Here are some charts investors should know about.
Chart 1 - Fiscal policy via US Congress
Government spending is exceeding revenues and is fueling the US economy more than private investment. Fiscal policy is dominating monetary policy, as it simply has more influence in the economy and unfortunately crowding out private investment.
Chart 2 - Federal Reserve Balance sheet
Since the stock market lows of the 2009 GFC the Federal Reserve's (FED) balance sheet has grown, and this growth has supported the equity markets.
Chart 3 - Department Of Treasury Funding Accounts.
The Dept of Treasury (DOT) has been using the TGA, Rev Repo, discount window, and other short term funding tools to massage liquidity into the markets. Add to this issuing new debt as ready cash short term T Bills, and also changing rules for domestic banks to allow 'more' treasuries on the balance sheet relative to their reserves.
The red line below shows the consolidation of both the FED and DOT actions. The green line is the difference between the two. As you can see, the FED dominated actions from 2009 to 2019, but since 2020, the DOT has played a major role in providing liquidity. In fact, the DOT is the dominant player over the FED.
The point: US Congress fiscal policy combined with Dept of Treasury funding actions simply over powers any monetary policy via Federal Reserve actions. Therefore markets are held up by public actions and not private actions.
Original Post: https://ift.tt/VUM1ja4
