US Treasuries are by far the most popular collateral type in secured short-term funding markets (e.g. the repo market)

US Treasuries are by far the most popular collateral type in secured short-term funding markets (e.g. the repo market) outstanding volume of these markets is larger than M2 notice the increase in usage of less safe assets as a collateral not enough UST for its demand ⬇️

the higher use of lower quality collateral has pro-cyclical effects if the price of collateral falls during economic downturn - you'll get a lot of margin calls & insolvencies. this will further put pressure on short-term funding mechanisms, which already lack HQ collateral

liquidity abundance leads to the narrowing of spread between riskier and safe assets (mostly government bonds) safe assets fall in price, with their yields increasing towards the riskier ones US bond yields are high under tighter monetary conditions - liquidity is pro cyclical

once FED lowers interest rates, it's likely to put downward pressure on yields - assuming term premia doesn't increase by more in the end, the yields will be higher than in the last 20 years, for the same FED funds rate QE/liquidity injections will further devalue USD

this new liquidity will reach financial markets first, before reaching the "real economy" equity, cryptocurrencies all go up in prices. bubble further fueled. you know what (eventually) happens to all bubbles Gold & Co. is a great hedge

this is the general model, and think of these events as adding pressure towards the described outcome, rather than an axiom there are other events than can steer the pressure towards a different outcome, and the final outcome is a combination of all 😄

using historical behavior can be a great alpha - but you should probably focus on the patterns from this century perpetually low ≈0% interest rates have been a norm only post ≈2009 (but the bubble started before) so you want to look at the behavior in that environment

ex: in the 1980's US fought high inflation by raising interest rates towards ≈20% if the FED did that today - the global financial markets, alongside the US would be destroyed. there wouldn't be enough liquidity to refinance the debt

so today it may not be wise to assume that the FED will hike interest rates into double digits to lower the CPI/inflation rather - the interest rates are headed down, bc of challenge in refinancing debt that's what I meant by focusing on historical patterns from this century

all of this very bullish for gold & other commodities it's not just gold & silver - you may have seen the recent appreciation of platinum those commodities have still have price to catch up on & that has been signaled by their volatility gold up 40% on the year isn't normal