Liquidity is absolutely surging- but where is it actually coming from?The Surge

Last week focused on the Yen Carry Trade and noted it as being one of the many marginal drivers of liquidity. With that clearly in the rear-view mirror, as yet another Yen intervention has occurred since that article was published, we need to confront a critical reality:

Dollar liquidity is absolutely soaring.

One of the primary reasons I became more cautious in late-summer/early-fall of last year was due to liquidity very clearly rolling over. Not only was the repo market in increasingly severe distress, the broad money supply was decelerating.

Nominally, M2 was still growing (and almost always does), but that’s…

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