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EndGame Macro
China’s Growth Machine Is Running on Fumes
China is still expanding, but the pace is nothing like the old days. The red GDP line keeps climbing, yet it consistently lags the 6–7% growth paths China once treated as normal. At the same time, the grey bars showing loan growth are sliding to record lows.
That combination matters. For decades, China’s model was to pump credit into construction, industry, and local governments, and GDP rises automatically. But now every extra yuan of lending buys less growth than it used to. Banks are cautious, regulators are squeezing excess risk, and the old formula is losing power.
Markets Aren’t Buying the China Rebound Story
The copper to gold ratio is basically the market’s mood ring for global growth. Copper is tied to building and manufacturing; gold is where you hide when you don’t trust the future. When this ratio sinks toward crisis era lows, the same territory as 2008, 2015, and 2020 it means investors are quietly bracing for weak demand ahead.
That’s why Chinese government bond yields stay so low even when global yields are higher. It’s not optimism. It’s the opposite: the bond market is pricing in a long stretch of slower growth.
The Consumer Never Became the Center of Gravity
The retail sales chart shows what Beijing has struggled with for years: the consumer never stepped into the starring role. Through the 2000s and early 2010s, retail growth was strong and consistent. But it gradually faded, and the post COVID spikes were just base effects not a lasting rebound.
Households are cautious. Property wealth isn’t reliable anymore, job security is weaker, and the appetite for big spending just isn’t there. The long promised rebalancing toward consumption is more slogan than reality.
A Structural Slowdown, Not a Rough Patch
The long run GDP chart pulls everything together. China’s peak growth years are firmly behind it. The 1990s and 2000s were powered by globalization, rising populations, and massive construction. After 2008, each growth cycle topped out lower than the one before. After 2015, even the lows drift downward. By the 2020s, China is mostly delivering mid single digit growth, unless a statistical quirk gives it a one time pop.
This is the trajectory of an economy running into hard constraints of demographics, debt saturation, and a political system that prioritizes control over risk taking.
My Read
All these charts are saying the same thing in different ways. China is leaving its high growth era and settling into something much more modest. Credit doesn’t lift the economy like it used to. Households aren’t spending aggressively. Markets don’t see a big rebound coming. And the long term trend line is bending lower, not stabilizing.
This is a structural shift and markets have already priced in the idea that the China of the 2020s will be smaller, slower, and more constrained than the China of the 2000s and 2010s.
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China’s Growth Machine Is Running on Fumes
China is still expanding, but the pace is nothing like the old days. The red GDP line keeps climbing, yet it consistently lags the 6–7% growth paths China once treated as normal. At the same time, the grey bars showing loan growth are sliding to record lows.
That combination matters. For decades, China’s model was to pump credit into construction, industry, and local governments, and GDP rises automatically. But now every extra yuan of lending buys less growth than it used to. Banks are cautious, regulators are squeezing excess risk, and the old formula is losing power.
Markets Aren’t Buying the China Rebound Story
The copper to gold ratio is basically the market’s mood ring for global growth. Copper is tied to building and manufacturing; gold is where you hide when you don’t trust the future. When this ratio sinks toward crisis era lows, the same territory as 2008, 2015, and 2020 it means investors are quietly bracing for weak demand ahead.
That’s why Chinese government bond yields stay so low even when global yields are higher. It’s not optimism. It’s the opposite: the bond market is pricing in a long stretch of slower growth.
The Consumer Never Became the Center of Gravity
The retail sales chart shows what Beijing has struggled with for years: the consumer never stepped into the starring role. Through the 2000s and early 2010s, retail growth was strong and consistent. But it gradually faded, and the post COVID spikes were just base effects not a lasting rebound.
Households are cautious. Property wealth isn’t reliable anymore, job security is weaker, and the appetite for big spending just isn’t there. The long promised rebalancing toward consumption is more slogan than reality.
A Structural Slowdown, Not a Rough Patch
The long run GDP chart pulls everything together. China’s peak growth years are firmly behind it. The 1990s and 2000s were powered by globalization, rising populations, and massive construction. After 2008, each growth cycle topped out lower than the one before. After 2015, even the lows drift downward. By the 2020s, China is mostly delivering mid single digit growth, unless a statistical quirk gives it a one time pop.
This is the trajectory of an economy running into hard constraints of demographics, debt saturation, and a political system that prioritizes control over risk taking.
My Read
All these charts are saying the same thing in different ways. China is leaving its high growth era and settling into something much more modest. Credit doesn’t lift the economy like it used to. Households aren’t spending aggressively. Markets don’t see a big rebound coming. And the long term trend line is bending lower, not stabilizing.
This is a structural shift and markets have already priced in the idea that the China of the 2020s will be smaller, slower, and more constrained than the China of the 2000s and 2010s.
As bad as the 2010s went for China, the 2020s are shaping up to be worse. That's why Chinese bond yields are as low as they are, no faith in Xi Jinping's sci-fi future (communists can't do economics; just ask India and Gorbie). Banks are cooked over there and FAI just crashed again. tweet
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EndGame Macro
The reason the Treasury is sitting on nearly a trillion dollars in its account at the Fed is a response to how unstable the government’s financing environment has become. After more than a decade of shutdowns, near misses on the debt ceiling, and erratic appropriations, the Treasury no longer trusts the calendar or Congress to keep the government funded smoothly. A large TGA balance is their insurance policy. It gives them breathing room to roll debt, meet outlays, and ride out political shocks without immediately stressing the market or risking delayed payments. The old rule of keeping only a few billion in the account made sense in a calmer era. It doesn’t in this one.
But the part that matters for markets is what this choice does to liquidity. Every dollar the Treasury parks at the Fed is a dollar that leaves the banking system. When the TGA rises, reserves fall. When reserves fall, funding feels tighter even if the Fed isn’t actively draining anything. And right now the data shows exactly that where reserves have slid, the RRP facility has emptied out, and the TGA has climbed toward the top of its post 2020 range. In effect, the Treasury has become an unintended partner in tightening financial conditions at the exact moment the Fed is trying to wind QT down.
So while it’s true that holding this much cash means issuing more debt than strictly necessary, the alternative isn’t as simple as cutting the TGA and reducing the debt. To shrink the TGA meaningfully, the government would need smaller deficits or steadier spending patterns, neither of which exist. Until that changes, a large TGA is the cost of surviving political volatility. And the side effect for markets is even as the Fed stops shrinking its balance sheet, the Treasury’s cash hoarding keeps liquidity tighter than the headline policy stance suggests.
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The reason the Treasury is sitting on nearly a trillion dollars in its account at the Fed is a response to how unstable the government’s financing environment has become. After more than a decade of shutdowns, near misses on the debt ceiling, and erratic appropriations, the Treasury no longer trusts the calendar or Congress to keep the government funded smoothly. A large TGA balance is their insurance policy. It gives them breathing room to roll debt, meet outlays, and ride out political shocks without immediately stressing the market or risking delayed payments. The old rule of keeping only a few billion in the account made sense in a calmer era. It doesn’t in this one.
But the part that matters for markets is what this choice does to liquidity. Every dollar the Treasury parks at the Fed is a dollar that leaves the banking system. When the TGA rises, reserves fall. When reserves fall, funding feels tighter even if the Fed isn’t actively draining anything. And right now the data shows exactly that where reserves have slid, the RRP facility has emptied out, and the TGA has climbed toward the top of its post 2020 range. In effect, the Treasury has become an unintended partner in tightening financial conditions at the exact moment the Fed is trying to wind QT down.
So while it’s true that holding this much cash means issuing more debt than strictly necessary, the alternative isn’t as simple as cutting the TGA and reducing the debt. To shrink the TGA meaningfully, the government would need smaller deficits or steadier spending patterns, neither of which exist. Until that changes, a large TGA is the cost of surviving political volatility. And the side effect for markets is even as the Fed stops shrinking its balance sheet, the Treasury’s cash hoarding keeps liquidity tighter than the headline policy stance suggests.
WHY?!? The US Treasury now has $943 billion in its checking account at the Fed. We pay interest on debt in order to hold this cash. And this cash is a subtraction from M2, which makes money tighter. The Treasury could reduce our debt by going back to its old rule of only holding $5 billion in the TGA. tweet
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EndGame Macro
A Big Economy With 2009 Level Freight? Something Doesn’t Add Up.
What’s happening in freight right now is the continuation of a slowdown that really started in mid 2022 and never fully reversed. Shipments are running at levels we last saw in the aftermath of the financial crisis, which makes no sense when you consider the size of today’s economy and population. A freight economy this weak in an economy this large tells you something deeper is going on.
A big part of it is demand. The pandemic pulled years of spending forward…people bought the appliances, furniture, home goods, and gear they were going to buy anyway. Once that wave washed through, consumers shifted back toward services, and goods flow hasn’t really recovered. At the same time, the freight industry is still working off the excess capacity that built up during the boom. Too many carriers chasing too few loads means rates stay soft, margins stay thin, and smaller operators get pushed out.
You also have an industry dealing with higher operating costs and a tougher regulatory backdrop at the exact moment demand is weakest. Fuel, insurance, maintenance…all up. New CDL rules and compliance requirements add friction. And when you stack all of that on top of weak freight rates, you end up with an environment where even steady freight volumes feel painful. Put simply the sector is in a long, grinding recession of its own, one that hasn’t gotten enough attention because it doesn’t show up in the headline economic numbers until much later.
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A Big Economy With 2009 Level Freight? Something Doesn’t Add Up.
What’s happening in freight right now is the continuation of a slowdown that really started in mid 2022 and never fully reversed. Shipments are running at levels we last saw in the aftermath of the financial crisis, which makes no sense when you consider the size of today’s economy and population. A freight economy this weak in an economy this large tells you something deeper is going on.
A big part of it is demand. The pandemic pulled years of spending forward…people bought the appliances, furniture, home goods, and gear they were going to buy anyway. Once that wave washed through, consumers shifted back toward services, and goods flow hasn’t really recovered. At the same time, the freight industry is still working off the excess capacity that built up during the boom. Too many carriers chasing too few loads means rates stay soft, margins stay thin, and smaller operators get pushed out.
You also have an industry dealing with higher operating costs and a tougher regulatory backdrop at the exact moment demand is weakest. Fuel, insurance, maintenance…all up. New CDL rules and compliance requirements add friction. And when you stack all of that on top of weak freight rates, you end up with an environment where even steady freight volumes feel painful. Put simply the sector is in a long, grinding recession of its own, one that hasn’t gotten enough attention because it doesn’t show up in the headline economic numbers until much later.
The Cass Shipment Index, the goto benchmark for freight volumes since 1992, has dropped to 2009 levels.
Freight volumes currently match the Great Financial Crisis levels.
Main Street is experiencing a massive recession. https://t.co/ex4R9jHeet tweet
AkhenOsiris
He's living to 120! 🙏🏼
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He's living to 120! 🙏🏼
His final investing decision was to buy Google. I think that’s beautiful tweet
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EndGame Macro
Liquidity’s Quiet Peak: Why the Tide Turns After January
Two posts for the full picture scroll down for part two
If you zoom out, the liquidity path into Q1–Q2 is still pretty simple: we’re stepping into a short easy window into year end, and then the system quietly tightens again. Rate cuts, QE chatter, Basel headlines, even the labor data, all of that sits on top of that basic plumbing story, it doesn’t replace it.
Year End Is As Easy as This Cycle Gets
From now into late December and probably into January, the setup is about as friendly as it’s been all cycle.
The Fed has already cut twice and QT stops on December 1. After that, the balance sheet basically goes sideways: maturing Treasuries are rolled, MBS runoff is redirected into T‑bills instead of just disappearing. ON RRP is almost emptied out, so the giant tightening reservoir from 2022–23 is no longer soaking up every dollar.
Year end helps too. You normally get more government outlays, heavier bill issuance, and some cash bleeding out of the Fed and back into banks and money markets. Layer in the possibility of one more insurance cut and you get softer SOFR, calmer repo, and a funding market that feels less jumpy. The long end can still stay sticky under deficits and term premium, but the front end actually breathes.
All of that means that into year end and maybe into early February if Treasury doesn’t rush another big TGA rebuild and reserves stop bleeding, funding steadies, and risk assets get the benefit of the doubt. It’s not 2021, but it’s the least hostile backdrop we’ve had in this tightening phase.
Unemployment rising slowly in the background only reinforces this short window: as the jobless rate drifts up, the Fed has political and macro cover to lean dovish without looking reckless. Markets will want to believe that story.
Q1–Q2: Liquidity Rolls Over Just as Jobs Weaken
The turn comes when Treasury goes back to actively managing the TGA.
That account is already huge, and in Q1–Q2 it gets pulled around by things we can see on the calendar: April tax receipts, heavy coupon issuance to fund big deficits and roll old 2–3% debt, seasonal spending patterns, and whatever political drama D.C. decides to stage.
Every time the TGA rebuilds, cash moves into the Fed and out of bank reserves. With ON RRP nearly tapped out, those drains hit reserves directly. Liquidity tightens even if the Fed doesn’t touch rates or the size of its balance sheet.
You don’t necessarily get a dramatic cliff. You get firmer funding, less cushion under equities, credit spreads that stop tightening, and a tape that suddenly reacts more to bad news than good. If unemployment is still grinding higher at the same time from low and rising toward uncomfortable the pressure shows up in earnings, downgrades, and default rates. That’s when the higher for longer funding costs and the refi wall start to bite.
Even if the Fed cuts again, that only changes the price of money at the front end. The TGA path and issuance mix determine how much of that money is actually sloshing around in the system.
Basel And SLR Relief: Important, But On A Lag
The regulatory story matters, just not on a Q1–Q2 clock.
Regulators are talking about easing capital rules by tweaking the Supplementary Leverage Ratio and watering down parts of Basel III Endgame so reserves and Treasuries aren’t treated like toxic balance sheet hogs. In the long run, that could give the big banks more room to hold duration and reserves, and to step in as a real buffer when Treasury supply is heavy.
But these are still proposals and reproposals. You’ve got public comment, inter agency negotiations, then a multi year phase in once anything is finalized. Real balance sheet behavior doesn’t shift in a big way until 2026.
So in Q1–Q2, banks are still playing under today’s constraints, at the exact moment liquidity is turning down and unemployment is inching up. That encourages caution, not heroics.
Continued below… tweet
Liquidity’s Quiet Peak: Why the Tide Turns After January
Two posts for the full picture scroll down for part two
If you zoom out, the liquidity path into Q1–Q2 is still pretty simple: we’re stepping into a short easy window into year end, and then the system quietly tightens again. Rate cuts, QE chatter, Basel headlines, even the labor data, all of that sits on top of that basic plumbing story, it doesn’t replace it.
Year End Is As Easy as This Cycle Gets
From now into late December and probably into January, the setup is about as friendly as it’s been all cycle.
The Fed has already cut twice and QT stops on December 1. After that, the balance sheet basically goes sideways: maturing Treasuries are rolled, MBS runoff is redirected into T‑bills instead of just disappearing. ON RRP is almost emptied out, so the giant tightening reservoir from 2022–23 is no longer soaking up every dollar.
Year end helps too. You normally get more government outlays, heavier bill issuance, and some cash bleeding out of the Fed and back into banks and money markets. Layer in the possibility of one more insurance cut and you get softer SOFR, calmer repo, and a funding market that feels less jumpy. The long end can still stay sticky under deficits and term premium, but the front end actually breathes.
All of that means that into year end and maybe into early February if Treasury doesn’t rush another big TGA rebuild and reserves stop bleeding, funding steadies, and risk assets get the benefit of the doubt. It’s not 2021, but it’s the least hostile backdrop we’ve had in this tightening phase.
Unemployment rising slowly in the background only reinforces this short window: as the jobless rate drifts up, the Fed has political and macro cover to lean dovish without looking reckless. Markets will want to believe that story.
Q1–Q2: Liquidity Rolls Over Just as Jobs Weaken
The turn comes when Treasury goes back to actively managing the TGA.
That account is already huge, and in Q1–Q2 it gets pulled around by things we can see on the calendar: April tax receipts, heavy coupon issuance to fund big deficits and roll old 2–3% debt, seasonal spending patterns, and whatever political drama D.C. decides to stage.
Every time the TGA rebuilds, cash moves into the Fed and out of bank reserves. With ON RRP nearly tapped out, those drains hit reserves directly. Liquidity tightens even if the Fed doesn’t touch rates or the size of its balance sheet.
You don’t necessarily get a dramatic cliff. You get firmer funding, less cushion under equities, credit spreads that stop tightening, and a tape that suddenly reacts more to bad news than good. If unemployment is still grinding higher at the same time from low and rising toward uncomfortable the pressure shows up in earnings, downgrades, and default rates. That’s when the higher for longer funding costs and the refi wall start to bite.
Even if the Fed cuts again, that only changes the price of money at the front end. The TGA path and issuance mix determine how much of that money is actually sloshing around in the system.
Basel And SLR Relief: Important, But On A Lag
The regulatory story matters, just not on a Q1–Q2 clock.
Regulators are talking about easing capital rules by tweaking the Supplementary Leverage Ratio and watering down parts of Basel III Endgame so reserves and Treasuries aren’t treated like toxic balance sheet hogs. In the long run, that could give the big banks more room to hold duration and reserves, and to step in as a real buffer when Treasury supply is heavy.
But these are still proposals and reproposals. You’ve got public comment, inter agency negotiations, then a multi year phase in once anything is finalized. Real balance sheet behavior doesn’t shift in a big way until 2026.
So in Q1–Q2, banks are still playing under today’s constraints, at the exact moment liquidity is turning down and unemployment is inching up. That encourages caution, not heroics.
Continued below… tweet
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EndGame Macro
The Fed Just Checked the Brakes
If this story is right, it’s the clearest tell yet that the Fed knows the plumbing is getting tight and is trying to fix the umbrella before it rains.
The standing repo facility (SRF) is supposed to be the fire extinguisher on the wall so if funding gets tight, dealers hand the Fed Treasuries, get cash overnight at a known rate, and repo markets calm down. The fact that New York Fed felt the need to call the big banks in and ask, “Why aren’t you using this thing, even when market rates trade above it?” tells you two things at once:
They’re Seeing Real Strain Under The Surface
You don’t convene that meeting if everything is perfectly “ample.” Between QT about to end, a big TGA, heavy Treasury issuance, and RRP nearly empty, reserves are a lot thinner than the headline balance sheet makes it look. The recent pops in SOFR and episodes where private repo traded above the SRF rate are exactly the kind of signals that would make them nervous about a 2019 style funding spike.
They’re Worried The Safety Valve Won’t Actually Be Used In An Accident
Banks still treat Fed backstops with stigma: because tapping a facility can look like weakness to risk committees, boards, shareholders, or regulators. Add operational friction (legal docs, intraday limits, internal charges) and you get a tool that exists on paper, but isn’t the first call when funding gets sticky. The Fed does not want to discover in real time that its main shock absorber is psychologically or operationally off limits.
So My Read Is This
This meeting is less about announcing a new problem and more about the Fed admitting to itself that we’re at the edge of the ample reserves zone. They’re trying to destigmatize the SRF, understand what would make dealers actually use it, and buy insurance against the combination of a high TGA, low RRP, and continued issuance colliding with some random shock.
For markets, that cuts both ways. On one hand, it’s reassuring: the Fed is paying attention and doesn’t want a plumbing accident. If they tweak terms, widen access, or just convince dealers the SRF is safe to use, short term funding should be more stable. On the other hand, it’s a quiet confirmation of what the SOFR spikes and H.4.1 have been hinting at: the buffers are thin. When the central bank is calling around about its emergency hose, it’s because they see dry brush building up around the house.
This is a sign we’re close enough to the edge that the Fed is double checking the brakes. Liquidity can still look fine day to day, but in a late cycle setup like this, even small shocks hit harder than they did a year ago.
tweet
The Fed Just Checked the Brakes
If this story is right, it’s the clearest tell yet that the Fed knows the plumbing is getting tight and is trying to fix the umbrella before it rains.
The standing repo facility (SRF) is supposed to be the fire extinguisher on the wall so if funding gets tight, dealers hand the Fed Treasuries, get cash overnight at a known rate, and repo markets calm down. The fact that New York Fed felt the need to call the big banks in and ask, “Why aren’t you using this thing, even when market rates trade above it?” tells you two things at once:
They’re Seeing Real Strain Under The Surface
You don’t convene that meeting if everything is perfectly “ample.” Between QT about to end, a big TGA, heavy Treasury issuance, and RRP nearly empty, reserves are a lot thinner than the headline balance sheet makes it look. The recent pops in SOFR and episodes where private repo traded above the SRF rate are exactly the kind of signals that would make them nervous about a 2019 style funding spike.
They’re Worried The Safety Valve Won’t Actually Be Used In An Accident
Banks still treat Fed backstops with stigma: because tapping a facility can look like weakness to risk committees, boards, shareholders, or regulators. Add operational friction (legal docs, intraday limits, internal charges) and you get a tool that exists on paper, but isn’t the first call when funding gets sticky. The Fed does not want to discover in real time that its main shock absorber is psychologically or operationally off limits.
So My Read Is This
This meeting is less about announcing a new problem and more about the Fed admitting to itself that we’re at the edge of the ample reserves zone. They’re trying to destigmatize the SRF, understand what would make dealers actually use it, and buy insurance against the combination of a high TGA, low RRP, and continued issuance colliding with some random shock.
For markets, that cuts both ways. On one hand, it’s reassuring: the Fed is paying attention and doesn’t want a plumbing accident. If they tweak terms, widen access, or just convince dealers the SRF is safe to use, short term funding should be more stable. On the other hand, it’s a quiet confirmation of what the SOFR spikes and H.4.1 have been hinting at: the buffers are thin. When the central bank is calling around about its emergency hose, it’s because they see dry brush building up around the house.
This is a sign we’re close enough to the edge that the Fed is double checking the brakes. Liquidity can still look fine day to day, but in a late cycle setup like this, even small shocks hit harder than they did a year ago.
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