Could QT reduce the liquidity premium of certain assets to such an extent that there’s a ‘sudden stop’ in market liquidity? This question has been a preoccupation since I persuaded myself a link existed between a/ the rising level of system reserves and b/ both the daily turnover of FedWire and the daily turnover of securities/repo in US capital markets…
Keep reading with a 7-day free trial
Subscribe to ExorbitantPrivilege to keep reading this post and get 7 days of free access to the full post archives.