It’s all about Liquidity

The Fed can say what they want, the pundits on television can do the same, but the bottom line is a debt-based global economy can not function without constant liquidity.  The Fed talks about quantitative tightening, but when push comes to shove they will have to do what they have to do: provide liquidity.  If not, game over.

Last part of this article from the Market Insider, says the following (with the part in the parenthesis being my edit)…

But while this is true (Fed performing quantitative tightening) for short-term assets such as T-bills, the Fed has actually been picking up long-duration bonds since QT started in June of last year.
Market veteran Ed Yardeni pointed out in a note last month that the Fed seeks to moderate the impact of its QT program with continued purchases of Treasuries with maturities of 10 year of more.
Though QT has reduced the Fed’s balance sheet by $1 trillion overall since beginning last year, the central bank has added around $77.5 billion in bonds with maturities of 10 years or more, according to St. Louis Fed data.

I think understanding this concept is crucial.

Share on

You Might Also Like