RMP = QE? Understanding Reserve Management Purchases and Their Impact on Markets

(Any views expressed here are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)

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If I had an online dating profile, it would sound something like this:

Love Language:

Euphemistic terms and acronyms created by politicians and central bankers describing money printing.

The two most apropos examples that this essay shall discuss:

• QE – Quantitative Easing

• RMP – Reserve Management Purchases

RMP is a new acronym that entered my Love Language dictionary on December 10 – the day of the most recent Fed meeting. Immediately, I recognized it, understood its meaning, and treasured it like my long‑lost love, QE. I love QE because it means money printing, and thankfully I own financial assets like gold, gold/silver mining stocks, and Bitcoin that rise faster than the pace of fiat money creation. But it’s not all about me. If money printing in all its forms drives the price and adoption of Bitcoin and decentralized public blockchains higher, then hopefully one day we can discard this filthy fiat fractional‑reserve system and replace it with one powered by honest money.

We aren’t there yet. But the rapture quickens with every unit of fiat created.

Unfortunately, in the here and now for most of humanity, money printing destroys their dignity as productive humans. When the government intentionally debases the currency, it destroys the link between energy inputs and economic outputs. Knowing no fancy economic theories that explain why they feel like they are running in quicksand, those wage‑cucking plebes understand that money printing is no bueno. In democratic systems of one‑human‑one‑vote, the plebes vote out the incumbent party when inflation surges. In autocratic systems, the plebes enter the streets and topple the regime. Therefore, politicians know that ruling in an inflationary environment is a death sentence for their careers. However, the only politically palatable way to pay for the massive amount of global debt is to inflate it away. Given that inflation destroys political careers and dynasties, the skill is hoodwinking plebes into believing that the inflation they feel isn’t inflation at all. Consequently, central bankers and finance ministers roll out a cauldron of bubbling ghoulish acronyms to obfuscate the inflation they hoist upon the public in order to forestall the inevitable systemic deflationary collapse.

If you want to understand what aggressive credit deflation and destruction looks like, remember how you felt from US President Trump’s self‑proclaimed “Liberation Day” (April 2 – April 9) when he TACO’d on tariffs. It wasn’t pleasant for the rich, because stonks dumped, nor for everyone else because if global trade slowed to rectify a multi‑decade buildup of economic, trade, and political imbalances, many would lose their jobs. Allowing rapid deflation is a sure way to spark a revolution and end a politician’s career—or life.

All this subterfuge, given time, because of the expansion of knowledge, always results in the plebes associating the acronym de‑jour with money printing. Like any good drug dealer, the monetary mandarins must change up when the plebes get hip to the new slang. This linguistic dance excites me because when they change up, it means the situation is dire and the Brrrrr button shall be slammed with a force necessary to levitate my portfolio to new dimensions.

Currently, the establishment wishes to convince us that RMP ≠ QE, because QE is associated with money printing and inflation. In order for readers to fully understand why RMP = QE, I created several annotated accounting T‑charts.

Why does this all matter?

Since the post‑2008 Global Financial Crisis March 2009 lows, risky assets like stonks (S&P 500 and Nasdaq 100), gold, and Bitcoin have flown out of the deflationary river Styx and notched up insane returns.

This is the same chart but normalized to a starting index value of 100 in March 2009. Lord Satoshi’s Bitcoin’s percentage appreciation is so magnificent that it deserves its own panel for readability against other traditional inflation hedges, i.e. stocks and gold.

If you wanted to be rich in the age of Pax Americana QE, you needed to own financial assets. If there is another age of QE or RMP or whatever the fuck they call it, hold the assets you have, and do whatever it takes to convert your shitty salary into more.

Now that you care whether RMP = QE, let’s do some money‑markets accounting.

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Understanding QE and RMP

It’s time for accounting T‑chart “porn.” Assets are on the left side of the ledger and liabilities on the right. The easiest way to understand how money moves is to depict it.

QE – Step 1

1. JP Morgan is a primary dealer with an account at the Fed, and it holds Treasury bonds.

2. The Fed conducts a round of QE by purchasing bonds from JP Morgan.

3. The Fed creates money out of thin air and pays for the bonds by crediting JP Morgan with reserves.

Ending Balance: The Fed created reserves and purchased bonds from JP Morgan. What does JP Morgan do with those reserves?

QE – Step 2

1. The Fed created money (reserves). JP Morgan will purchase another bond only if the new bond is attractive from an interest‑rate and credit‑risk perspective.

2. The US Treasury issues new bonds at auction, which JP Morgan buys.

3. JP Morgan pays for the bonds with reserves.

4. The Treasury receives the reserves into its Treasury General Account (TGA) – its checking account with the Fed.

5. JP Morgan receives its bonds.

Ending Balance: The Fed’s money printer financed the increase in the supply of bonds (Fed + JP Morgan’s holdings).

QE – Step 3

1. Money printing allowed the Treasury to issue more bonds at a cheaper price – pure financial‑asset inflation.

2. The Treasury credits a federal grant to a recipient (e.g., a daycare center) by debiting the TGA and crediting the center’s JP Morgan account.

Ending Balance: The TGA funds government handouts, which creates demand for goods and services. This is how QE creates inflation in the real economy.

Bills vs. Bonds

A bill has a maturity of less than one year. Re‑running Step 1 with bills instead of bonds shows that the Fed exchanges reserves for bills, and the QE money flow stops because JP Morgan is less incentivized to purchase additional bills when the interest on reserves exceeds the bill yield.

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RMP – Step 1

1. Vanguard is a licensed money‑market fund with an account at the Fed, and it holds Treasury bills.

2. The Fed conducts a round of RMP by purchasing bills from Vanguard.

3. The Fed creates money out of thin air and pays for the bills by crediting Vanguard with balances in the Reverse Repo Program (RRP), an overnight facility with interest paid daily by the Fed.

Ending Balance: What else can Vanguard do with RRP balances?

RMP – Step 2 (Vanguard buys more bills)

1. The Fed created RRP balances. Vanguard will only buy another short‑dated, risk‑free debt instrument if it yields higher than the RRP; thus it will purchase newly issued T‑bills.

2. The Treasury issues a new bill at auction, which Vanguard purchases.

3. Vanguard pays for the bills by spending cash in the RRP.

4. The Treasury receives the RRP cash into its TGA.

5. Vanguard receives its bills.

Ending Balance: The Fed’s creation of money financed the purchase of newly issued Treasury bills.

Because the T‑bill yield will never fall below that of the RRP (MMFs, as the marginal buyer of T‑bills, will keep cash in the RRP if yields are equal), the Fed’s money creation via RMP does not dramatically affect financial‑asset inflation unless the Treasury spends the proceeds on goods and services.

RMP – Step 2 (Vanguard lends to the repo market)

If newly issued T‑bills yield ≤ RRP or supply is insufficient, MMFs can lend cash into the Treasury repo market.

1. The Fed created RRP balances by printing money and purchasing bills from Vanguard.

2. The Treasury issues bonds.

3. A hedge fund (e.g., LTCM) purchases the bonds at auction but must borrow cash in the repo market to pay.

4. A clearing bank (e.g., BNY Mellon) facilitates the tri‑party repo, receiving the bonds as collateral and providing cash drawn from Vanguard’s RRP balance.

5. The cash becomes a deposit at the clearing bank, which is then given to the hedge fund.

6. The hedge fund uses the deposit to pay for the bonds; the deposit becomes a TGA balance held by the Treasury at the Fed.

7. Vanguard withdraws cash from the RRP and lends it in the repo market.

Ending Balance: The Fed’s printed money bought bills from Vanguard, which facilitated the hedge fund’s financing of its bond purchases. The Treasury can issue debt of any duration, and the Fed’s RMP is a thinly disguised way to cash the government’s checks—highly inflationary from both a financial‑asset and real‑goods/services perspective.

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RMP Politics (Q&A)

Why wasn’t the announcement of the RMP included in the formal FOMC statement like previous QE programs?

The Fed treats QE as a policy tool that stimulates the economy by removing long‑term bonds from the market. RMP is viewed as a technical implementation tool that removes cash‑like T‑bills and is therefore deemed non‑stimulative.

Is the RMP subject to a formal FOMC vote?

Yes and no. The FOMC instructed the New York Fed to implement RMP so that reserves remain “ample.” The New York Fed can unilaterally adjust the size of RMP purchases until the FOMC votes to end the program.

What is the level of “ample reserves”?

It is a nebulous concept with no fixed definition. The New York Fed decides when reserves are ample or deficient. In effect, the Fed has handed over control of the short‑end of the yield curve to the Treasury.

Who is the New York Fed president and what are his views on QE versus RMP?

John Williams is the president of the New York Fed. His five‑year term begins in March 2026. He is a vocal proponent of expanding the Fed’s balance sheet to ensure “ample reserves.” Publicly he supports money printing (QE) and claims RMP is not QE and therefore not economically stimulative. This allows him to distance himself from inflationary outcomes while continuing to print money via RMP.

Unlimited Unchecked Money Printing

The distinction between QE and RMP, and the vague “ample reserves” definition, lets the Fed cash politicians’ checks. Past QE programs featured an end date and a maximum amount of bonds to be purchased each month; extensions required a public vote. RMP can theoretically expand indefinitely as long as the New York Fed president wishes, because its “technical” label sidesteps the usual oversight.

Ample Reserves and RMP

The RMP exists because the market cannot handle the surge in T‑bill issuance without a matching increase in reserves. Treasury debt issuance (2020‑2025) has risen sharply, forcing the market to absorb roughly $500 billion per week of T‑bills—up from $400 billion per week in 2024. Political leadership does not affect this schedule; the Treasury’s need for cheap short‑term funding continues regardless of who is in office.

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RMP‑Funded Buy‑Backs and the Housing Market

The Treasury can use proceeds from T‑bill issuance to buy back older, off‑the‑run debt. If the Fed prints money to purchase T‑bills, the Treasury can increase gross T‑bill issuance and use part of the proceeds to buy back longer‑dated Treasury notes, lowering the 10‑year yield. A lower 10‑year yield reduces mortgage rates, improving housing affordability—a political priority for the Republican Party.

Housing‑Market Data (selected charts)

• US single‑family housing market debt and owners’ equity (1950‑2030).

• US mortgage applications (percentage change vs. pre‑pandemic average).

• US home‑equity revolving lines of credit (2000‑2025, % of GDP).

• Number of Bloomberg news stories containing “affordability.”

• Polymarket predictions for 2026 House and Senate control.

These data points illustrate that a reduction in 10‑year yields could boost home‑equity borrowing and mortgage applications, potentially aiding the Republican electoral outlook.

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Haters Gonna Hate (Criticisms of RMP)

• Duration Argument: The Fed buys T‑bills via RMP and longer‑duration bonds via QE. Without duration, T‑bill purchases have little effect on financial markets.

• Seasonality Argument: RMP will end in April because tax payments are due, after which repo markets will normalize.

Counter‑argument: The accounting T‑charts show that RMP’s T‑bill purchases directly fund new Treasury debt issuance, which finances spending and creates inflation. The structural shift toward funding the government with T‑bills invalidates the notion that RMP’s usefulness ends in April.

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Market Outlook

• Bitcoin: Expect price action between $80 k – $100 k until early 2025, then a rapid rally to $124 k and possibly $200 k as the market equates RMP to QE.

• Gold & Silver: Gold modestly up; silver expected to outperform.

• Shitcoins: The October 10 wipe‑out hurt many traders; recovery will be gradual. My favorite is Ethena (ENA), which should benefit from widening spreads between T‑bill yields and crypto perpetual basis yields.

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Footnotes

1. The Fed is short for the US Federal Reserve.

2. TACO – “Trump Always Chicken’s Out.”

3. IORB – Interest on Reserve Balances.

4. CBO – Congressional Budget Office.

5. Duration and interest‑rate risk are synonymous.