As The Fed Has A Full-Blown Liquidity Crisis On Their Hands!
Jpow and the Fed have backed themselves & the banks in a corner after letting the printer run brrrrr. High Reverse Repo Purchase usage signals that the banks simply don’t have the balance sheets to accept the excess reserves.
Thus, they are forced to park them right back with the Fed using the Overnight Reverse Repo Purchase and 0.05% lending.
This has created a dangerous game of chicken in the market. Currently, the liquidity in the market is entirely artificial because of the aforementioned brrrrr. If JPow lets up on the central-bank asset purchases, it could shut down the entire game. However, if he keeps letting the printer run, he risks hyperinflation.
It’s turned into either no more liquidity for anyone or so much liquidity that the value of USD becomes near worthless and we see Weimar Republic levels of hyperinflation.
For GME, I believe the thought is that no liquidity means institutions will have to sell off other assets to increase their capital supply. This will continue until they can no longer increase their capital supply to meet margin requirements. Finally, an uncorrelated financial asset
When/if institutions cannot meet their margin requirements (aka prove liquidity to be able to cover positions), DTCC will forcibly close all of their positions and MOASS takes flight
Poster Comment:
This won't end well.