Will Jerome Powell Chose "Option 1" or "Option 2"?

If you think what's happening in the markets has ANYTHING to do with tariffs, you need to rethink some things. The single most important factor for the markets is...LIQUIDITY.

The Fed is pulling liquidity out of the market at its fastest pace in decades... possibly ever. What started as a $10B per month QT program has hit $30B per month and will soon be $50B per month

That comes to $600 billion per YEAR. Meaning the Fed is withdrawing Sweden's GDP in liquidity every 12 month.

To make this worse, the Fed is ALSO hiking rates, which strengthens the $USD making debt more expensive. There is over $6T in $USD-denominated debt in the EM space. This is why this area started blowing up in March/ April when the Fed's QT rose to $30B per month.

And, lest we not forget, the $USD is the reserve currency of the world, accounting for 86% of currency trading. So if the $USD is strengthening AND the Fed is pulling liquidity, you're talking about 86% of ALL currency transactions becoming more expensive/ tighter.

Put simply, the Fed is going ALL OUT with is program to normalize. It's almost as if Powell wants to undo the entire '08-'16 period in 3-4 years. That's insane especially when you consider that when you borrow in $USD, you are effectively SHORTING the $USD.

So that $20T in US debt.. that's basically $20T in $USD shorts. Expand that thinking to the total amount of $USD-denominated debt in the global financial system and Powell is really playing with fire.