Normally the tri-party rate runs around 8.6 basis points below interest on reserves. Now it's running six basis points above it. In other words, the funding markets have tightened up by about 13 to 15 basis points.

Why is that happening? Because the bond market is too big and the Fed has done too much QT so that the funding markets are too small given the size of the bond market.

If you've got demand for funding because you've got a huge $38 trillion market, the funding is being supplied by banks that are getting their reserves being reduced constantly by the QT. The cost of money goes up.

So what's effectively happened is the Fed has cut by 50 basis points but 13 to 15 of that has been given back because of tightness in the funding market and it's not done.

The funding rates will spike on Monday. How much will they spike? Will they spike all the way to 50 basis points on October 31st? That remains to be seen. But in these non-funding settlement dates, we are still 13 to 15 basis points higher and in an uptrend.

So the market is undoing the Fed rate cuts with this tight money.

They're starting to diverge from those targets because the bond market has grown so big because of a huge deficit, massive government spending that the funding markets can't meet it.

What's the fix? The Fed stops QT. They're going to do that in three weeks. But will that be enough? Will we have to see them buy assets or inject liquidity into the market? Maybe.

What's the problem? What are you telling Washington? You've got a 6% deficit to GDP, 100% debt to GDP. Don't worry, we'll print money to fix the funding markets so you could borrow even more.

What's the risk? If you're stimulating because you want 100,000 jobs and you're not going to get it. What's all that excess cash going to do? Create inflation.

If you're telling the banks 'Get bigger, get bigger, get bigger, get bigger.' What are they going to do with this money? They're going to put it to work. They're going to lend out more. They're going to overstimulate the economy in an economy with no population growth.

Unless we have a productivity miracle, they're going to hand out loans to businesses. And what are businesses going to do with it? They're going to invest in capital equipment and expand their businesses. They're going to buy things and they're going to create higher prices, more inflation.

The harm is you're stimulating into a 3% inflation world and you're encouraging more economic activity which isn't going to create more jobs, it's going to create more inflation.

The vast majority of the economy is the bottom 50% of the country if not the bottom 70% of the country. They think this economy is a train wreck because prices are going up faster than their paycheck.

Let's print more money to meet the ever funding markets. Let's demand that the Fed cut rates because we want more jobs when there's no population growth. Let's lower mortgage rates so everybody can raise houses. You're just going to exacerbate decay.

You're going to make cheap money so the stock market goes up. These people in the bottom 50% can't afford less things and this is just going to get worse.

This is why the Fed is fracturing. They're fracturing along three lines: 1) Is inflation a one-time tariff driven event or more permanent? 2) Is the labor market creating 20,000 jobs at normal break even? 3) What is the fair value - is it 3% or closer to 4%?

If you're stimulating because you think we need to be creating 150,000 jobs a month and we have no population growth, where are these people going to come from? A pool of 52 million people is where they're going to come from and you're just going to have to raise wages to get them into the workforce.

How do we know that we're not already at neutral, if not stimulative already, because interest rates are too low? You keep telling us it's 3%. The market keeps saying it's 4%.