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Today 4880, Tomorrow the World 1/22/24

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55 minutes ago, SiP said:

A lot of money on sideline?



There is no "sideline." Money is money. It's held in different places, in the banks and MMFs. Money market funds started attracting a greater share away from the banking system when they began paying interest again. For part of this period, bank deposits fell, but they started rising recently as well as repo borrowing soared along with T-bill issuance.

Total money (liquidity) is what matters. MMFs are a part of that. The stock market isn't money. It's a mechanism of exchange where prices are set, but the money remains on deposit in banks and MMFs at all times. It just moves between the accounts of buyers and sellers. 

T-bills have become even more moneyish because the Fed starting to allow the banks to borrow up to the full face value of the bills with no haircut. That's pure money to the players in the market.

Stock holdings also provide the ability to borrow more money into existence, or to quickly destroy money, based on direction of the mechanism of exchange, i.e. the price. 

The direction of prices tells you everything that you need to know about the quantity of money. And likewise if you know the direction of of the trend of the Q of M, there's a pretty good chance that you will know the direction of the total exchange value of stock prices as they transact.  


 Weekly Bank Data and Fed Balance Sheet Say the End is Nigh 

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