The next round of money printing is about to begin.
It’s not a question of “if,” but a question of “when.”
On the surface, everything seems hunky dory in the financial system. Stocks are at all-time highs. Bonds are stable. And the $USD appears to be finding its footing after losing 11% during the first half of the year.
However, “beneath the surface” things are beginning to unravel.
Since 2023, the Fed has drained some $2.38 trillion in reserves from the financial system via its Quantitative Tightening (QT) program. As a result of this and other recent developments, reserves (cash available for overnight/short-term lending) in the financial system have fallen to their lowest levels in FIVE years ($3 trillion).
That sounds like a lot of money, but it’s in fact quite low for what banks require to keep things running smoothly in the financial system. As a result of this, banks/ financial firms are turning to the Fed as a kind of “lender of last resort” for short-term liquidity/ financing needs. And not by a little: in the last two weeks, demands for overnight funding from the Fed have skyrocketed from nothing to over $50 billion.
I realize this sounds like a bunch of financial jargon, so let me put it this way… the issues that led to the 2018 market collapse are beginning to resurface again. At that time, stocks nose-dived 20% in the span of a few weeks before the Fed was forced to panic and reverse course.
So, while things look great in the financial system as far as stocks are concerned. The reality is that if the Fed doesn’t act quickly things could get UGLY fast.
In light of this, I fully believe the Fed will be forced to launch a new Quantitative Easing (QE) program in the next six months.
I’m not the only one.
Lorie Logan is the President of the Federal Reserve Bank of Dallas. As such she is one of 12 Fed Presidents. This is an extremely high-level insider at the Fed. And she just said the following…