Real Net Liquidity

the single most important chart in global finance

I hate being confined to hanging on Jerome's every word and tirelessly decoding the lies in the statements, minutes and Timiraos tweets.

If only we had a way to observe the Fed’s actions, beyond rate hikes…

(Re-)introducing real net liquidity: a way to observe the actual liquidity conditions in the financial system, in real-time.

Combining data from the three components which have the most impact on liquidity:

1. U. S. Federal Reserve Balance Sheet (FED)

2. U. S. Treasury General Reserve Account (TGA)

3. Overnight Reverse Repurchase Agreements (RRP)

The formula is:

Money Supply = FED - TGA - RRP

Here is what it looks like below in green, compared to SPX in purple:

Real net liquidity gives us an idea of the degree to which monetary debasement is occurring — and whether they are actually engaged in QT or QE.

Using real net liquidity we are able to determine the reality of returns — an evaluation of the macro assets in terms of how well they perform against the rate of debasement of money.

If you use TradingView and would like to track this yourself, please plug these into the formula above:

1. WALCL — Fed Balance Sheet

2. WDTGAL — Treasury General Reserve Account

3. RRPONTSYD — Overnight Reverse Repo

If you have a Bloomie, you can get (unnecessarily) precise with the following:

1. FARBAST

2. RRPQTOON

3. CERBTGAN

4. NYRPVOA

5. FARWFOIA

6. FESLTOTL

Credit to the Notorious Arthur Hayes for these inputs.

100X shared the following on 10/29/22 on twitter, commenting on the increase in liquidity from the change in RRP: