'Big Short' investor Michael Burry warns of a massive bubble and epic market crash

[BlueKelah]

One elephant in the room we have to consider is the reverse repo aka cash that banks have deposited with the Federal Reserve. There is US$2 trillion.

In times of crisis, the Fed can just cancel this reverse repo mechanism and return the banks US$2 trillion in cash. Even in a risk off environment, the banks will be compelled to put some of the US $2 trillion into risk assets to generate returns

If FED reduce RRP, it will cause increase in money supply which will then filter into inflation. Dont think the FED wanna do that at the moment, but maybe when there is a bad recession they will do it.