Quick Caveat - I’m no macro expert, but had fun putting together this post. Very open to feedback! Liquidity Liquidity drives markets, and is a term we’ve all heard many times over the last few years. When liquidity pours in, markets generally go up (as it did during the onset of the pandemic). And when liquidity is sucked out, markets fall. Given the recent debt ceiling deal, and its implications on upcoming liquidity in the markets, I wanted to write up a quick primer on what we could see in the weeks / months ahead with respect to liquidity. TLDR - the recent debt ceiling deal
Isn't the refilling of the TGA partially offset by the TGA fulfilling its obligations (salaries, interest payments etc.). As the refilling takes place over time the net effect is smaller, meaning debt issuance - payments = net liquidity drain.
Sure, we will see some liquidity drain but I doubt it's gonna be as bad as many people think.
I think you need make a distinction between inside and outside money (stuck within the banking system and not spent on goods & services).
Isn't the refilling of the TGA partially offset by the TGA fulfilling its obligations (salaries, interest payments etc.). As the refilling takes place over time the net effect is smaller, meaning debt issuance - payments = net liquidity drain.
Sure, we will see some liquidity drain but I doubt it's gonna be as bad as many people think.
Excellent read!
Thanks for organizing this so well!
Great write-up. Hope to see you continue to expand your topic coverage in the future!
fantastic information on Macro.