Comment by RC_ITR | Hacker News Reader

Comment by RC_ITR | Hacker News Reader

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I can't reply to your many new comments (guess this is a flamewar lol), but

>Liquidity is the amount of cash in the system relative the size of the market for assets. All else equal, adding or removing is the same as adding or removing cash.

Citation needed there buddy. Like you're arguing that the Fed is hoovering up too much cash? Wouldn't QE be anti-liquidity since it's net result is more cash goes to the Fed and QT be pro-liquidity since the opposite happens?

On this earth, liquidity is about transaction velocity, and The Fed taking transactions off the table (by being a guaranteed buyer at every auction) makes non-Fed transactions happen at lower prices. The end.

Anyway, enjoy the end of this flamewar.

> Wouldn't QE be anti-liquidity since it's net result is more cash goes to the Fed and QT be pro-liquidity since the opposite happens?

You have QE and QT backwards.

QE => fed builds up it’s balance sheet, it sends out cash.

QT => fed reduces its balance sheet, it gets cash back.

>On this earth, liquidity is about transaction velocity, and The Fed taking transactions off the table (by being a guaranteed buyer at every auction) makes non-Fed transactions happen at lower prices. The end.

Transaction velocity matters but it’s not everything. You’re myopically looking at one market, while the rest of us are talking about the systemic effects.

Transaction volume follows from the supply and demand for money. If you remove money from the system, you remove liquidity.

Look, you quoted a blatantly incorrect definition of QE/QT below. You clearly have no idea what you’re talking about.

You have QE/QT backwards. QE increases the money the Treasury sends to the Fed as coupon, which you said removes liquidity.

My entire point was that you are backwards in one of your two conflicting arguments.

EDIT: Maybe let's put it this way, the US pays off it's debt and no longer sends coupon payments to anyone. In your framework, that reduces 'liquidity.' But in what market exactly? The "systemic" market?

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