Look at this source of liquidity since March - then look at the
SPX chart - this is ONE source of liquidity. Some like to
pronounce bullish or bearish but have no supporting evidence.
The market remained range bound for 8 months (shorting 4200
several times was a good bet until the Fed pivot) and called out
the range break back in early June. I outlined this last
weekend and will be tracking closely - best to stay
abreast.
Wonder how this loan program adds to liquidity. If banks are
borrowing from the FED to cushion their deposit flight and deposits
(Checking+savings) go to Short-term treasuries, how is it adding to
liquidity? If bank customers invest in the stock market instead of
short-term treasuries then it does add to liquidity. But,
cheking+Savings accounts are meant for payroll and working capital
needs. I wonder if they'd risk it in the stock market.
Posted by timebandit on 16th of Jun 2023 at 08:50 am
I do not understand the intricacies of the financial system.
Full stop. But I suspect that funds injected into that system will
find their way, one way or another, to the various places where it
can generate a return. How it gets there, I cannot explain. But I
imagine they call it liquidity for a good reason. As anyone who has
had a leak in their house knows, water has a funny way of traveling
into the damnedest places..
UPDATE: Sorry, I see Steve already addressed this much better
than I could.
These loans increase the funds available to such banks, which in
turn use fractional reserve banking to multiply this money and thus
create even more NEW money in the system. You can track via
the H41 report.
BTFP adds to liquidity (it's one of 4 components) which include
1. Bank Reserves 2. Fed Balance Sheet 3. Treasury operating cash
balance (TGA) 4. FRB Loans
Bank Reserves being the highest impact liquidity source on
the market.
Secondary source of liquidity would be the overnight RRP -
basically RRP increase has a negative impact on liquidity while an
RRP decrease has a positive impact on liquidity
One other note: the restart of individuals paying back student
loans will have a negative impact on liquidity - that's part of
commercial banks reserves and would be taken into account in the
bank reserves report. All of the above impact the market
with a lagged effect which differs in time to each.
Posted by DigiNomad on 16th of Jun 2023 at 03:52 pm
"the restart of individuals paying back student loans will have
a negative impact on liquidity - that's part of commercial banks
reserves and would be taken into account in the bank reserves
report." -- it's not in the budget so I assume it's
been 100% debt / deficit outlay with the good ole money
printer...but it's been getting paid the whole time, it's just been
the Gov paying it. Ahh, I just answered my own question.
Notionally, deficit spending and money printing will
decrease by 5 billion per month when the Gov stop making the
payments (I'll believe they are actually going to stop when I see
it...not convinced yet).
Sorry for being slow to catch on here but if I read this
correctly it appears this access to loans is working counter to the
feds attempt to stem inflation-correct?
BTFP - Look at the Ramp Since March (Liquidity)
Posted by steve on 15th of Jun 2023 at 06:47 pm
Look at this source of liquidity since March - then look at the SPX chart - this is ONE source of liquidity. Some like to pronounce bullish or bearish but have no supporting evidence. The market remained range bound for 8 months (shorting 4200 several times was a good bet until the Fed pivot) and called out the range break back in early June. I outlined this last weekend and will be tracking closely - best to stay abreast.
Steve any update on this
Posted by xxkumarxx on 9th of Jul 2023 at 03:34 pm
Steve any update on this chart to what that looks like this month.
You can Find this information
Posted by steve on 9th of Jul 2023 at 03:51 pm
You can Find this information on the FRED site
Wonder how this loan program
Posted by coolhat on 16th of Jun 2023 at 08:20 am
Wonder how this loan program adds to liquidity. If banks are borrowing from the FED to cushion their deposit flight and deposits (Checking+savings) go to Short-term treasuries, how is it adding to liquidity? If bank customers invest in the stock market instead of short-term treasuries then it does add to liquidity. But, cheking+Savings accounts are meant for payroll and working capital needs. I wonder if they'd risk it in the stock market.
I do not understand the
Posted by timebandit on 16th of Jun 2023 at 08:50 am
I do not understand the intricacies of the financial system. Full stop. But I suspect that funds injected into that system will find their way, one way or another, to the various places where it can generate a return. How it gets there, I cannot explain. But I imagine they call it liquidity for a good reason. As anyone who has had a leak in their house knows, water has a funny way of traveling into the damnedest places..
UPDATE: Sorry, I see Steve already addressed this much better than I could.
Coolhat
Posted by steve on 16th of Jun 2023 at 08:37 am
These loans increase the funds available to such banks, which in turn use fractional reserve banking to multiply this money and thus create even more NEW money in the system. You can track via the H41 report.
BTFP adds to liquidity (it's one of 4 components) which include 1. Bank Reserves 2. Fed Balance Sheet 3. Treasury operating cash balance (TGA) 4. FRB Loans
Bank Reserves being the highest impact liquidity source on the market.
Secondary source of liquidity would be the overnight RRP - basically RRP increase has a negative impact on liquidity while an RRP decrease has a positive impact on liquidity
One other note: the restart of individuals paying back student loans will have a negative impact on liquidity - that's part of commercial banks reserves and would be taken into account in the bank reserves report. All of the above impact the market with a lagged effect which differs in time to each.
"the restart of individuals paying
Posted by DigiNomad on 16th of Jun 2023 at 03:52 pm
"the restart of individuals paying back student loans will have a negative impact on liquidity - that's part of commercial banks reserves and would be taken into account in the bank reserves report." -- it's not in the budget so I assume it's been 100% debt / deficit outlay with the good ole money printer...but it's been getting paid the whole time, it's just been the Gov paying it. Ahh, I just answered my own question. Notionally, deficit spending and money printing will decrease by 5 billion per month when the Gov stop making the payments (I'll believe they are actually going to stop when I see it...not convinced yet).
WOW on that chart! just
Posted by matt on 15th of Jun 2023 at 07:38 pm
WOW on that chart! just like another QE, all that excess money finds itself into the markets
Sorry for being slow to
Posted by Glad on 16th of Jun 2023 at 08:49 am
Sorry for being slow to catch on here but if I read this correctly it appears this access to loans is working counter to the feds attempt to stem inflation-correct?
One word: WOW.
Posted by timebandit on 15th of Jun 2023 at 06:50 pm
One word: WOW.