Uncovered Fed Data Just Exposed The TRUTH About QE
Summary
QE vs Liquidity: The guest argues the new Fed bill purchases (“not QE”) likely have limited real-economy impact, highlighting a disconnect between soaring reserves and actual settlement needs.
Fedwire Evidence: Fedwire daily volume has only doubled since 2006 while bank reserves rose hundreds of times, suggesting bank-reserve scarcity is not the core issue.
Market Plumbing: Divergence between SOFR and Fed funds showed funding tightness, but the guest believes QE’s effect is mostly mechanical/psychological rather than inflationary.
Disinflation: Emphasis that current dynamics point to disinflationary forces persisting, with QE “pushing on a string” rather than reigniting 1970s-style inflation.
Oil: With oil near $57 and low gas prices, he sees weak demand signals from energy, viewing energy as a key proxy for the underlying economy.
US Treasuries: Given his view that QE won’t reaccelerate inflation, he leans toward being bullish on rates (supportive of Treasuries) rather than bearish.
Positioning Scenarios: If you believe QE restores liquidity, go long oil/commodities and short rates; if not, be cautious on oil and favor being bullish on rates.
Investment Approach: Monitor Fedwire, repo/SOFR dynamics, and energy prices to shape macro framework and guide portfolio risk management.
Transcript
Hello, fellow Rebel Capitals. Hope you're well. So, I've done some detective work. I put on the old CSI hat and found, uncovered, exposed some hidden data on the Fed's balance sheet that reveals the truth about quantitative easing. Because most of you know from watching my videos that the Fed just announced that they're doing not QEQE once again. And a lot of people out there saying, "Well, my gosh, there's going to be a liquidity injection. This is money printing. Inflation is going to be off to the races." more than other people are saying, well, there's also shows or this also shows how this could be disinflationary and we just need more bank reserves. And the fact that we're constrained on these bank reserves shows us that this could lead most likely would lead to disinflation because there's this tight tightness in the short-term dollar funding markets. So, I want to I wanted to dig into this and say, "Okay, well, what's really happening here and what because the Fed's not going to tell you. Mainstream media is not going to tell you. Social media is not going to tell you. They're mostly wrong. So, let's I wanted to go straight to the source and find out if I or could I wanted to see if there was other data that I could see that would help us determine what the real effects of creating more bank reserves in the financial plumbing what this actually does. So, let's dive and then of course actionable takeaways. So, let's first and foremost go over the problem, a visual representation of the tightness that we have absolutely seen in these dollar funding markets. So, I've got the screen share going right here. Okay. And I used this chart on the whiteboard video for tonight. So, first focus on this blue line, the one's pretty straight. That's going to be Fed funds. And then this red line is going to be the sofur rates. So we can just use that as kind of a proxy for what's happening in the repo market. So you can see that this red line getting way above the blue line. That's the no bueno zone. You don't want that. And I first started talking about this on my videos and for those of you who are are big fans or watch the show a lot, you'll remember in the comments that everyone was telling me that this was a nothing burger. Oh, this is a nothing burger. You're just fear-mongering, George. This is just clickbait to get engagement. Okay. They say people always I don't know what they look like, but I wouldn't be surprised if they look a lot like Pat. Remember from Saturday Night Live? If you have to ask what's that, it's Pat. [laughter] [groaning] Nothing burger. Okay, Mr. Nothing Burger. Now, why is the Fed doing not QE QE again? Because of the big nothing burger I was talking about two months ago. But anyway, so then you see the divergence here and the volatility with this red line and blue line starts to get more extreme. And then you see right here the red line starts pulling up the blue line and that's when the Fed is like, okay, this is really not getting good. And then you can see this further volatility. Now, a lot of people back here are saying month of and quarter end, blah blah blah blah blah blah. They're just dismissing it. But now they're getting to the point where they can't dismiss it anymore, especially after Jerome Pal comes out in the press conference the other day and admits that they're going to start buying bills. And they're calling it the reserve management program or something like that. And they're doing this specifically because of this tightness. So, what are they doing? Well, they only have a couple tools in their bag. One is just, if you want to call it interest rates, I don't even think it is because it's kind of follow the interest rates and where the economy is going. But then the other one is quantitative easing, which that's what this video is about. It is it's a tool, but does it do anything? Okay, so it may squash the volatility, but how do we know that's mechanical? It could just be psychological. So, now that you see kind of what they're up in arms about, let's go over to just kind of a a simple little diagram I pulled up here. It's why these whiteboard videos are a lot better for this, but this is basically the settlement on the Fed's balance sheet. So, you've got the Fed right here, and then you've got uh clearing service, whatever. We we'll say it's Fed Wire, and then you've got the senders bank, you've got the recipients bank. So you just run your credit card or in this case it would be a repo transaction where the uh let's see it would be the uh lenders's bank or being the bank themselves uh is sending money to the recipient's bank and the recipient would be the person that's borrowing money in repo and that transaction uh because this entity is creating a deposit liability they're sending it to this bank in the name of the individual counterparty in repo that's borrowing and therefore they would have to give this bank a an offsetting asset to match up with that liability they just sent them and it's the exact same thing as if you're just running your debit card at Chipotle it's and Chipotle let's say is with Bank of America and you're with Wells Fargo that $20 transaction that has to go over to uh Chipotle's bank account which would add to their bank's deposit liabilities. So therefore, your bank, the sending bank, would have to somehow offset that liability with reducing their other liabilities or giving them an asset. So in this case, that asset is going to be a bank reserve. So your bank, the guy that's buying the Chipotle, would just send $20 in bank reserves over to Chipotle's banks bank account [laughter] at the Fed. So the argument here is that there's just not enough of the these bank reserves. So the settlement process back and forth is is being constrained. You see, so there's just you want to buy that burrito, but there's just not enough bank reserves in order for you to buy that burrito. So BFA can transfer that over to Wells Fargo, assuming you're with BFA and Chipotle is with Wells Fargo. You see? So, and it's the same thing in the repo market. It's just basically you're transferring deposit liabilities that are being created through the loan itself and you're transferring those deposit liabilities to another bank and therefore they need bank reserves to do it. You see, so if interest rates are going up, then the argument here is, well, there's just not enough bank reserves for the interbank settlement and so we've got to do some we got to provide more bank reserves and then the line is going to go back down. That's the argument, right? So, what I wanted to do is put this to the test because my view is this is incorrect. And it's not just my opinion. It's it's based on the research I've done over what, call it, 3,000 YouTube videos by now. But I always like to push holes in my own theories and my own ideas. Try to poke holes in them because maybe I'm wrong. I mean, I'm totally open to being wrong. Absolutely. Which is rare for someone on social media, [laughter] but I'm totally open to being wrong. And so I I want to do a deep dive here. So what I did is I went over to this page. This is the Fed's website or one of them. And this shows their Fedwire service. So what is Fedwire? Fed wire is the clearing mechanism where they trans the Fed transfers those bank reserves from BFA's account to Wells Fargo. So this captures all of the interbank settlements that are settling on the Fed's balance sheet. Now, you could say chips does as well, but this is going to capture the majority of it, right? Because chips is a netting uh what they call that that we call that um this would be gross settlement with Fed Wire and CHIPS would be net settlement. So, chips isn't sending back, you know, bank reserves back and forth. Chips is basically taking all the transactions, netting them out at the end of the night, and then they're saying, "Okay, Bank of America, you owe Wells Fargo 50 bucks in bank reserves. Okay, done." Even though that could equal a trillion transactions and a trillion dollars worth of transactions throughout the day, it's just a net settlement process at the end of the night. So, this is uh Fed Wire gross settlement here. So this is going to c this is going to track every single transaction that's going back and forth and then chips if I understand it correctly just nets at the end of the night and then that one transaction goes through Fed wire to so it's still picked up on Fedwire but it was netted out initially through chips. Okay. So, what we want to do here is we want actually before I get here, what I'm going to do is I'm going to compare 2006 and 7 to where we are today. And that's going to reveal really what's going on here. That that's what's going to expose everything. So, before we get there, let's go over to the bank reserve totals. There we go. Okay. So, you guys have seen me use this chart many, many, many, many times. And what I want to do is I want to go back before they started doing QE. And you guys probably know from watching my videos that back here 2006 as an example, there were about 40 billion with a B in bank reserves. Now keep in mind about 30 billion of those bank reserves vault cash. So why is that important? Because the there's they're not inner bank settling with vault cash. like the vault cash is there just in case someone comes to the counter and says, "Hey, I want $1,000 in in currency." Great. Here's your thousand or it's for the ATM machine or something like that. They're they're not using vault cash to go ahead and send settle these interbank transactions between Wells Fargo and uh BFA. You know, BFA isn't sending a Brinks truck [laughter] at the end of the night over to Wells Fargo full of a billion dollars in cash or whatever it is. So, I like to net that out so we can see exactly how much are the electronic reserves because those are really the only settlement assets that we can real realistically consider. Okay. So let's remember that back here in 2006 when there's 40 billion of reserves, there's only 10 billion of those that are actually used for net settlement. And so that's our starting point, right? So then we fast forward to today where we're roughly 3 trillion. Now, most of this 99.999% is going to be electronic reserves, settlement assets. It ain't going to be vault cash. The vault cash, I'm sure, grew, but didn't grow that much. [laughter] So, we can say almost I don't know what it is, you know, 95%, 99, whatever, but we can say the vast majority of this 3 trillion is going to be electronic res. So we can what we're doing here is we're comparing the 10 billion with 3 trillion. Okay. So now the argument here is well George this actually makes a lot of sense because of regulations. So prior to this granted they're not really settling on the Fed's balance sheet. They're using a lot of interbank credit and all these things that you talk about you correspondent banking relationships yada yada yada yada yada. But when QE hit the whole system changed. This is the argument that you get from people. The whole system changed. So you can't compare what's happening today because now this the system needs $3 trillion of bank reserves even though back here it only needed 10 uh 10 billion. So because the whole systems change, we've got Basil 3, we've got the SLR requirements, we've got blah blah blah blah blah blah blah blah blah blah blah. And therefore what we're seeing here is obviously a result of the fact that the system needs 3 trillion and we just dipped just 10 tr 10 billion below that and all of a sudden the system's freaking out. Okay, so let's go over to the Fed wire because this is where the rubber meets the road. This is the proof's in the pudding as they say. So, and before I reveal the data, let's remember that if the system has absolutely unequivocally changed and if it has changed due to whatever regulations, it it doesn't matter. If the system has changed, then what we would need to see is almost an exponential increase with the use of Fed wire. Not to mention the fact that the M2 money supply was 7.5 trillion and now it's 22 23 and and that's just domestic because the argument that that people have is that the entire global system of dollar interbank settlement settles on the Fed's balance sheet. Okay. So, what we would need to see there is if let's say we've got I don't even know what that is. We've got uh let me do the math here quickly. So, if you've got um I mean the numbers so astronomical. It's uh what would that be? 3 trillion. So 10% would be 300 billion. Then 1% would be 30. So less than 1%. So 3%. So I don't even know how much of an X that is. So you got something that's you would have to let's just Okay. So let's just because these numbers get astronomical and they get ridiculous. So let's just assume for a moment that the um increase in reserves was 100x, right? A 100x increase. And it would obviously [laughter] it would it's even more than that. But let's just assume that it's a 100x. I think it's like a 300x. Well, let's just assume it's 100x. Okay, cool. So then if the system had changed to the point where we have to have $3 trillion or if the sky is falling $3 trillion worth of these bank reserves then you would need to see at least a 100x increase in the usage of Fed wire right that makes sense. So let's see if we have a 100x increase in the use of Fed wire. Let's go back to 2006. Now, this is a daily. This is daily. And by the way, that's $2 trillion daily. So this re this actually makes me kind of poke holes in my own model because I I guess there's an argument that you could have settled with uh you know the 7.5 trillion that we had uh that you could have settled or even the global um with you know just 10 billion in bank reserves because [laughter] it's just all going back and forth between this bank that bank that bank that bank. So it is possible. Now I I would need to do a deep dive there as well, but we'll save that for a completely separate discussion. So right here, you're doing 2.2 trillion a day in transaction volume. 2.2 trillion a day. Okay, that's using Fed Wire and that's using the 10 billion of bank reserves. So what we would need to see if this is $2.2 trillion a day in transaction volume, you would you would need to see 100x that if it is true that the system completely and totally changed to where back here you didn't really need bank reserves that much, but up here you have to have them or the whole sky is going to the whole world is going to end. and we're going to see the tightness in the dollar funding markets. So, let's fast forward to 2024 right here. And we can see that it is not 100x, it's double. It's just double. So if you want to argue that we need a lot more bank reserves because the transaction volume is increased on the Fed's balance sheet because of regulations or blah blah blah blah blah blah the system has changed whatever okay that's fine but then we would need 20 billion in bank reserves. 20 billion with a B because that's the increase in the use of Fed wire which is a representation of the use of the bank reserves on the Fed's balance sheet. So let me remind you we have a a little bit over a little bit more than 20 billion. We have 3 trillion. 3 trillion. So, what are the chances that what we're seeing in repo in the short-term funding markets is a result of not having enough bank reserves when we have 3 trillion when if we're doing an applesto apples comparison based on the actual transactions that are settling with bank reserves. reserves on the Fed's balance sheet. If we're comparing apples to apples, we would need 20 billion. I think what this shows I mean I [laughter] don't know how you could look at this and argue that we just don't have enough bank reserves. I I don't know using this Fed wire data. So, don't take my word on it. I mean, just go straight to the Fed. And if someone in the chat or one of you guys watching this video right now, I if you can figure out how the daily volume settled on the Fed's balance sheet has doubled, but yet for some reason we need 300x or whatever it is, the amount of bank reserves. I I I I don't get that. So maybe there's something I'm not seeing. Maybe there's something I'm not seeing. You guys let me know in the chat and you guys let me know in the comments of the video. So now let's assume for a moment that this is accurate and what I'm saying makes sense. Then what's the takeaway as far as um something actionable, right? Well, let's go over to oil because I think that tells a very good story. Right now, oil is trading roughly $57 a barrel. That is not inflationary. That does not represent inflation or an let's say an accelerate because obviously we have inflation in the United States. Obviously prices are going up every single day. But the question is to what degree are they going up and are they going up at a faster rate every single day? Are we seeing an acceleration? Right? Because you can look at the Fed restarting QE one of two ways. Like we said yesterday, you can look at it as, oh my gosh, they're adding all of this liquidity that was needed to the system. And therefore, by adding all of these bank reserves that the system desperately needed, now the system's going to be able to create a lot more currency units, chasing goods and services, and that's going to lead to a reaceleration of inflation. That's one way to look at it. Or you can look at it and say, okay, they're going to create more bank reserves. are doing to do QE and they've already got three trillion more bank reserves than they need or roughly three trillion or whatever based on the actual settlement data from the Fed's balance sheet Fed wire using those bank reserves uh and then you would come to a completely different conclusion. you would say, "Okay, well, they've already got three trillion too many." And if they add another hundred billion or 40 billion a month or whatever they're proposing to add, that's not going to do anything because you're pushing on a string. You're pissing into the wind. Like it's right. So then you would come to the conclusion that whatever the underlying fundamental forces are that we have seen play out over the past year, let's say, or in 2025, that's most likely going to continue into the future. And pushing on a string isn't going to do anything to prevent that. And it's definitely not going to just do a complete 180 to where we're disinflation, deterioration of the labor market, economic contraction, but yet all of a sudden because the Fed starts doing QE, we're going to have this money multiplier because those these bank reserves are so desperately needed. And then we're going to just rip right back into the 1970s. See? So the the actionable component of that is how you set up your macro framework and what's your starting point, right? So if your starting point is this is adding, you know, desperately needed liquidity that's going to have a money multiplier that's going to create more currency units in the real economy chasing goods and services, then you would want to go long oil right here for sure. Now, this isn't investment advice. I'm just thinking this through out loud to where I want to take these esoteric topics and turn them into something that's actionable in the real world. Then you would want to be long oil. You would be want to long you would want to be long uh commodities for sure and you would definitely want to be short interest rates. But if your view is that, okay, we've got plenty of bank reserves and this is pushing on a string, then you would look at the price of oil and you would say, yikes, what is that telling me? I just heard today that gas prices are just unbelievably low in the United States. What is that telling you? That tells you a lot about demand. And that tells you a lot about the health of the underlying economy. Because at the end of the day, energy is the economy. So then you would have a much different view on interest rates. Instead of being bearish, you'd probably be bullish on rates. So that's just a quick example, a quick example of how you take first and foremost, it reveals, I think, a lot of the truth about QE. And you guys correct me if I'm wrong. If there's something there that I'm missing, just going through that kind of common sense approach, just using the Fedwire data, let me know in the chat. let me know in the comments. But um it's and this so this video first and foremost was to reveal this data that nobody looks at. And by the way, I want to give a huge hat tip to my good buddy Mike Green who who tweeted this uh data this um Fedwire data to me because I'd never seen it before. So if it wasn't for Mike uh Green tweeting that to me, I I would not have known about that. And so number one, it was just to kind of give you guys food for thought there about the potency of quantitative easing. And then also to show you that these esoteric topics that we talk about with interest rates, the Fed balance sheet, um you know, reverse repo, the repo market, sofa rates that although it sounds very abstract and just like a thought experiment, when you actually think about it and understand it, it is very very very actionable. And if you and if you get it and if you follow this stuff, it definitely gives you an edge when it comes to setting up your portfolio and protecting your wealth and hopefully growing your wealth into the future. All right, guys. Enjoy the rest of your afternoon. Enjoy your weekend. As always, make sure you're standing up for freedom, liberty, free market, capitalism, and we'll see you in the next video.
Uncovered Fed Data Just Exposed The TRUTH About QE
Summary
Transcript
Hello, fellow Rebel Capitals. Hope you're well. So, I've done some detective work. I put on the old CSI hat and found, uncovered, exposed some hidden data on the Fed's balance sheet that reveals the truth about quantitative easing. Because most of you know from watching my videos that the Fed just announced that they're doing not QEQE once again. And a lot of people out there saying, "Well, my gosh, there's going to be a liquidity injection. This is money printing. Inflation is going to be off to the races." more than other people are saying, well, there's also shows or this also shows how this could be disinflationary and we just need more bank reserves. And the fact that we're constrained on these bank reserves shows us that this could lead most likely would lead to disinflation because there's this tight tightness in the short-term dollar funding markets. So, I want to I wanted to dig into this and say, "Okay, well, what's really happening here and what because the Fed's not going to tell you. Mainstream media is not going to tell you. Social media is not going to tell you. They're mostly wrong. So, let's I wanted to go straight to the source and find out if I or could I wanted to see if there was other data that I could see that would help us determine what the real effects of creating more bank reserves in the financial plumbing what this actually does. So, let's dive and then of course actionable takeaways. So, let's first and foremost go over the problem, a visual representation of the tightness that we have absolutely seen in these dollar funding markets. So, I've got the screen share going right here. Okay. And I used this chart on the whiteboard video for tonight. So, first focus on this blue line, the one's pretty straight. That's going to be Fed funds. And then this red line is going to be the sofur rates. So we can just use that as kind of a proxy for what's happening in the repo market. So you can see that this red line getting way above the blue line. That's the no bueno zone. You don't want that. And I first started talking about this on my videos and for those of you who are are big fans or watch the show a lot, you'll remember in the comments that everyone was telling me that this was a nothing burger. Oh, this is a nothing burger. You're just fear-mongering, George. This is just clickbait to get engagement. Okay. They say people always I don't know what they look like, but I wouldn't be surprised if they look a lot like Pat. Remember from Saturday Night Live? If you have to ask what's that, it's Pat. [laughter] [groaning] Nothing burger. Okay, Mr. Nothing Burger. Now, why is the Fed doing not QE QE again? Because of the big nothing burger I was talking about two months ago. But anyway, so then you see the divergence here and the volatility with this red line and blue line starts to get more extreme. And then you see right here the red line starts pulling up the blue line and that's when the Fed is like, okay, this is really not getting good. And then you can see this further volatility. Now, a lot of people back here are saying month of and quarter end, blah blah blah blah blah blah. They're just dismissing it. But now they're getting to the point where they can't dismiss it anymore, especially after Jerome Pal comes out in the press conference the other day and admits that they're going to start buying bills. And they're calling it the reserve management program or something like that. And they're doing this specifically because of this tightness. So, what are they doing? Well, they only have a couple tools in their bag. One is just, if you want to call it interest rates, I don't even think it is because it's kind of follow the interest rates and where the economy is going. But then the other one is quantitative easing, which that's what this video is about. It is it's a tool, but does it do anything? Okay, so it may squash the volatility, but how do we know that's mechanical? It could just be psychological. So, now that you see kind of what they're up in arms about, let's go over to just kind of a a simple little diagram I pulled up here. It's why these whiteboard videos are a lot better for this, but this is basically the settlement on the Fed's balance sheet. So, you've got the Fed right here, and then you've got uh clearing service, whatever. We we'll say it's Fed Wire, and then you've got the senders bank, you've got the recipients bank. So you just run your credit card or in this case it would be a repo transaction where the uh let's see it would be the uh lenders's bank or being the bank themselves uh is sending money to the recipient's bank and the recipient would be the person that's borrowing money in repo and that transaction uh because this entity is creating a deposit liability they're sending it to this bank in the name of the individual counterparty in repo that's borrowing and therefore they would have to give this bank a an offsetting asset to match up with that liability they just sent them and it's the exact same thing as if you're just running your debit card at Chipotle it's and Chipotle let's say is with Bank of America and you're with Wells Fargo that $20 transaction that has to go over to uh Chipotle's bank account which would add to their bank's deposit liabilities. So therefore, your bank, the sending bank, would have to somehow offset that liability with reducing their other liabilities or giving them an asset. So in this case, that asset is going to be a bank reserve. So your bank, the guy that's buying the Chipotle, would just send $20 in bank reserves over to Chipotle's banks bank account [laughter] at the Fed. So the argument here is that there's just not enough of the these bank reserves. So the settlement process back and forth is is being constrained. You see, so there's just you want to buy that burrito, but there's just not enough bank reserves in order for you to buy that burrito. So BFA can transfer that over to Wells Fargo, assuming you're with BFA and Chipotle is with Wells Fargo. You see? So, and it's the same thing in the repo market. It's just basically you're transferring deposit liabilities that are being created through the loan itself and you're transferring those deposit liabilities to another bank and therefore they need bank reserves to do it. You see, so if interest rates are going up, then the argument here is, well, there's just not enough bank reserves for the interbank settlement and so we've got to do some we got to provide more bank reserves and then the line is going to go back down. That's the argument, right? So, what I wanted to do is put this to the test because my view is this is incorrect. And it's not just my opinion. It's it's based on the research I've done over what, call it, 3,000 YouTube videos by now. But I always like to push holes in my own theories and my own ideas. Try to poke holes in them because maybe I'm wrong. I mean, I'm totally open to being wrong. Absolutely. Which is rare for someone on social media, [laughter] but I'm totally open to being wrong. And so I I want to do a deep dive here. So what I did is I went over to this page. This is the Fed's website or one of them. And this shows their Fedwire service. So what is Fedwire? Fed wire is the clearing mechanism where they trans the Fed transfers those bank reserves from BFA's account to Wells Fargo. So this captures all of the interbank settlements that are settling on the Fed's balance sheet. Now, you could say chips does as well, but this is going to capture the majority of it, right? Because chips is a netting uh what they call that that we call that um this would be gross settlement with Fed Wire and CHIPS would be net settlement. So, chips isn't sending back, you know, bank reserves back and forth. Chips is basically taking all the transactions, netting them out at the end of the night, and then they're saying, "Okay, Bank of America, you owe Wells Fargo 50 bucks in bank reserves. Okay, done." Even though that could equal a trillion transactions and a trillion dollars worth of transactions throughout the day, it's just a net settlement process at the end of the night. So, this is uh Fed Wire gross settlement here. So this is going to c this is going to track every single transaction that's going back and forth and then chips if I understand it correctly just nets at the end of the night and then that one transaction goes through Fed wire to so it's still picked up on Fedwire but it was netted out initially through chips. Okay. So, what we want to do here is we want actually before I get here, what I'm going to do is I'm going to compare 2006 and 7 to where we are today. And that's going to reveal really what's going on here. That that's what's going to expose everything. So, before we get there, let's go over to the bank reserve totals. There we go. Okay. So, you guys have seen me use this chart many, many, many, many times. And what I want to do is I want to go back before they started doing QE. And you guys probably know from watching my videos that back here 2006 as an example, there were about 40 billion with a B in bank reserves. Now keep in mind about 30 billion of those bank reserves vault cash. So why is that important? Because the there's they're not inner bank settling with vault cash. like the vault cash is there just in case someone comes to the counter and says, "Hey, I want $1,000 in in currency." Great. Here's your thousand or it's for the ATM machine or something like that. They're they're not using vault cash to go ahead and send settle these interbank transactions between Wells Fargo and uh BFA. You know, BFA isn't sending a Brinks truck [laughter] at the end of the night over to Wells Fargo full of a billion dollars in cash or whatever it is. So, I like to net that out so we can see exactly how much are the electronic reserves because those are really the only settlement assets that we can real realistically consider. Okay. So let's remember that back here in 2006 when there's 40 billion of reserves, there's only 10 billion of those that are actually used for net settlement. And so that's our starting point, right? So then we fast forward to today where we're roughly 3 trillion. Now, most of this 99.999% is going to be electronic reserves, settlement assets. It ain't going to be vault cash. The vault cash, I'm sure, grew, but didn't grow that much. [laughter] So, we can say almost I don't know what it is, you know, 95%, 99, whatever, but we can say the vast majority of this 3 trillion is going to be electronic res. So we can what we're doing here is we're comparing the 10 billion with 3 trillion. Okay. So now the argument here is well George this actually makes a lot of sense because of regulations. So prior to this granted they're not really settling on the Fed's balance sheet. They're using a lot of interbank credit and all these things that you talk about you correspondent banking relationships yada yada yada yada yada. But when QE hit the whole system changed. This is the argument that you get from people. The whole system changed. So you can't compare what's happening today because now this the system needs $3 trillion of bank reserves even though back here it only needed 10 uh 10 billion. So because the whole systems change, we've got Basil 3, we've got the SLR requirements, we've got blah blah blah blah blah blah blah blah blah blah blah. And therefore what we're seeing here is obviously a result of the fact that the system needs 3 trillion and we just dipped just 10 tr 10 billion below that and all of a sudden the system's freaking out. Okay, so let's go over to the Fed wire because this is where the rubber meets the road. This is the proof's in the pudding as they say. So, and before I reveal the data, let's remember that if the system has absolutely unequivocally changed and if it has changed due to whatever regulations, it it doesn't matter. If the system has changed, then what we would need to see is almost an exponential increase with the use of Fed wire. Not to mention the fact that the M2 money supply was 7.5 trillion and now it's 22 23 and and that's just domestic because the argument that that people have is that the entire global system of dollar interbank settlement settles on the Fed's balance sheet. Okay. So, what we would need to see there is if let's say we've got I don't even know what that is. We've got uh let me do the math here quickly. So, if you've got um I mean the numbers so astronomical. It's uh what would that be? 3 trillion. So 10% would be 300 billion. Then 1% would be 30. So less than 1%. So 3%. So I don't even know how much of an X that is. So you got something that's you would have to let's just Okay. So let's just because these numbers get astronomical and they get ridiculous. So let's just assume for a moment that the um increase in reserves was 100x, right? A 100x increase. And it would obviously [laughter] it would it's even more than that. But let's just assume that it's a 100x. I think it's like a 300x. Well, let's just assume it's 100x. Okay, cool. So then if the system had changed to the point where we have to have $3 trillion or if the sky is falling $3 trillion worth of these bank reserves then you would need to see at least a 100x increase in the usage of Fed wire right that makes sense. So let's see if we have a 100x increase in the use of Fed wire. Let's go back to 2006. Now, this is a daily. This is daily. And by the way, that's $2 trillion daily. So this re this actually makes me kind of poke holes in my own model because I I guess there's an argument that you could have settled with uh you know the 7.5 trillion that we had uh that you could have settled or even the global um with you know just 10 billion in bank reserves because [laughter] it's just all going back and forth between this bank that bank that bank that bank. So it is possible. Now I I would need to do a deep dive there as well, but we'll save that for a completely separate discussion. So right here, you're doing 2.2 trillion a day in transaction volume. 2.2 trillion a day. Okay, that's using Fed Wire and that's using the 10 billion of bank reserves. So what we would need to see if this is $2.2 trillion a day in transaction volume, you would you would need to see 100x that if it is true that the system completely and totally changed to where back here you didn't really need bank reserves that much, but up here you have to have them or the whole sky is going to the whole world is going to end. and we're going to see the tightness in the dollar funding markets. So, let's fast forward to 2024 right here. And we can see that it is not 100x, it's double. It's just double. So if you want to argue that we need a lot more bank reserves because the transaction volume is increased on the Fed's balance sheet because of regulations or blah blah blah blah blah blah the system has changed whatever okay that's fine but then we would need 20 billion in bank reserves. 20 billion with a B because that's the increase in the use of Fed wire which is a representation of the use of the bank reserves on the Fed's balance sheet. So let me remind you we have a a little bit over a little bit more than 20 billion. We have 3 trillion. 3 trillion. So, what are the chances that what we're seeing in repo in the short-term funding markets is a result of not having enough bank reserves when we have 3 trillion when if we're doing an applesto apples comparison based on the actual transactions that are settling with bank reserves. reserves on the Fed's balance sheet. If we're comparing apples to apples, we would need 20 billion. I think what this shows I mean I [laughter] don't know how you could look at this and argue that we just don't have enough bank reserves. I I don't know using this Fed wire data. So, don't take my word on it. I mean, just go straight to the Fed. And if someone in the chat or one of you guys watching this video right now, I if you can figure out how the daily volume settled on the Fed's balance sheet has doubled, but yet for some reason we need 300x or whatever it is, the amount of bank reserves. I I I I don't get that. So maybe there's something I'm not seeing. Maybe there's something I'm not seeing. You guys let me know in the chat and you guys let me know in the comments of the video. So now let's assume for a moment that this is accurate and what I'm saying makes sense. Then what's the takeaway as far as um something actionable, right? Well, let's go over to oil because I think that tells a very good story. Right now, oil is trading roughly $57 a barrel. That is not inflationary. That does not represent inflation or an let's say an accelerate because obviously we have inflation in the United States. Obviously prices are going up every single day. But the question is to what degree are they going up and are they going up at a faster rate every single day? Are we seeing an acceleration? Right? Because you can look at the Fed restarting QE one of two ways. Like we said yesterday, you can look at it as, oh my gosh, they're adding all of this liquidity that was needed to the system. And therefore, by adding all of these bank reserves that the system desperately needed, now the system's going to be able to create a lot more currency units, chasing goods and services, and that's going to lead to a reaceleration of inflation. That's one way to look at it. Or you can look at it and say, okay, they're going to create more bank reserves. are doing to do QE and they've already got three trillion more bank reserves than they need or roughly three trillion or whatever based on the actual settlement data from the Fed's balance sheet Fed wire using those bank reserves uh and then you would come to a completely different conclusion. you would say, "Okay, well, they've already got three trillion too many." And if they add another hundred billion or 40 billion a month or whatever they're proposing to add, that's not going to do anything because you're pushing on a string. You're pissing into the wind. Like it's right. So then you would come to the conclusion that whatever the underlying fundamental forces are that we have seen play out over the past year, let's say, or in 2025, that's most likely going to continue into the future. And pushing on a string isn't going to do anything to prevent that. And it's definitely not going to just do a complete 180 to where we're disinflation, deterioration of the labor market, economic contraction, but yet all of a sudden because the Fed starts doing QE, we're going to have this money multiplier because those these bank reserves are so desperately needed. And then we're going to just rip right back into the 1970s. See? So the the actionable component of that is how you set up your macro framework and what's your starting point, right? So if your starting point is this is adding, you know, desperately needed liquidity that's going to have a money multiplier that's going to create more currency units in the real economy chasing goods and services, then you would want to go long oil right here for sure. Now, this isn't investment advice. I'm just thinking this through out loud to where I want to take these esoteric topics and turn them into something that's actionable in the real world. Then you would want to be long oil. You would be want to long you would want to be long uh commodities for sure and you would definitely want to be short interest rates. But if your view is that, okay, we've got plenty of bank reserves and this is pushing on a string, then you would look at the price of oil and you would say, yikes, what is that telling me? I just heard today that gas prices are just unbelievably low in the United States. What is that telling you? That tells you a lot about demand. And that tells you a lot about the health of the underlying economy. Because at the end of the day, energy is the economy. So then you would have a much different view on interest rates. Instead of being bearish, you'd probably be bullish on rates. So that's just a quick example, a quick example of how you take first and foremost, it reveals, I think, a lot of the truth about QE. And you guys correct me if I'm wrong. If there's something there that I'm missing, just going through that kind of common sense approach, just using the Fedwire data, let me know in the chat. let me know in the comments. But um it's and this so this video first and foremost was to reveal this data that nobody looks at. And by the way, I want to give a huge hat tip to my good buddy Mike Green who who tweeted this uh data this um Fedwire data to me because I'd never seen it before. So if it wasn't for Mike uh Green tweeting that to me, I I would not have known about that. And so number one, it was just to kind of give you guys food for thought there about the potency of quantitative easing. And then also to show you that these esoteric topics that we talk about with interest rates, the Fed balance sheet, um you know, reverse repo, the repo market, sofa rates that although it sounds very abstract and just like a thought experiment, when you actually think about it and understand it, it is very very very actionable. And if you and if you get it and if you follow this stuff, it definitely gives you an edge when it comes to setting up your portfolio and protecting your wealth and hopefully growing your wealth into the future. All right, guys. Enjoy the rest of your afternoon. Enjoy your weekend. As always, make sure you're standing up for freedom, liberty, free market, capitalism, and we'll see you in the next video.