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All about collateral and reserves

Financial media is obsessed with the Fed and everything they do or say, especially if it is labeled as "quantitative". Unfortunately, though, there are some myths about all this quantitative stuff that even the most qualified analysts believe and spread around to the public opinion.

As central banks are set to begin normalizing their balance sheets, I thought it would be a good time to look at pros and cons of the mysterious QT.

This 3-article series will look at quantitative tightening from three different perspectives:

  • Good: collateral injection to the monetary system,
  • Bad: reduction of intraday liquidity (incoming),
  • And the ugly: collateral-reserves balancing and the regulatory setting (incoming).

Resources

To learn more about the upcoming QT, check out the list below that expands on the concepts that I mentioned in the articles above. Some authors may have a different opinion than my own, so don't get confused when you read something that contradicts with what I wrote here. Nevertheless, I consider all resources below to be very well-structured and very well-argued.

Collateral mechanics:

QE scarcity channel:

This list is not complete! In the coming month, as article #2 and #3 roll out, I will be adding here new resources for you to explore!