Saturday, August 6, 2022

The Fed’s Path Towards QT

 Warning to markets: things are about to get a lot tighter, money wise.  

The Fed has been tightening money supply very slowly for the last two months, but after August QT is set to double to $95 billion per month - see chart below.

These amounts have already been announced as official FOMC policy - I wonder how many non-professional investors have bothered to look (perhaps even some professionals?). Yes, these are caps, ie maximum QT amounts, but after yesterday’s very strong employment report I don’t see the Fed doing anything less until the economy takes a serious dive.

I believe the Fed, if anything, will err on the side of too tight, to make up for thinking inflation was “transitory”. The market, I am certain, is now expecting/hoping that the Fed will raise its foot off the brake. It is wrong.


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3 comments:

  1. a kind of chickenAugust 8, 2022 at 6:37 PM

    btw hell, the new climate legislation feels real good... any caveats to that?... =)

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    Replies
    1. AnonymousAugust 9, 2022 at 5:24 PM

      I fear it is too late - and way too little. And you truly can't change the climate with tax policy, unless it goes to WWII levels (max marginal rate at 90%).

      Delete
  2. a kind of chickenAugust 11, 2022 at 4:36 AM

    " And you truly can't change the climate with tax policy"... I kind of smiled a little when I read that... the fact that such a statement is even possible shows how much power humanity has... the power of the Gods in the hands of little children... =)

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