Daniel, I follow Crossborder Capital and Alan Longbon (Away from the Herd) and Alan for example adds bank credit creation and subtracts trade deficits. Your thoughts?
Fascinating. My key takeaway is that volatility on the liability composition of the Fed’s balance sheet is WAY higher than asset side, and that this is meaningful. The shift between RRP/TGA and bank reserves certainly is not monetarily neutral. When compared to the H8 table of total bank balance sheets it is clear they have shifted out of Base Money into counterparts to very broad money (M3 or broader). I put this down to a fall in profitability of securities business and the need by banks to search for profit elsewhere (particularly in the loan market). This may not be a voluntary decision, and it may not turn out to be profitable. Moreover, it is counter-intuitive at the beginning of what looks (at present) like a pretty aggressive tightening cycle by the Fed. In addition, the reduced focus on securities trading may gather pace because reserves are being redirected away from settlement into O/N Tri-party repo for money-market funds - further damaging securities prices.
Love it. Now is there a way to plug into the FRED API and generate this visualization on the fly?
Daniel, I follow Crossborder Capital and Alan Longbon (Away from the Herd) and Alan for example adds bank credit creation and subtracts trade deficits. Your thoughts?
Fascinating. My key takeaway is that volatility on the liability composition of the Fed’s balance sheet is WAY higher than asset side, and that this is meaningful. The shift between RRP/TGA and bank reserves certainly is not monetarily neutral. When compared to the H8 table of total bank balance sheets it is clear they have shifted out of Base Money into counterparts to very broad money (M3 or broader). I put this down to a fall in profitability of securities business and the need by banks to search for profit elsewhere (particularly in the loan market). This may not be a voluntary decision, and it may not turn out to be profitable. Moreover, it is counter-intuitive at the beginning of what looks (at present) like a pretty aggressive tightening cycle by the Fed. In addition, the reduced focus on securities trading may gather pace because reserves are being redirected away from settlement into O/N Tri-party repo for money-market funds - further damaging securities prices.