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Andreas Steno Larsen

lines on the record: 59
first: 2025-02-12
most recent: 2025-02-12
sittings or episodes: 1
sources: podcast

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“If we look at the liquidity in a very narrow definition. 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, et cetera. But if you look at the private sector liquidity, we see a pretty abundant liquidity picture, on the other hand. Because of then acceleration of the private credit creation, because of an acceleration of the money multiplier. So basically private banks create money on this base layer of bank reserves from the Federal Reserve.”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, maybe just to prove out this idea, you could address this notion that I've seen where it's somebody will look at, okay, we've had a couple years of quantitative tightening now. We've had one of the fastest increases in the Fed funds rate, 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 mentioning these different dynamics, there's nuance there involved. So would you characterize as liquidity dynamics as actually being tightened? And if not, could you just explain like how have we gone through the last couple years where we've just seen all-time highs being hit all the time? What are some of those offsetting dynamics compared to some of the top line indicators like quantitative timing when people refer to that? Why is it that even though these have been occurring, we've seen strength in liquidity and strength in risk assets to pair with it?”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“But on the other hand, we're starting to see signs of a severe pickup, a very, very solid pickup in the demand for credit in the private banking system. We also saw how small and medium-sized companies said this week that credit conditions ease now. The availability of credit is actually better than it's been for a while. Meaning that we should probably expect them to take up some more loans, right? And when you get a loan as an SME, you ultimately created a deposit in the banking system, and that's liquidity. So, you know, even with QE not being around the corner, I actually think it's a feasible scenario that liquidity will do absolutely okay this year and it will likely even increase a lot because of the private banking system.”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“The driving force of liquidity over the past 18 months. We've actually seen a decent increase in the private credit creation, especially over the past, say, nine months or so. And to me, that is the most important part of the liquidity cycle right now because we're not going to get Curie anytime soon. Powell basically told us that.”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“The Federal Reserve is just one out of three agents in this space. If you look at the treasury, the public sector, they can create dollars as well by running a fiscal deficit. They can add liquidity by running down their liquidity holdings at the Federal Reserve, the so-called Treasury General account. That's probably what we're going to see over the next six to eight weeks, by the way. And they obviously impact liquidity on a running basis, both via their issuance decisions, but also via their budget decisions. And then finally, on top of this public layer of liquidity and money, we have the private banking system. And the so-called money multiplier is basically a measure of how many dollars the private banking system creates on top of the base layer of public liquidity. And that's been...”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“You know, if you look at the liquidity developments, say over the past 18 months or so, we've actually had a pretty benign overall liquidity environment because of the private sector liquidity developments, not because of the public sector liquidity developments necessarily, and certainly not because of the liquidity developments from the Federal Reserve. So let's try and deduct the importance of these three agents in terms of creating liquidity. First of all, obviously, the Fed reserve is in charge of creating the base layer of money. So they can do so by adding to liquidity via QE. They can add liquidity via all sorts of technical programs, such as the overnight reverse repo facility. That facility has been mentioned a lot. It's almost been the highlight of liquidity analysis for a while. But in any case,”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“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, et cetera. But it's not really a surprise. QE has always been a tool used when the zero lower bound was hit in interest rates. 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 are various forms of liquidity. Some of them created by the public sector, some of them created by the Federal Reserve itself. And some falls on liquidity stem from the private sector.”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“It feels like there's a lot of points of tension in different dynamics. So, yeah, you really got to get into the weeds of the macro world right now to really get past the surface headlines, especially because they are so Trump heavy, to say the least. 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 when we talk about liquidity, often a lot of different acronyms start getting thrown around in different charts of liquidity. So I would love for you to just first off define how do you view this idea of liquidity and how it impacts markets. And then what are some of the main top line drivers that you're seeing change at the moment in terms of your forecast?”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT
“So much for having me. And I've been looking forward to this discussion. It seems like our views are kind of aligned, but let's see. I think 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.”
2025-02-12 · Forward Guidance · The Credit Cycle Is Just Getting Started | Andreas Steno Larsen · IDENTIFIED FROM THE TRANSCRIPT