Fed will shrink liquitity

[Voxo2222]

How do you think it will affecting our daily life.
And markets i think we will see more black swans and flash crashes.
If the fed will shrink the liqutity the question is will they make rates negative under zero again ?
Or thats it ? By the 2025-2030 we will be all in crypto and fed will not print any more money.
Who got crypto 10 years ago they are happy others are too late and have to play the rules of the first investors.
And by the 2022 tgey will be going to stop all the repo.

So the fed will shrink the money supply no wonder why market is so quiet and slow no pumps like ut use to be.

[paxmao]

It has been mentioned many times that this will happen. The FED should not keep the current level of liquidity as it will create a level of inflation difficult to fight. Still, the spending programme of JB needs financing, so the tampering may not be as strong as should be.

How does it affect everyday life... well for most people it means a contraction of the economy and possibly, as it is allied with a offer shock, a global problem in supply chains and problems with raw materials, it is obvious that will add to the burden of most people. The stocks will also lose value.

[Voxo2222]

It has been mentioned many times that this will happen. The FED should not keep the current level of liquidity as it will create a level of inflation difficult to fight. Still, the spending programme of JB needs financing, so the tampering may not be as strong as should be.

How does it affect everyday life... well for most people it means a contraction of the economy and possibly, as it is allied with a offer shock, a global problem in supply chains and problems with raw materials, it is obvious that will add to the burden of most people. The stocks will also lose value.

Its a good time for usa dollar and usdt then.
Good to stake usdc usdt good apy to payed.
But how long they keep recression and deflation going on ? Will they start again REPO like after 2024-2025?

[Quickseller]

The fed is currently engaging in QE, and will likely continue doing so for at least another 9 months based on their current plan. They won’t raise interest rates until after QE is stopped (or at least until they stop purchasing additional bonds).

For the fed to remove liquidity, they will need to either raise short term interest rates, or be a net seller of bonds (selling a bond would include redeeming it at maturity and not purchasing an equivalent amount). It appears it will be a long time until either of these will happen.

As long as the fed is either adding liquidity, or not removing liquidity, we will see additional speculation in financial markets.

It has also been noted that there are no capital controls throughout the west (eg europe), so if the ECB is engaging in QE, it is the same as if the fed was engaging in QE.

[Voxo2222]

The fed is currently engaging in QE, and will likely continue doing so for at least another 9 months based on their current plan. They won’t raise interest rates until after QE is stopped (or at least until they stop purchasing additional bonds).

For the fed to remove liquidity, they will need to either raise short term interest rates, or be a net seller of bonds (selling a bond would include redeeming it at maturity and not purchasing an equivalent amount). It appears it will be a long time until either of these will happen.

As long as the fed is either adding liquidity, or not removing liquidity, we will see additional speculation in financial markets.

It has also been noted that there are no capital controls throughout the west (eg europe), so if the ECB is engaging in QE, it is the same as if the fed was engaging in QE.

The fed QE will last long until 2022 but what then ?
Btw ecb still not stop QE
canada and usa are the first ones to stop QE
Just by looking at bond buying plan and QE i think europe economy will do much better then usa as they keep going longer with QE

[Findingnemo]

They decided to pull back the stimulus or printed money during pandemic by their retreat policy which is actually decided but yet to be made if I am not wrong so they will cut down 10 billion every month for the a year or so to boost the recovery and stop the inflation hike but they never going to stop printing the money.

[Poker Player]

The Fed is in a catch-22 situation. On the one hand, the massive printing of money has caused not only inflation but an artificially doped growing economy. Withdrawing stimulus will cause this artificial growth to slow or at least decelerate. And the Fed wants neither, neither excessive inflation nor economic slowdown. The problem is that the doping of the economy is such that there seems to be no easy solution.

If the withdrawal of stimulus has too detrimental an effect on the economy, and let's remember that this is likely because of other added factors, such as rising energy prices, they will eventually have to go back and continue printing, but continuing to print will still lead to high inflation.

In short, the future looks bad, very bad. Maybe we can weather it better, because we have Bitcoin and other financial assets, but I hope that the coming crisis will not be like the one in 2008 or the Great Depression.

[palle11]

How do you think it will affecting our daily life.
And markets i think we will see more black swans and flash crashes.
If the fed will shrink the liqutity the question is will they make rates negative under zero again ?
Or thats it ? By the 2025-2030 we will be all in crypto and fed will not print any more money.
Who got crypto 10 years ago they are happy others are too late and have to play the rules of the first investors.
And by the 2022 tgey will be going to stop all the repo.

There is a sense to this and there is a possibility in this and a reason to support this is that countries have started talking of digital currency, some have started planning while some have started too and more will commence soon. This is an innovation that is coming with cashless supported by cryptography.

Meanwhile about 10 years ago that people are regarded as early adopters but I don't see such people as good hodlers because they ended up giving out there hodlers for cheap slice of cake like things as buying pizza with loads of bitcoin because of the reason they didn't estimate positive for bitcoin, ethereum and cryptocurrency at large.

Times will change and have changed. Those ignorance of 10 years ago are no more because the hodlers of today are going to be regarded as the real believers who have believed and waiting for 6 and more digits of the prices of cryptocreency with bitcoin at the top. They are the real hodlers who have seen reality falling down that more government will adopt, more institutions will adopt and the price will keep shooting high with the principle of scarcity to demand and supply. And are hodling bitcoin to keep taking over ATH.

They are the real hodlers that have held hodling to the level it is and corrections have not been dip so far. Soon printing may reduce and shink fiat supply and cryptocurrency currency will keep the highs because the government will focus on digital currency and that of course supports cryptocurrency since more people will be "chased" into the internet space looking for there CBDC.

[hugeblack]

The Fed has already begun to reduce its bond-buying program from about $120 billion a month, so the pandemic required some extraordinary measures.
Liquidity is a problem in normal cases but people need to pay and back to normal life.
Inflection will be at 13% for some years but it will back to 4% at the end of 2025

[Kakmakr]

The federal reserve can raise short term interest rates and start selling bonds as much as they want, but they can only keep up this house of cards for so long. There will come a time where nothing they do, will be able to prevent the house of cards ..coming down hard on top of them.

The markets are bloated and the debt are increasing and the government are printing more and more fiat currencies to manipulate the economy, but that is just one huge smoke screen... (Tax payers will soon have to pick up the bill for the bailouts again)  

[South Park]

The Fed is in a catch-22 situation. On the one hand, the massive printing of money has caused not only inflation but an artificially doped growing economy. Withdrawing stimulus will cause this artificial growth to slow or at least decelerate. And the Fed wants neither, neither excessive inflation nor economic slowdown. The problem is that the doping of the economy is such that there seems to be no easy solution.

If the withdrawal of stimulus has too detrimental an effect on the economy, and let's remember that this is likely because of other added factors, such as rising energy prices, they will eventually have to go back and continue printing, but continuing to print will still lead to high inflation.

In short, the future looks bad, very bad. Maybe we can weather it better, because we have Bitcoin and other financial assets, but I hope that the coming crisis will not be like the one in 2008 or the Great Depression.

This is the way I see it too, it seems they have finally trapped themselves in the loop that leads us to hyperinflation, the FED wants to have their cake and eat it too, they want to stimulate the economy by printing money as this gives the illusion of economic growth while at the same time they do not want inflation to raise, these are mutually exclusive goals, however taking a look at history I think they will try to achieve this, failing spectacularly in the process.

[Quickseller]

The fed is currently engaging in QE, and will likely continue doing so for at least another 9 months based on their current plan. They won’t raise interest rates until after QE is stopped (or at least until they stop purchasing additional bonds).

For the fed to remove liquidity, they will need to either raise short term interest rates, or be a net seller of bonds (selling a bond would include redeeming it at maturity and not purchasing an equivalent amount). It appears it will be a long time until either of these will happen.

As long as the fed is either adding liquidity, or not removing liquidity, we will see additional speculation in financial markets.

It has also been noted that there are no capital controls throughout the west (eg europe), so if the ECB is engaging in QE, it is the same as if the fed was engaging in QE.

The fed QE will last long until 2022 but what then ?
Btw ecb still not stop QE
canada and usa are the first ones to stop QE
Just by looking at bond buying plan and QE i think europe economy will do much better then usa as they keep going longer with QE

QE was supposed to be an emergency measure for something that has honestly already past.

Inflation is heating up in Europe, and the ECB will need to slow down their QE soon. I suspect that the fed and other western central banks will slow down QE ahead of what is currently scheduled, or else inflation will get out of control.

Inflection will be at 13% for some years but it will back to 4% at the end of 2025

I am not sure about 13% inflation. If we get anywhere near that level of inflation, there will be broad political pressure for central banks world-wide to tighten monetary policy, which would include both raising rates and stopping, or even reversing QE (ie being a net seller of bonds).

[Hydrogen]

So the fed will shrink the money supply

That is certainly interesting news.

The fed has shrank the money supply a few times during its history. I'm not the most knowledgeable about economics or finance. But I do remember reading an essay written by former fed chairman Ben Bernanke on previous instances of the fed following that policy. It certainly made for interesting reading. Especially given the context of the current era. I would highly recommend anyone interested digging that essay up and reading it.

An interesting point here is, credit and liquidity may be needed to jump start economies post COVID and post supply chain issues. Should both be resolved. Shrinking the money supply could make it more difficult for credit and loans to be acquired. Which could have a negative impact on recovery and growth. There are other aspects to it, that are relevant.

[Voxo2222]

So the fed will shrink the money supply

That is certainly interesting news.

The fed has shrank the money supply a few times during its history. I'm not the most knowledgeable about economics or finance. But I do remember reading an essay written by former fed chairman Ben Bernanke on previous instances of the fed following that policy. It certainly made for interesting reading. Especially given the context of the current era. I would highly recommend anyone interested digging that essay up and reading it.

An interesting point here is, credit and liquidity may be needed to jump start economies post COVID and post supply chain issues. Should both be resolved. Shrinking the money supply could make it more difficult for credit and loans to be acquired. Which could have a negative impact on recovery and growth. There are other aspects to it, that are relevant.

Economic growth year 2021 7%
Economic grouwth year 2022  4%

[fiulpro]

If the FED'S might have to step in the system then they have to realize that, they have already lost their whole economic game them. FED's managing the liquidity is the last resort. Which does mean that, the system is flawed and not working.

*Shrinking the liquidity is of utmost importance*
Write now the reason why the whole system is in chaos is due to excessive money being printed. The Donald Trump's era, meant a lot of money being poured into the COVID-19 reliefs being provided to the people. The system did not manage to generate jobs at the end of the day whose negative effects were already seen during the strikes.

Right now they need a healthy economic growth and controlled liquidity.

{ Suddenly the whole idea of Bitcoins having limited coins to be mined seems interesting, doesn't it?}

[Voxo2222]

If the FED'S might have to step in the system then they have to realize that, they have already lost their whole economic game them. FED's managing the liquidity is the last resort. Which does mean that, the system is flawed and not working.

*Shrinking the liquidity is of utmost importance*
Write now the reason why the whole system is in chaos is due to excessive money being printed. The Donald Trump's era, meant a lot of money being poured into the COVID-19 reliefs being provided to the people. The system did not manage to generate jobs at the end of the day whose negative effects were already seen during the strikes.

Right now they need a healthy economic growth and controlled liquidity.

{ Suddenly the whole idea of Bitcoins having limited coins to be mined seems interesting, doesn't it?}

They dont care if inflation going too high they can make taxes go higher.

[South Park]

{ Suddenly the whole idea of Bitcoins having limited coins to be mined seems interesting, doesn't it?}

The idea is interesting for us but not for the FED, they want to have the power to manipulate the markets to their advantage and a form of money like bitcoin prevents a great deal of their tactics.

What is so interesting about bitcoin is not only its limited supply but also the fact we know with great precision how much bitcoin on average is going to be created each year, this is not possible with gold as there have been times in history in which gold went through high inflation due to a lot of it being mined at once or by one civilization conquering another getting a huge influx of gold as a result of it, so once enough time passes bitcoin if used directly could become the most stable currency we ever had, and this is not something any central bank wants.

[philipma1957]

The Fed has already begun to reduce its bond-buying program from about $120 billion a month, so the pandemic required some extraordinary measures.
Liquidity is a problem in normal cases but people need to pay and back to normal life.
Inflection will be at 13% for some years but it will back to 4% at the end of 2025

Hmmm I do not think they want years of inflation.

 I lived in the Nixon Ford Carter times 5-10% every year.

But I do think the issue is that everyone in the world see that the USA goes in the hole almost every year without fail.

https://www.thoughtco.com/history-of-us-federal-budget-deficit-3321439

...



By Tom Murse
Updated July 26, 2021
The budget deficit is the difference between the money the federal government takes in, called receipts, and what it spends, called outlays each year. The U.S. government has run a multibillion-dollar deficit almost every year in modern history, spending much more than it takes in.


The opposite of a budget deficit, a budget surplus, occurs when the government’s revenue exceeds current expenditures resulting in an excess of money that can be used as needed.

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Budgeting for an Online Education
In fact, the government has recorded budget surpluses in only five years since 1969, most of them under Democratic President Bill Clinton.

 In all-too-rare times when revenue equals spending, the budget is called “balanced.”

Adds to National Debt
Running a budget deficit adds to the national debt and, in the past, has forced Congress to increase the debt ceiling under numerous presidential administrations, both Republican and Democrat, to allow the government to meet its statutory obligations.

Although federal deficits have shrunk markedly in recent years, the Congressional Budget Office (CBO) projects that under current law increased spending for Social Security and major health care programs, like Medicare, along with increasing interest costs will cause the national debt to rise steadily over the long term.

The larger deficits would cause federal debt to grow faster than the economy. By 2040, the CBO projects, the national debt will be more than 100% of the nation’s Gross Domestic Product (GDP) and continue on an upward path— “a trend that cannot be sustained indefinitely,” notes the CBO.


Notice particularly the sudden jump in the deficit from $162 billion in 2007, to $1.4 trillion in 2009. This increase was due primarily to spending for special, temporary government programs intended to re-stimulate the economy during the "great recession" of that period.

Budget deficits eventually tapered back down into the billions by 2013. But in August 2019, the CBO predicted the deficit would again surpass $1 trillion in 2020—three years earlier than it had originally expected.

Here is the actual and projected budget deficit or surplus by fiscal year, according to CBO data for modern history.

2029 - $1.4 trillion budget deficit (projected)
2028 - $1.5 trillion budget deficit (projected)
2027 - $1.3 trillion budget deficit (projected)
2026 - $1.3 trillion budget deficit (projected)
2025 - $1.3 trillion budget deficit (projected)
2024 - $1.2 trillion budget deficit (projected)
2023 - $1.2 trillion budget deficit (projected)
2022 - $1.2 trillion budget deficit (projected)

2021 - $1 trillion budget deficit (projected)
2020 - $3.3 trillion budget deficit (projected)
2019 - $960 billion budget deficit (projected)
2018 - $779 billion budget deficit
2017 - $665 billion budget deficit
2016 - $585 billion budget deficit
2015 - $439 billion budget deficit
2014 - $514 billion budget deficit
2013 - $719 billion budget deficit
2012 - $1.1 trillion budget deficit
2011 - $1.3 trillion budget deficit
2010 - $1.3 trillion budget deficit
2009 - $1.4 trillion budget deficit
2008 - $455 billion budget deficit
2007 - $162 billion budget deficit
2006 - $248.2 billion budget deficit
2005 - $319 billion budget deficit
2004 - $412.7 billion budget deficit
2003 - $377.6 billion budget deficit
2002 - $157.8 billion budget deficit
2001 - $128.2 billion budget surplus
2000 - $236.2 billion budget surplus
1999 - $125.6 billion budget surplus
1998 - $69.3 billion budget surplus
1997 - $21.9 billion budget deficit
1996 - $107.4 billion budget deficit
1995 - $164 billion budget deficit
1994 - $203.2 billion budget deficit
1993 - $255.1 billion budget deficit
1992 - $290.3 billion budget deficit
1991 - $269.2 billion budget deficit
1990 - $221 billion budget deficit
1989 - $152.6 billion budget deficit
1988 - $155.2 billion budget deficit
1987 - $149.7 billion budget deficit
1986 - $221.2 billion budget deficit
1985 - $212.3 billion budget deficit
1984 - $185.4 billion budget deficit
1983 - $207.8 billion budget deficit
1982 - $128 billion budget deficit
1981 - $79 billion budget deficit
1980 - $73.8 billion budget deficit
1979 - $40.7 billion budget deficit
1978 - $59.2 billion budget deficit
1977 - $53.7 billion budget deficit
1976 - $73.7 billion budget deficit
1975 - $53.2 billion budget deficit
 1974 - $6.1 billion budget deficit
1973 - $14.9 billion budget deficit
1972 - $23.4 billion budget deficit
1971 - $23 billion budget deficit
1970 - $2.8 billion budget deficit
1969 - $3.2 billion budget surplus


very few good years and by the very nature of this going on and on and on inflation will occur.

BTW this is a bit old so the numbers from 2019 on are suspect. But are all in the hole.