The Fed has just reached its breaking point, and no one is talking about it. Let me explain. On October 31st, the Fed had to inject $30 billion to avoid tension in the money market — its biggest move in years. And if it’s doing that, it’s because the system is starting to run out of money. For the past three years, the Fed has been reducing the amount of money available in the economy through quantitative tightening. But this time, it’s gone too far. Banks have less and less cash, short-term rates are rising, and the markets are starting to freeze up.
On October 31st, everything came together: end of the month, banking balance sheets under pressure, over $60 billion in Treasury debt to settle, and major banks preferred to ease off in the repo market — the market where they lend cash to each other for very short periods. The result: less money available and the cost of short-term funding skyrocketed. A clear signal that the system is under stress.
The Fed realized it had gone too far, and on October 29th, it officially announced the end of quantitative tightening starting December 1st. In other words, it’s going to start injecting money back into the system. This marks a major turning point. The Fed has just moved from tightening to reopening the liquidity tap.
So tell me — do you think this monetary pivot is the true beginning of the next major bull run, or just a short-term liquidity rebound?
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