This report has become a broken record. However, sooner or later the Fed will be forced to hit the brakes and the fallout from its insane policies of the past 10 years will start.

The Fed has printed plenty in February, but the effect has been muted because the Treasury is floating a massive amount of new debt. There’s been enough supply to absorb the Fed’s cash injections twice over. It’s seemingly a miracle that the markets have held up as well as they have. I’ll just reiterate that I believe that this attests to two factors. One is just a garden variety institutional mania, and the other is foreign capital flight into the US. Those two forces feed on each other.

Macroliquidity Component Indicators 
 
Fed Cash to Primary Dealers The Fed has now tapered QE twice, by $10 billion each, in addition to the silent taper of reduced MBS replacement purchases that has been under way for more than a year. Can you see all that tapering on this chart? You can’t? That’s what I thought. It’s virtually invisible. That’s how small it is. Once the February March Treasury supply bulge is cleared out, the markets should have clear sailing until May… then go away. 

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