One week later, the Fed capitulated on tight monetary policy and ushered in the era of rate cuts, just as we said it would. But more importantly, one month later it was Dallas Fed president (and former head of the NY Fed’s plunge protection team) Lorie Logan who said the quiet part out loud when she confirmed our “canary in the coalmine” note, namely that the Fed’s QT is effectively over due to the sudden, unexpected slide in systemic liquidity, primarily due to the rapid drain in the reverse repo facility which now has just $600 million left and is set to be fully drained some time in March…

Of course, it’s one thing for a regional Fed president to opine on such things, it’s something entirely different for Powell’s preferred media leak conduit to confirm it, and yet this morning that’s precisely what happened when Nick Timiraos, aka Nikileaks, aka Powell’s favorite media mouthpiece confirmed that QT’s days are now numbered writing that “Fed officials are to start deliberations on slowing, though not ending, that so-called quantitative tightening as soon as their policy meeting this month. It could have important implications for financial markets.”

If that wasn’t enough, Nikileaks also confirms our suspicion about the driver behind said QT runoff: the financial plumbing is starting to clog up.

[I wondered about that, too. The Fed may have to let inflation run wild again to hedge against bank instability in the short run, and that will mean more problems for people whose buying power has fallen nearly every quarter over the last three years. Peter Grandich and I discuss the issue briefly in our TEMS podcast today. — Ed]