing the government debt 😁
even if it doesn't happen directly at the start - eventually QE also increases broad money, due to reduced balance sheet constraints and an increase in cash reserves, which needs to be invested ASAP. this leads to more lending and asset purchases
even if it doesn't happen directly at the start - eventually QE also increases broad money, due to reduced balance sheet constraints and an increase in cash reserves, which needs to be invested ASAP. this leads to more lending and asset purchases
initially QE may only increase base money supply - as commercial banks reserve balances get credited by the Central Bank if the Central Bank purchases assets from non-bank financial institutions, then broad money increases directly as well, as deposits increase
initially QE may only increase base money supply - as commercial banks reserve balances get credited by the Central Bank if the Central Bank purchases assets from non-bank financial institutions, then broad money increases directly as well, as deposits increase
the US Treasury may also issue more debt to increase the supply of safe assets, thus offsetting the compression shock end result: more safe assets/prime collateral provided to markets. remember that the newly issued treasuries are likely to be rehypothecated several times
the US Treasury may also issue more debt to increase the supply of safe assets, thus offsetting the compression shock end result: more safe assets/prime collateral provided to markets. remember that the newly issued treasuries are likely to be rehypothecated several times
the global financial system depends on the abundance of this collateral, otherwise - defaults, margin calls, etc i wrote a thread/article explaining how US Treasuries are the dominant collateral in short-term wholesale debt markets (e.g. repo). read here: https://illya.sh/threads/@1751726431-1.html
the global financial system depends on the abundance of this collateral, otherwise - defaults, margin calls, etc i wrote a thread/article explaining how US Treasuries are the dominant collateral in short-term wholesale debt markets (e.g. repo). read here: https://illya.sh/threads/@1751726431-1.html
QE also removes safe collateral from the market, mainly US Treasury bills, notes and bonds. this safe collateral is the backbone of wholesale debt markets, where financial institutions, including commercial and central banks finance and re-finance their positions