Watch Out: The Fed is Removing Liquidity from the Markets

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"Liquidity" and "volatility" are routinely used by the financial media (this publication excepted) and Wall Street as if everyone fully understands them and their importance. These terms are vital, but regrettably, few investment professionals help investors fully appreciate those concepts.

Mea culpa! I also use the terms extensively in my writings and podcasts, yet I fail to impress upon my followers their importance.

With volatility spiking and the Fed removing liquidity, let’s discuss the two terms and their dependency on each other. This broader understanding of volatility and liquidity will help you better assess market conditions.


  • "Fed Pumps $70.2 Billion in Short-Term Liquidity Into Markets." – WSJ December 2019
  • "Is this a Liquidity Crisis or a Solvency Crisis? It Matters to the Fed." WSJ April 2020
  • "Liquidity Shocks: Lessons Learned from the Global Financial Crisis." NYT August 2021

Those headlines are just a few of the many ways the media use the word liquidity.