Thank you so much, Robin, for your generous compliment!. It’s particularly valued because our mutual appreciation disregards our opinion divergences, starting, as you know, with the issues about the euro. Regarding your stated preference for tight liquidity at the end of your post, to which you are entitled, I fail to see its advantages. As you know, it goes against the 2019 FED decision on its implementation monetary policy regime of always ensure a situation of “ample reserves” In a floor system. The decline of bank reserves with QT, brought them below a sort of normal level of 10% of GDP indicated by several FMOC members. You seem to be afraid of “disguised QE” if the FED would expand its balance sheet to ensure: 1) ample bank reserves; 2) control of SOFR to avoid too large a difference with the FFR, the two crucial prices, secured and unsecured, of overnight dollars, thereby also getting protection from a nasty unwind of the basis trade.

The temporary expansion of the balance sheet to ensure those two goals has nothing to do with QE, which designates a monetary policy tool to ensure lower medium term market yields, therefore requiring much, much larger amounts than the ones at stake in fulfilling the two objectives I mentioned. Sometimes, the FED Standing Repo Facility may be insufficient to control the SOFR, because it can only be used by primary dealers and a list of authorised banks, and there are many other players in the repo market. In any case, maybe the use of the SRF will be enough this time to put an end to an increasing SOFR. In my post, I considered very unlikely a crisis situation if the FED does its job.