Fed's Williams: Higher energy prices hit both sides of Fed's mandates | Metals Mine

  • Fed's Williams: Higher energy prices hit both sides of Fed's mandates

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Trader#5CF4
Apr 2, 2026 3:04pm
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See? That's the point... it's not only a problem of the energy cost. Fed has started massively increasing the money supply again at the start of the year. All of this will converge together and create a complete and utter disaster soon. And we thought the last couple of years were bad... if you can survive the next 5-10 years, congratulations!
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FlyingTurtle
Apr 2, 2026 3:56pm
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The fed can't increase the money supply. All they can do is swap a non-interest-bearing asset for an interest-bearing one. The money supply is increased by those who create the interest-bearing assets.
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Trader#5CF4
Apr 2, 2026 4:23pm
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Never heard the term for digitally created money on the account being called non-interest-bearing-asset but okay haha. Assuming interest-bearing would be debt. Whatever the term we use, for the Fed to swap NIBA for IBA it first has to create NIBA to have something to swap it for. In normal english, Fed creates the money out of thin air (increases the money supply) with which they than buy the debt issued by the US treasury. Basically, the Fed lends the money to the US government.

And why is the Fed increasing the money supply as of late? Because, there are less and less of investors that are willing to lend money to the US government, as they perceive the interest that they annually get on that lent money isn't worth it.

Since yields have been on the rise lately, and auctions for the US debt are worse and worse, the Fed has to step in as the buyer of last resort.


To also answer the previous question on the Fed and the markets. Yes, the markets will care if the Fed doesn't hike rates and I don't believe (as the Fed has to be cautious moving on with their forward guidance) that the Fed will threaten with rate hikes. They will either hike or they won't, and right now it all points to the fact that they won't. Markets will care, because markets are preparing for rate hikes, which are probably not going to happen. Therefore, this current strong USD trend will probably end at that point, which means that the price of pretty much everything will surge.
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FlyingTurtle
Apr 2, 2026 5:33pm
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The treasury creates IBA from thin air then the fed creates reserve notes (NIBA) from thin air then they swap, and the fed puts the IBA in reserve to back the NIBA. No change to the money supply happens during the swap since the IBA are locked up in reserve at the fed and out of circulation. The change of the money supply happened when the treasury created the IBA and sold them to whomever. Ironically, the fed is the only entity that cannot affect the money supply because it cannot issue debt.

Which is more like money: the reserve notes or the treasuries in reserve backing the reserve notes?

The only way the fed hikes is if employment and GDP are stellar, which is hard to see, but they have a nasty habit of threatening to hike and cheerleading the USD higher every chance they get. The fed's only tool is cheerleading. If they worked secretly in the background buying and selling bonds I doubt they'd have much effect on markets.

The last 2 times the fed cut, rates and the USD went up. So what traders believe, even if stupid and wrong, matters more than data points or what the fed does. If traders were rational, predicting markets would be easy.

So I agree that conditions are good for the USD going down but I have a hard time believing traders will actually sell. People need USD to buy oil and I don't see oil going down much.
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