Arthur Hayes: Infrastructure Bill Could Lead to Temporary USD Liquidity Crunch, Market May Consolidate Until August

July 3rd. Arthur Hayes has released an article today, highlighting that following the passage of Trump's spending bill (referred to as the "Beautiful Bill"), there might be a short-lived pause in the creation of U.S. dollar liquidity. Since January 1st, the Treasury has been primarily funding the government by drawing down funds from its checking account, which is the Treasury General Account (TGA). As of June 25th, the TGA balance stood at $364 billion. According to the guidance provided by the Treasury in its latest quarterly refunding announcement, if the debt ceiling is raised today, the TGA balance will be increased to $850 billion through the issuance of bonds. This will lead to a contraction of $486 billion in U.S. dollar liquidity. The only significant U.S. dollar liquidity item that could counteract the negative impact is the funds flowing out of the RRP account (currently at $461 billion). The bull market may be interrupted in the short term. From now until August when Jerome Powell delivers a speech at the Jackson Hole Fed meeting, the market is likely to trade sideways to slightly lower. If the TGA supplementation proves to be detrimental to U.S. dollar liquidity, then the downside risk would range between $90,000 and $95,000. If the supplementation turns out to be insignificant, Bitcoin will remain around $100,000 and not break above the all-time high of $112,000. "I have a hunch that Powell will announce the end of quantitative tightening and/or other seemingly ordinary but crucial banking regulatory reforms." By early September, the debt ceiling will be raised, the TGA will be effectively replenished, and the Republicans will focus on distributing welfare so that they won't face the impact in their home districts in November 2026. By that time, the Green Cross Star will pierce through the bears driven by the surge in currency issuance.