Arthur Hayes: Fed Rate Hikes Will Push Financial Asset Prices Higher

Hayes's argument inverts the usual rate-hike playbook: higher policy rates become a stimulus when the government's debt stock is large, because the interest paid on reserves and T-bills flows to banks and savers rather than being absorbed. The claim rests on a mechanical money-creation channel that persists even after the Fed's RMP operations stopped, since bank balance sheet expansion still adds to total assets. That reframes the debate over whether tightening is genuinely restrictive. The open question is whether this reserve-and-T-bill income effect keeps showing up in consumption data, particularly of financial assets.