Hello fellow rebel capitalists hope you're well I've got a treat for everybody we've got my good buddy macro

alf coming on to discuss or notative tightening and this is something that most people forgot about

because they've been hyper-focused on interest rates.

But maybe QT is a much bigger dealer has a more significant impact on the economy and maybe could

trigger the next economic crisis and maybe more so than just the Federal Reserve hiking interest rates.

So while we're waiting for Macro Alf to come on and explain this, let's go over to one of his recent blog posts and it's something he

emailed to me a while about an hour ago and I was looking at very, very interesting here.

So let's see if we can zoom in.

All right, so this is titled liquidity,

and this is the report from January 24th.

And his reporter blog is called the Macro Compass.

So the Fed intends to drain liquidity at rapid pace in 2023 and while the pace might be more friendly for the next three months don't get distracted

Wall Street will soon start feeling the heat.

So most of you understand that quantitative tightening is the reverse of quantitative easing,

where instead of buying treasuries now, all of a sudden the Fed are either selling assets could be mortgage securities or they're just

letting them mature and they're not rolling over so let's just say they've got a billion dollars in mortgage

back securities that are maturing tomorrow usually they would have just when they

got paid they would have just bought more of them so their balance sheet wouldn't decrease but now what's

happening is they're taking payment they're not buying more of the mortgage

of securities in this example and therefore it's decreasing the size of their balance sheet and

it's decreasing the amount of bank reserves in the system.

Why?

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