Change is Significant
In most analytical fields and in science, financial analysis, economics, we study the change or delta of data. Today we saw a report of Total Asset rise by $300B which is significant when we study the charts and are aware that QT should be going on with restrictive monetary policies not an increase in more debt.
If you look at this chart which I zoomed out to “all” we see that a $300B change (increase) was only surpassed during other challenging recessionary periods – 2020 and 2007/8 and areas highlighted in grey meaning recessions.
3 ways to reduce inflation:
1. Raise rates
2. Reduce quantity of money via balance sheets and tightening of credit
3. Reduce government spending
Well it seems #2 and #3 aren’t happening.
This does not mean QE or stimulus at all as it is a loan to FDIC, however, this shines light into that financial sector. Most likely consolidation will continue at a faster rate with fewer smaller banks as they consolidate into the mega cap banks such as JP Morgan. This trend has been going on since the 70s and the recent phenomena will accelerate it.
Yes we had massive QE with huge increase in money supply so our inflation is massive and now they are attempting to remove liquidity and it is directly affecting the small banks. They don’t have the liquidity for all their deposits. So if the FED continues their hikes and QT, these smaller banks will suffer from liquidity drain.
Yes it is a pickle and a very delicate path.