✨ A year before 2008, the U.S. Federal Reserve's budget was less than a trillion dollars. Today, by the end of 2025, it has exceeded 6 trillion dollars despite two rounds of budget cuts. Next December, the Fed will stop its contraction policy, and there is no avoiding the start of a new expansion round — but under a different name, and not 'quantitative easing.'
🔹 Today's market = debts needing liquidity… and liquidity needing debts
The structure of the financial market is built on a closed equation:
Debt needs liquidity to continue. And liquidity is only created through new debt.
Many believe that an increase in the money supply (M2) is what drives markets up, but the reality is that the Federal Reserve's balance sheet is the most correlated factor with financial asset prices.
And the reason? Because the real driver of the markets is the shadow banking sector:
• Hedge funds
• Money market funds
• The highly leveraged repo market
These institutions do not live off deposits, but on the liquidity provided by the Federal Reserve directly or indirectly.
🔹 Warning signals have already begun to appear:
• Commercial bank reserves are low within the financial system.
• The SOFR rate is rising → a sign of liquidity shortage among banks.
• The repo market is burdened with debt and leverage → any minor disturbance could turn into a systemic crisis.
• The U.S. Treasury will continue to issue massive debts, and with a lack of liquidity… who will finance them?
The only solution: the Federal Reserve injects liquidity and raises bank reserves.
🔹 Why is this inevitable?
Debt can bear almost everything… inflation, recession, and even political crises.
But what it cannot bear is a lack of liquidity.
In a moment of liquidity shortage, debts begin to collapse, along with the entire financial system.
That’s why the Federal Reserve will not announce 'new QE', but it will invent another name to give it the cover to expand its balance sheet again.
🔹 The coming events are more dangerous and faster
• If the financial system remains this way, the Federal Reserve's balance sheet could rise an additional 500% over the next decade.
• What has happened since 2008 until today (the rise of assets due to liquidity) will repeat… but at a faster pace.
• The market is no longer an 'investment market', but a liquidity market.
Even Warren Buffett holds $380 billion in cash and cannot find real value to buy.
As long as every dollar is created as debt, injecting liquidity is not an option… but an existential necessity for the financial system.
As long as every dollar is created as debt, injecting liquidity is not an option… but an existential necessity for the financial system.
