$750 Billion Set to Surge into Markets: The Fed's Next Move Explained!
Summary
TLDRThis video script discusses the impact of the Treasury General Account (TGA) on asset prices amidst economic uncertainties. It highlights the potential for a significant liquidity injection into the economy through the TGA, especially during debt ceiling showdowns. The script suggests that such injections could lead to a rise in asset prices, including Bitcoin, tech stocks, and real estate, despite the broader economic implications. The presenter advises viewers to monitor these developments closely over the next 9 to 12 months for potential investment opportunities.
Takeaways
- π The script discusses the fear among investors due to market crashes, upcoming elections, and potential wars, suggesting that many economic indicators are signaling a recession.
- π It highlights that while economic indicators can show the direction of the economy, they may not accurately predict asset prices, which are better indicated by liquidity levels.
- π° The importance of the Treasury General Account (TGA) is emphasized as the government's bank account, which influences liquidity when it accumulates or releases funds.
- π The script suggests that the TGA levels are currently high, which is typically bad for liquidity, but the government's future actions could inject significant funds into the economy.
- π€ The reliability of government forecasts is questioned, as they are often incorrect and later revised, which could impact understanding of future liquidity.
- π‘ The concept of 'Extraordinary Measures' is introduced, where the government uses the TGA to fund operations during debt ceiling debates, potentially leading to increased liquidity.
- ποΈ Historical patterns show that during debt ceiling showdowns, the TGA is often drawn down to around $100 billion, which could happen again in the upcoming 2025 debt ceiling debate.
- πΈ The potential for a massive liquidity increase is highlighted, suggesting that around $750 billion could be injected into the economy, similar to the 2008 TARP program.
- π The script predicts that this liquidity increase could lead to a rise in asset prices, including Bitcoin, tech stocks, and real estate, despite potential negative impacts on the overall economy.
- π A cautionary note is given about the security of Bitcoin, recommending that individuals secure their own assets rather than relying on exchanges.
- π The video encourages viewers to keep an eye on the economic situation over the next 9 to 12 months, anticipating significant changes due to the potential liquidity injection.
Q & A
What is the main concern of investors mentioned in the video script?
-The main concern of investors mentioned in the video script is the fear of an imminent market crash due to various factors such as economic indicators, yield curve inversion, weakening unemployment, slowing home sales, and potential political and military events.
What economic indicator is discussed as a signal for asset prices movement?
-The Treasury General Account (TGA) is discussed as the best indicator for asset prices movement, as it reflects the liquidity in the system which directly affects asset prices.
What is the Treasury General Account (TGA) and why is it significant?
-The Treasury General Account (TGA) is the U.S. government's bank account where it keeps its funds. It is significant because changes in the TGA balance can influence the liquidity in the economy, which in turn affects asset prices.
How does the level of the TGA account affect the economy?
-When the TGA account is high, it indicates that money is being taken out of the market, reducing liquidity, which can be negative for the economy. Conversely, when the TGA is low or being drained, it is akin to injecting money into the economy, which can increase liquidity and potentially boost asset prices.
What is the expected change in the TGA account level by the end of Q3 2024 according to the government's estimates?
-According to the government's estimates, the TGA account is expected to increase to about 850 billion by the end of Q3 2024.
What does the video suggest about the accuracy of government forecasts for the TGA account?
-The video suggests that the government's forecasts for the TGA account are often inaccurate, as they have historically been revised after being proven wrong.
What is the 'debt ceiling showdown' mentioned in the script?
-The 'debt ceiling showdown' refers to the political debate and negotiations that occur when the U.S. government approaches its borrowing limit and needs to decide whether to raise it to continue funding government operations.
What measures does the government take when it cannot agree on raising the debt ceiling?
-When the government cannot agree on raising the debt ceiling, it takes 'extraordinary measures' which may include using the TGA account to fund the gap where they cannot get new debt.
How does the video script relate the TGA account to the potential increase in asset prices?
-The script suggests that if the TGA account is drained and the funds are injected directly into the economy, it could lead to an increase in asset prices, as it did during the 2008 financial crisis with the TARP program.
What advice does the video give regarding Bitcoin and exchange security?
-The video advises viewers not to trust their Bitcoin on exchanges and to secure it themselves using hardware devices like Trezor, which keep private keys safe and make the process of managing cryptocurrencies easier and more secure.
What is the potential impact of the TGA account changes on the U.S. economy and asset prices according to the video?
-According to the video, changes in the TGA account can have a significant impact on the U.S. economy and asset prices. If the TGA is drained and the money is injected into the economy, it could lead to increased liquidity, which may result in higher asset prices, although it could also diminish the purchasing power of dollars.
Outlines
π Economic Fears and Asset Price Indicators
This paragraph discusses the current economic climate marked by market crashes, upcoming elections, and potential wars, which have led to widespread fear among investors. It highlights various economic indicators such as yield curve inversion, unemployment, and slowing home sales, suggesting an imminent recession. However, the focus shifts to the importance of asset prices, which these indicators do not necessarily reflect. The best indicator for asset prices is currently positive, and the video promises to analyze the event in 2024 that will most impact these prices, contrasting the common fear-mongering narratives.
π° The Role of Treasury General Account (TGA) in Liquidity
The second paragraph delves into the concept of liquidity and its impact on asset prices. It introduces the Treasury General Account (TGA), the U.S. government's primary bank account, and its role in affecting market liquidity. When the TGA is high, it indicates less money circulating in the economy, which can negatively affect asset prices. Historical patterns of the TGA, especially during tax seasons, are examined, along with the government's estimates for the TGA levels in 2024. The paragraph also discusses the mechanics of how the TGA influences the economy, drawing parallels to deficit spending and quantitative easing.
ποΈ Debt Ceiling Showdown and its Impact on the TGA
This paragraph explores the historical context of the U.S. government's debt ceiling debates and their effects on the TGA. It explains that during these debates, the government often resorts to 'extraordinary measures,' using the TGA to fund the gap created by the lack of new debt. The paragraph presents a chart illustrating the TGA's fluctuations during previous debt ceiling showdowns and speculates on the potential impact of the upcoming 2025 event. It emphasizes the importance of understanding the TGA's drawdown levels and the potential for significant liquidity injection into the economy.
πΉ Projected Liquidity Injection and its Effect on Asset Prices
The final paragraph projects a substantial liquidity increase due to the potential drawdown of the TGA during the 2025 debt ceiling debate. It suggests that this could result in a significant injection of funds into the economy, surpassing the 2008 TARP program's $700 billion. The speaker anticipates that this influx of liquidity could lead to a rise in asset prices across various sectors, including Bitcoin, tech stocks, and real estate. However, they caution that while asset prices may rise, the overall economic health may not necessarily improve, and the increase in money supply could diminish the purchasing power of the dollar.
Mindmap
Keywords
π‘Market Crash
π‘Economic Indicators
π‘Asset Prices
π‘Liquidity
π‘Treasury General Account (TGA)
π‘Debt Ceiling
π‘Extraordinary Measures
π‘Quantitative Easing (QE)
π‘Inflation
π‘Bitcoin
π‘Asset Allocation
Highlights
Investors are anticipating a significant market crash due to recent market crashes, upcoming elections, and potential wars.
Economic indicators such as yield curve inversion, weakening unemployment, and slowing home sales suggest an imminent recession.
While economic indicators can predict economic trends, they are less effective at predicting asset prices.
The Treasury General Account (TGA) is a key indicator for asset prices, representing the government's bank account at the Federal Reserve.
The TGA's current flatline level, around $770 billion, is unusual and may indicate future market movements.
The mechanics of the TGA affect market liquidity; a full TGA indicates less money available for the market, while a draining TGA suggests an injection of funds into the economy.
Government estimates for TGA levels by the end of Q3 2024 and Q4 2024 may not be accurate, based on historical revisions.
Draining the TGA is akin to deficit spending or quantitative easing, injecting fresh money into the economy.
The process of draining the TGA can increase household net worth, leading to more spending and potentially higher asset prices.
Banks with more reserves can loan out more money, increasing liquidity in the system when the TGA is drained.
The Debt Ceiling Showdown is a significant event that can impact the TGA and, consequently, market liquidity.
During the Debt Ceiling Showdown, the government may use the TGA to fund the gap created by the lack of debt availability.
Historical patterns show that the TGA is often drawn down to about $100 billion during debt ceiling debates.
The potential injection of $750 billion into the economy could have a significant impact on asset prices, similar to the TARP program in 2008.
The upcoming debt ceiling debate in 2025 may follow historical patterns, leading to a decrease in the TGA and an increase in market liquidity.
The increase in liquidity could lead to a rise in asset prices, but may also diminish the purchasing power of dollars.
The video suggests keeping an eye on market movements over the next 9 to 12 months due to potential significant liquidity changes.
Transcripts
with the recent crash in markets and the
coming election and potential Wars many
investors are really scared they're
expecting a big market crash to come any
day and of course it's no wonder we have
many economic indicators like the yield
curve inversion weakening unemployment
we have slowing home sales and they're
all showing us that recession is
imminent but while those might be really
good indicators of where the economy is
going they're not good at showing where
asset prices are going and the best
indicator for that is right now flashing
a giant green arrow well at least you
know what you're looking for so in this
video I'm going to break down the event
that's coming this year in 2024 that's
going to have the biggest impact on
asset prices and no it's not the
election right I'm going to show you the
prices I'm going to show you the levels
I'm going to show you what's expected to
happen but we're going to look at the
data we're going to look at the facts of
other previous Cycles like the one
that's setting up right now now once you
see this data and you understand its
impact on asset prices markets you're
can to have a completely different view
uh than you know all the Talking Heads
that are pedaling Their Fear for you so
let's
go all right so jumping right in we are
going to look at the money it's always
about the money right so we're going to
look at the money and as we I talk about
all the time now liquidity so liquidity
when there's more money in the system
more liquidity in the system then prices
tend to go up and when there's less
liquidity then prices tend to go down
now it's very simple but it's it's not
it's not that easy to understand all the
millions of reasons why pricing go up or
down but let's look at a giant one right
now and this is the United States
government's piggy bank sort of like
this a little bit different than you
have when you're a kid now of course the
government sort of like a business has
income right taxes and they have
expenses that they spend and they keep
the difference their money their piggy
bank and they keep it in the bank not
Wells Fargo JP Morgan not City Bank they
keep it at the Federal Reserve of course
all right and this is known as the TGA
or what we called the treasury general
account right now a lot of people don't
know what the TGA is it's the
government's bank account okay and what
we can see is that uh there's a lot of
money sitting in that bank account but
the important piece that we're going to
break down is how much money is there
how has that money been used in the past
what have we seen through other types of
cycles and what do we expect is going to
happen based off of the information
they've given us and what's historical
now I do want to just give a quick shout
out here uh to Thomas uh Thomas right
sees great tweet uh threads over on
Twitter and so I've taken some of the
charts from his Twitter thread we'll
link to it down below in the description
if if you want to read the entire uh
thread that he put together is pretty
good but just real quickly uh you can go
on to prettyy much anywhere trading view
or whatever this is from the FED
directly and you can look at the
treasury general account now it did get
really high in 2020 like everything else
did right so you can see we sort of have
this Baseline around here this was this
2020 anomaly now these red arrows that I
put on the screen here here is uh tax
time this is April of 20 uh 22 or 21
April 22 April 23 and you can see that
there's these spikes every year right
when we get the when the taxes come in
uh but what we can see right now is that
this level has pretty much been Flatline
here which is sort of rare you can see
it's usually pretty volatile right
coming in from taxes spending down up
from taxes spending down and we've had
this pretty flat area there's about
$770 billion little less than a trillion
we might see some of the Peaks about
$770 billion in that now one thing to
understand is the mechanics of how this
works when the treasury TGA when the
treasury account is full cash is out of
the market it's on the sidelines it's uh
it's dormant as I said right so it's
like money in the bank it can be spent
whenever they want to spend it but it's
not actively incentivizing uh spending
at that time now if we look at the TGA
treasury general account levels we can
start to get a sort of better idea of
where things are at now and more
importantly where they might go
historically now typically you might
think that as the TGA account is rising
as there's more money piling into that
account that's typically bad for
liquidity levels so uh you know tax time
as I showed you how it starts to spike
around tax time well it has to go from
my account my personal account my
business account or yours to the
government and that means that I now
have less money to invest into my
business or to spend for my family or
whatever it is and so that money is
being sucked out of of the economy and
it's going to the government I like to
say that the government cannot give
something that it has not taken the
government doesn't create all it does is
redistribute so it's literally taking it
away from you and I productive members
of society and it goes into their
account so that is typically bad it's
sucking liquidity out when we see TGA is
draining then that is good for liquidity
that means that now the TGA that the
government is now pushing the money back
onto Main Street because remember the
government redistributes they take it
from me you from my business and then
they give it to whoever they want so
they're taking it sucking out giving it
back pushing it back so that would be
good good for liquidity anyway all right
now uh what we can see is the TGA the
government estimates where they expect
their bank account levels to be so they
said that by the end of Q3 2024 they
expected to have about 850 billion which
is it's about 770 billion right now so
they expect the TGA to go up between now
and the end of Q3 which is pretty
interesting because we don't have any
you know big tax dates coming up and
they expect by the end of Q4 so by the
end of this year to be at about 700
billion which is a little bit lower than
we're at today now this estimate is
completely wrong just like every other
estimate the government puts out the
treasury also puts out their borrowing
requirements every quarter and uh yeah
they're wrong every single one they have
to go back and revise them when no one's
paying attention all the economic data
the BLS puts out it's it's always wrong
they go back and revise that and these
numbers are way off and we're going to
take a look at that and why that's
important now just to kind of put this
into perspective with a chart that you
can see again this goes back to the T
TGA account and so we're right here at
this blue dot and they're expecting that
the end of Q3 were here a little bit
higher and by Q4 we're here a little bit
lower so we're going to stay right in
this range apparently according to them
now you can just look back here that has
not been the case we have not been in a
range at all that long but uh that's
that's where they say we're at now to
get an idea of how this works the TGA
account Works let's just break this down
U this is from macro Alf and he says
right here why does draining the TGA
matter that much for markets and the US
economy so when the TGA is high it's bad
for markets when the TJ is low or
drained it's good so why why does it
matter for markets in the economy and he
says because draining the TGA taking the
money and pushing it back into the
market is akin to throwing fresh money
at the economy just dumping money into
the economy similar to deficit spending
which we've been doing a lot of that as
well so deficit spending as well as TGA
spending and also adding new liquidity
to the interbank system similar to QE or
quantitative easing so this whole time
no we're tightening we're tightening no
quantitative easing well maybe
technically but there's lots of ways
that we get liquidity into the system so
how does it work well he goes on to say
it's sort of like this onew punch so
step one is the government drains down
its TGA at the Fed so right now 770
billion they could drain that money down
hence lowering its Equity position but
then injecting this fresh new money into
the real economy like this is the most
inflationary can be uh you know analysts
will argue that QE isn't really
inflationary because it doesn't really
get money into the actual Market or I'm
sorry to the economy QE just gives money
to the banks but the banks don't
necessarily put into the economy
supposedly that's a whole another topic
for another video but but here it's
literally injecting this fresh money
directly into the economy that's what
the government does the economy equals
households net worth goes up household
net worth goes up people have more money
to spend step number two households now
have more money that's good in the form
of bank deposits which end up back into
the banking system so if you get money
where do you put it of course you put it
into the bank and hence Banks also sit
on a larger amount of reserves so now
the banks take the deposits they have
more reserves what do banks do when they
have more res reserves well how they're
able to loan out even more money which
means even more liquidity in the system
the fed's balance sheet squares with
less TGA perfectly offset by a higher
amount of reserves so now you can see
how powerful this monetary mechanic
combination is so when they drain the
TGA it's literally throwing money
directly into it but they're saying that
they're not going to drain it they're
saying by the end it's actually going to
go up and by the end of the year it's
going to be about even that's what they
say but uh should we take them at their
word or should we understand this a
little bit more we just saw the markets
go into a tail spin and panic when Japan
raised rates and this thing called a
carry trade started to unwind now
doesn't really matter about that but
what we did see was brokerage accounts
were frozen and we saw people unable to
withdraw their Bitcoin from their
exchanges now that was a warning but the
reality of that happening is real and so
don't trust your Bitcoin on an exchange
secure it yourself secure it properly
now I know it can seem overwhelming but
if you use a device like this it can be
very easy this is a treasure Hardware
device and basically what this does is
keeps your private key secure and when
you want to use it you plug it into your
computer when you don't want to use it
you unplug it and put it back into your
safe I've been using this device treer
for I don't know six seven years because
I think it's the easiest to use and uh
if it's complex that creates problems on
its own it's easy to use it's fast to
really set up and it's open source so
you can trust the software on there so
check out this treasure device it's the
easiest it's the fastest way to secure
your Bitcoin take custody of it yourself
and protect your private property check
it out there's a link down below okay so
if we take the historical V view now I
want to go back in history to understand
where we're going in the future but I do
want to just let you know I don't really
care about the end of Q3 I don't really
care about the end of Q4 typically I'm
looking at least a year out most of my
stuff I'm looking three five or 10 years
out but let's just take a look at where
we'll be in 2025 all right so that's
sort of what I've been talking about a
lot with my qwave thesis this
quantitative uh leap that we're taking
forward right now is really through the
end of 2025 so right now we're looking
at that
and in if we want to know where we're at
in 2025 we have to see well what's going
to happen before we get there and
there's a really big event coming up
that you might have heard of before and
this is the debt sealing Showdown uh the
government gets together and says we
need more debt of course we do because
we can't afford the debt we have so we
need more debt President Biden was on
the news saying well we need to have
more debt because uh the US has never
defaulted and if we don't get more debt
how do we pay the old
debt sort of like the definition of a
Ponzi scheme so the debt sealing
Showdown comes and they argue over if
we're going to raise it or not uh both
sides grand stand about not wanting to
spend more there's some concessions made
and every single time it's been raised
now there has been sometimes where it's
got very close we've seen some credit
downgrades because of this but this is
basically what happens and in this event
it almost always seems to happen it will
probably happen this year before the
election is that the they can't come to
an agreement and so what happens is uh
without passing an agreement then
there's no more debt available there's
no no no more funding available for the
government so what happens in that event
well don't worry the government has a
piggy bank called the TGA during that
time they will do what they call
Extraordinary Measures and they'll use
the government bank account the TGA to
actually fund that Gap where they can't
get the debt ceiling this happens most
of the time now we can see this in this
chart right here here's the TGA account
again and what we have right here in
this first dotted line is where the debt
ceiling Showdown begins this is where
they start fighting and we can see they
start spending down the TGA account down
down down down down right here this line
right here is where an agreement is
finally reached now this time frame is
about 140 days now we fast forward the
TJ gets replenished kind of has this
sideways action and this dotted line
right here is where they start fighting
about the debt ceiling again we're not
going to raise it we need to raise it
Etc and then they start spending down
the G until they finally make a deal
right here about another 140 days now it
went up here it goes up it starts
walking sideways and this dotted line
right here is guess what where the next
debt ceiling Showdown is going to begin
now what's interesting is this is
January of
2025 now they predict that the TGA will
be higher by the end of the year so
maybe it'll be somewhere in this range
but when the debt ceiling debate or uh
start happening what do you think
happens based off of this most likely it
starts trending down let me show you
another chart this is a little bit
different of a historical lens again
thanks to Thomas I'm stealing his charts
we got these off of Twitter I'm going to
link to his full thread down below uh
what we can see here is when this
happened you can see it dropping right
here and each time we got to about 100
billion same level and so it's important
to understand what happened in this
mechanics right here but it's also
important to understand the sort of
empty level that they draw down to
because if we want to know where we end
up here what level will we be at about
100 billion now 100 billion how much did
they say would be in there by the end of
the
year now we can do some math all right
now I also want to show you for
historical purposes that this is where
the government said we would end up so
again we have these dotted lines where
the debt ceiling debates started here's
where it ended up now what's important
is this is where we ended up however
what the treasury had forecasted where
we end up was right
here same thing here we get to here they
forecast we would be here but we ended
up down here now they're forecasting
we're going to be here but where do you
think we're going to be well if history
is our guide we're going to be right
here in this range the same thing now
why does all this matter well it matters
because we need to figure out where
we're going in the form of liquidity and
the first thing we have to kind of
figure out is where do we go what are
the lawmakers going to do now we have to
remember as I said take into
consideration that we're also in an
election year so this is going to make
this even more volatile meaning um you
know is it going to be Republicans Or
democrats are going to take over the
presidency who's going to retain the
Senate the house I would imagine there's
going to be even more Grand standing
than we normally see fighting over
budgets different parts of the budgets
and so if anything this could probably
exacerbate the situation it could
probably make the treasury fund it for
longer than they typically have and if
so then they will have to continue to
inject the money so the question is how
much will they have to inject we know
that they're here now we know that they
say they might build it up a little bit
and the question is how far will they
drain it down well back to the math if
we're typically down to about a 100
billion each time and we have about 800
B billion 850 billion they draw it down
to 100 that means there's about 750
billion that could get injected directly
into the economy for you and I to spend
so what does that mean well if we have
750 billion injected not into the banks
like QE I'm talking about being injected
directly into the economy directly into
stimulus into building programs into
more welfare things like that it goes
directly to the economy now to put this
into perspective just to kind of
normalize ourselves because these
numbers get so out of whack in 2008
during the great financial crash where
the entire Global Financial system not
just the US Global Financial system was
melting down at the same time the FED
stepped into action to save the world
and at the time it was 700 billion that
was spent in this tarp program to do
that 700 billion this is more than that
and is most likely coming our way in the
next couple of months so again what
happens if we see this it takes about as
we saw history it's about a 140-day
process of shoveling this money in 750
going directly to Main Street what do
you think is going to happen well I put
some arrows here this is asset prices
now look this is good and bad right I'm
not saying the economy is going to be
fixed by this now a lot of people that
are losing their jobs a lot of
businesses that might suffer they're
going to get some help right they'll get
stimulus that will be coming their way
so it's good for them overall it's bad
for the economy but for asset prices
Bitcoin tech stocks real estate I expect
all this to go back up now not
everything moves up at the same time and
we do have to keep in mind that as more
money is created and as more money is
injected in the system it just
diminishes the purchasing power of those
dollars so just because assets are going
up doesn't necessarily mean you're
getting richer so for example as I break
this down in the investing black hole
the S&P 500 is basically just keeping
your nose above water just barely uh but
there's certain assets that will go up
one times five times nine times what
this liquidity will do um I broke it all
down in this other video called the
investing black hole I'm not going to go
through it right now but if you want to
watch the investing black hole video I'm
going to put it right up here for you go
watch that video because it's really the
only place that you should be investing
but this is what I'm expecting I'm
expecting a massive liquidity increase
so don't get tricked don't get faked out
over the next month or two the next
quarter or two keep your eye on the next
uh I don't know 9 months 12 months cuz
cuz it's going to be a wild ride let me
know what you think about this video in
the comments down below of course as
always give me a thumbs up if you like
it if you don't give me a thumbs down
that's okay either way at least tell me
what you think in the comments subscribe
if you're not already subscribed and
that's what I got all right to your
success I'm out
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