The key player in this monetary plumbing operation won’t be Powell and the Federal Reserve.
But rather Secretary Yellen and the US Treasury department!
How?
2/
— Alf (@MacroAlf) April 1, 2024
This excess cash flows into the TGA when the Treasury has issued bills or bonds and ”raised” money but it hasn’t spent it yet in the real economy for instance by cutting taxes or investing in certain projects.
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— Alf (@MacroAlf) April 1, 2024
1️⃣ Follow the green steps below.
The government reduces its TGA account, and it injects new resources for households: for example, it decides to cut taxes and that allows the US private sector to have more money to spend!
— Alf (@MacroAlf) April 1, 2024
So the drainage of the Treasury General Account created:
– Fresh new spendable money for the real-economy
– New liquidity (reserves) for the banking sectorThis is a very powerful monetary plumbing operation to understand, and especially now.
8/
— Alf (@MacroAlf) April 1, 2024
The important conclusion is that the US Treasury department could unleash over $250bn of fresh new resources into the economy and markets right before the elections, even though economic activity remains solid and the S&P500 is already hitting all-time highs.
Sit tight…
10/
— Alf (@MacroAlf) April 1, 2024
