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Searching for Volatile Macro Environments with Alfonso Peccatiello, The Macro Compass

The Derivative

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The Fed's Weapons to Backstop the Liquidity Side of Things

The Fed has weapons to backstop the liquidity side of things. Interest rate risk at a bank level, it's a hit on banks capital, but not an existential threat if you run the numbers. So what I think here is happening is we'll have a bit of a bifurcated system where overall systemically, the liquidity stress will not turn into some catastrophe. Those are exactly the kind of entities that need flow of credit for the economy to run. They don't know which kind of risk sit as run. Why would I keep my money there? Because I'm not rewarded for it in the first place. Long term macro impact of that is you're drying up funds and

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