“Quantitative tightening,” or QT, by top central banks will suck $2 trillion in liquidity out of the financial system over the next two years, according to a recent analysis by Fitch Ratings.
Investors and banks calibrate their strategies to the amount of money in the financial system, he noted.
Then, central banks started withdrawing liquidity from the financial system.
Even worse, many banks have large holes on their balance sheets because central banks have simultaneously jacked up interest rates.
While government debt levels have skyrocketed in recent years, the cost of servicing that debt has been tamped down by the willingness of central banks to buy large chunks of it.