Thread by @CryptoHayes

1/
Let's play a little game called "Hide Those Treasuries".

The Rules:

The Fed is reducing it's balance sheet, $ liq -ve

The US Treasury is issuing bonds to pay for large and increasing fiscal spending, $ liq -ve

But we want stonks to pump, what to do?

https://twitter.com/DeItaone/status/1564691726702465031

2/
Who will buy the bonds the Treasury must issues so voters can get more stimmiez?

Foreigners, no
The Fed, no
US Commercial Banks, maybe, they need some help

3/
What if the US banks can buy Treasuries, and then flip them to the Fed in exchange for $'s?

Then the banks take those $'s and leverage them through the financial markets net result more $ liq, stonks pump! Yay

4/
The banks can't buy more Treasuries right now bc holding Treasuries incurs balance sheet charges.

The Fed can't buy more Treasuries now because it's doing QT and reducing the size of its balance sheet to fight inflation.

But there is a solution ...

5/
Every night the Fed accepts Treasuries from the banks, and gives them fresh $.

Banks don't get hit with capital charges, and get v cheap $ liq that can get leveraged in the financial economy ... stonks pump.

6/
This is called the Standing Repo Facility run by the NY Fed, they are doing a test run in Sept to make sure the pipes are working correctly.

It's maximum size is $500bn

7/
Will the Fed activate it? IDK

But we should keep an eye on it, therefore I added it to my USD Liquidity Index.

The SRF is a great way to soak up Treasury issuance that is required for pre-election stimmiez.

8/
For those with a Bloomie the new CIX function is:

FARBAST Index - (RRPQTOON Index * 1000) - CERBTGAN Index + NYRPVOA Index

9/
Forget about the Fed Funds rate, just watch the $ liq and form a view on its future trajectory.

This Sept when the Fed is supposed to be draining more $ liq by QT let's see if that is actually the case when we look at the total picture.

10/
Remember:
$ liq number go up, stonks & $BTC pump
$ liq number go down, stonks & $BTC dump

You might as well throw away all those useless economics text books that talk about earnings and other nonsense. JAYPOW is yo daddy, give him some respect!