The Credit Cycle Is Just Getting Started | Andreas Steno Larsen
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Scale is the blockchain that's truly built different. Explore more at scale.space/ecosystem and follow them on x at scale network. Crypto's premier institutional conference is returning to New York on March. We're hosting one of the world's best crypto conferences for institutional and professionals alike. It's gonna be a ton of fun. I'm gonna be there hosting a variety of different panels. I'll be doing a fireside chat with Mohammed El Erian, a different macro panel with Jim Bianco and Joseph Wang. And we're also gonna be doing a live Ford guidance round up there where myself, Tyler, and Quin
Thanks so much for having me. And, you know, I've been looking forward to this discussion. It seems like our views are kind of aligned, but let's see. I I think it's it's a really, really interesting macro backdrop right now, and the sentiment is extremely bearish out there, amidst what looks to be an upswing to me, which is kind of peculiar. So let's dig into that. Yeah.
It feels like there's a lot of of of points of tension, in different dynamics. So, So, yeah, you really gotta get into the weeds of the macro world right now to really get past the the surface headlines, especially because they are so, Trump heavy, to say the least right
now.
Yeah. So why don't we start with the liquidity backdrop? Because I know you've been doing a lot of really great work there and what you're seeing there. So, you know, when we talk about liquidity, often a lot of different acronyms start getting thrown around in in different charts of of liquidity. So I'd love for you to just first off define how do you view, you know, this idea of liquidity and how it impacts markets. And then what are some of the the main top line drivers that you're seeing change at the moment in in in terms of your forecast?
Felix, first of all, yesterday, Jay Powell basically said that QE is not an option as long as interest rates are not zero. And, you know, that headline made the rounds across x, various media outlets, etcetera. But it's not really a surprise. It's that, you know, QE has always been a tool used when the zero lower bound was hit in interest rates. So, you know, it's nothing new. It's the same view as the Fed has always had, and we can get liquidity additions anyway. And that's important to underscore that point because QE is just one form of liquidity. There were there are various forms of liqui
Yeah. Maybe just to to prove out this idea, you could address this this notion that I've seen where it's, you know, somebody will look at, okay. We've had couple years of quantitative tightening now. We've had, one of the fastest increases in the Fed funds or one of the fastest hiking cycles we've ever seen. Oh, you know, financial conditions are as tight as they can really get. And despite that, we've still seen equities at all time high. We've still seen crypto doing really, really well. But it sounds like as you're as you're mentioning these different dynamics, there's nuance there involved
If we look at liquidity in a very narrow definition, I'd say that liquidity is relatively tight. So if you look at central bank reserves and the amount of liquidity that is available for banks with an account at the Federal Reserve, That, liquidity measure is tied. And we're starting to see the signs of that every quarter and year turn, where we have spikes in money market rates, etcetera. But if you look at the private sector liquidity, we see a pretty abundant, liquidity picture on the other hand. Because of an acceleration of the private credit creation, because of an acceleration of the mo
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