Renowned macro strategist Raoul Pal predicts a forthcoming surge of liquidity that could reshape the landscape of financial markets, significantly impacting risk assets.

In a recent discussion with Real Vision analyst Julien Bittel, Pal anticipates several catalysts that will bolster global liquidity, which he identifies as pivotal for assets such as cryptocurrencies.

“We anticipate multiple factors contributing to this surge,” Pal explains. “Including the depletion of the Treasury General Account, cessation of quantitative tightening by the Federal Reserve, and the gradual unwinding of reverse repos. Additionally, Congressional approval for Fannie Mae to offer equity release mortgages could inject trillions into the market. We also foresee potential tax or fiscal stimulus measures globally.”

Pal highlights the potential intervention by Japan in currency markets, potentially bolstering global dollar liquidity, alongside widespread efforts by various countries to augment liquidity, particularly emphasizing China’s need to enhance its monetary base.

The macro strategist also cites Basel IV implementation, which mandates higher liquidity reserves for banks, and points to vulnerabilities in commercial real estate as additional sources of liquidity.

“Basel IV’s arrival next year will likely drive increased bond purchases by banks, further expanding liquidity options,” Pal notes. “Moreover, the Federal Reserve might consider creating specialized vehicles to manage distressed commercial real estate loans, reminiscent of past crisis responses like the savings and loan crisis in the early 1990s.”

Pal recently coined the term “banana zone,” foreseeing an imminent phase where risk assets could experience substantial upswings.

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Disclaimer: The opinions expressed in this publication are not financial advice. Investors are advised to conduct their own research before engaging in high-risk investments such as Bitcoin, cryptocurrencies, or digital assets. All financial decisions and transactions are undertaken at the investor’s own risk, and any resulting losses are their responsibility. The Daily Hodl does not endorse the purchase or sale of cryptocurrencies or digital assets, nor does it provide investment advisory services. Please note that The Daily Hodl engages in affiliate marketing.

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