This post was authored by Adem Tumerkan, Dunham's Content Editor. If you have questions concerning today's topic, please call us at (858) 964 - 0500. Hold us to higher standards.

The Treasury’s About to Spend Big: How a $950 Billion Liquidity Wave Could Hit Markets Next

• The Treasury’s cash pile at the Fed - now near $950 billion - has drained liquidity from the banking system.
  
  
• Once Washington reopens the spending taps, that same money could rush back into markets, acting like a stimulus.

What you need to know: The Treasury’s General Account (TGA) has surged past $950 billion, its highest since 2021. That money has effectively been pulled out of circulation - but as the shutdown ends and spending resumes, it’s about to rush back into the economy.

Why it matters: The U.S. government is the economy’s biggest spender - and when it stops (like during a shutdown), liquidity stops with it. Thus, every dollar sitting idle in the Treasury’s account is a dollar missing from the private sector. And when that cash starts flowing again - through contracts, payrolls, and benefits - it won’t just refill the banking pipes, it could reignite demand. 

Now the Deep Dive: Everyone’s watching the Fed for rate cuts - but the real liquidity lever sits a short walk away at the Treasury.

I’ve written before about the surging TGA - basically the government’s checking account - ballooning and soaking up money from the economy, putting pressure on banks.

As of writing this, the TGA has swelled to nearly $950 billion, its highest level since 2021 and roughly 3% of GDP - and that pile of idle cash is about to flip from a reservoir to a firehose as the government shutdown ends.

Why does this matter?

Because when the government stops spending - like during a shutdown - demand can dry up.

• Think of it like this - every dollar sitting in the TGA is like cash stuffed under the nation’s mattress - not doing anything (useless). It doesn’t circulate. It doesn’t pay wages. It doesn’t fuel growth.

But when the Treasury starts writing checks again, that money re-enters the system. And it can multiply pretty quickly.

For example: Washington pays Contractor A for a bridge > who pays Supplier B for steel > who pays Employee C > who buys groceries from Retailer D > who deposits revenue back into the bank.

Each link multiplies deposits, boosts reserves, and expands the money supply.

And that’s the invisible ripple effect most miss.

So the liquidity drain we’ve seen over the past few weeks will soon reverse.

A $950 billion TGA drawdown can inject as much liquidity into markets as a couple of Fed rate cuts. Thus, it’s not a stretch to expect bank reserves to surge, repo stress to ease, confidence to rise, and risk assets - from small-caps to crypto - to catch a bid.

Because when Washington starts spending again, it tells everyone: “Hey, the biggest spender in the economy is back in the game.”

The downside of all this? Well, more spending risks reheating inflation.

But that’s the paradox of our age, right? No government spending creates a squeeze, and then more spending than before is needed to relieve it.

So while analysts parse every word from the Fed, the real catalyst might be hiding in the Treasury’s ledger.

So, keep an eye on the TGA. 

Figure 1: St. Louis Federal Reserve, Dunham, November 2025

CEO Euphoria Peaks: Why Boardroom Optimism May Signal a Market Top (Like 2007)

• Mentions of “economic slowdown” have hit their lowest since 2007 as CEO optimism and earnings soar.
  
  
• Yet the bottom half of the economy - workers, borrowers, and small firms - is running out of breath, revealing a "K-shaped" reality behind the CEO confidence

What you need to know: According to Bloomberg, mentions of “economic slowdown” during Q3 2025 earnings calls plunged to around 200 - the lowest since 2007 – as CEOs grow more upbeat¹. 

Why it matters: CEOs are confidently talking growth - and for now, the numbers back them up, with earnings smashing expectations and momentum looking very strong - but the labor market and consumer base are running out of oxygen. It’s turning into a textbook “K-shaped” economy with top-tier firms thriving while broad employment and real-world incomes soften. When leadership says everything’s fine, that’s when you ask, fine for whom? 

Now the Deep Dive: Corporate America hasn’t sounded this confident in years. Mentions of “slowdown” have collapsed to their lowest since before the 2008 financial crisis.

Meanwhile, S&P 500 earnings are up +18% year-over-year - the strongest since 2021 - with 80% of firms beating expectations.

• And if you exclude the post-pandemic recovery, this marks the strongest growth since 2018.

Boardrooms are talking pricing power, efficiency, and the ever-resilient consumer (although that last one looks increasingly sketchy).

It’s a welcome change from Q2’s gloom. But it’s not a rising tide for all.

Because while C-suites sound euphoric, the real economy looks exhausted.

For example:

• Real wage gains are stalling.
• October’s layoff announcements were the highest for any October in two decades.
• Subprime auto defaults hit 65% - the highest ever recorded².
• Late rent payments jumped to 11.7% - highest since COIVD began³.

This is what’s called a K-shaped market. The top half - megacaps, multinationals, the AI giants - are feasting on cheap capital, high growth, and global demand. But the bottom half - small caps, borrowers, and most households - are grinding under the weight of affordability struggles, tight credit, and weaker profitability. 

• Aka the upper leg of the “K” keeps rising while the lower is sinking.

But here’s the irony.

Historically, the same optimism that lifts markets near the end of a cycle often marks peak complacency.

For instance, in 2007, when CEOs stopped talking about “slowdowns”, it was the same euphoric setup – then credit spreads blew out months later, and the economy spiraled into its worst downturn since the Great Depression.

• Markets, like turkeys before Thanksgiving, feel safest right before the carving knife lands.

So yes, earnings look great and CEOs sound confident. But confidence is fickle – and can turn into doubt overnight.

Put simply, when everyone in the boardroom says everything’s fine, that’s usually your cue to start watching the exits. 

Figure 2: Bloomberg, October 2025

The $142 Trillion Flood: Why Global Inflation May Be Here to Stay

• Global money supply has exploded to $142 trillion, now growing three times faster than productivity and setting a structural 3–5 % inflation floor. 
  
  
• With $340 trillion in global debt riding on it, the system can’t stop expanding — policymakers must either keep inflating or risk a deflationary crash.

What you need to know: Global broad money supply hit a record $142 trillion, up 6.7% year-over-year and now over 121% of global GDP – marking a substantial increase of $116 trillion (+446%) since 2000⁴. 

Why it matters: When global money keeps compounding at 7% a year while productivity crawls at 2-3%, inflation stops being cyclical - it becomes structural. That’s because each new dollar dilutes the old ones, potentially locking in a 3–5% global inflation floor that no central bank can unwind without toppling the debt tower beneath it. That’s not “higher for longer.” It’s become higher forever.

Now the Deep Dive: Over the last 25 years, global liquidity hasn’t just grown - it’s gone parabolic.

To put it in perspective, global broad money supply now sits at $142 trillion, rising about 7% a year and 446% since 2000.

Worse is that happened while global productivity averaged just 2–2.5%⁵.

In other words, money is expanding nearly 3x faster than what the world actually produces.

• When money supply > productivity = recipe for inflation.

More interesting is that China now anchors the global liquidity system.

Its $47 trillion money base - up more than 3,000% since 2000 – now makes up one-third of all global liquidity, more than the U.S. and E.U. combined.

And while this is troubling – it’s not going to go away. In fact, it’ll likely get worse.

Why? Because debt has grown even faster, compounding into a ~$340 trillion mountain globally⁶.

That’s about $2.40 of debt for every $1 of money in circulation.

“But how does that make sense - how can debt expand faster than money?”

Because in today’s system, credit creates money. Every loan, bond, and deficit creates fresh demand (someone buying something they can’t afford) - and to keep the machine running, it must keep borrowing more than it earns.

• I wrote about how this works in “Debt Cycles 101: Why Credit Is the Beating Heart of Economic Growth”

Thus, as long as money grows 6–7% a year, debt stays serviceable. But if the flow ever slows - if money creation falters - the machine stalls.

• Less money for A means less spending.
• Less spending by A means less income for B.
• Less income for B means less cash to repay debt.
• When B defaults, the pain rolls to C, the creditor.

And so it spreads - one link starving the next.

Put simply, more debt outstanding requires ever more cash circulating around to pay it.

So inflation isn’t just temporary - it’s the system itself.

The choice for policymakers is binary:

• Deflate: Pull money out of the system (tightening policy), and the economy buckles under its own weight. Too little cash chases too much debt, forcing asset prices to plunge as everyone sells to raise liquidity.
  
  Inflate: Pump in more money (easing policy), and the currency erodes over time as policymakers try to “inflate the debt away.” Each dollar buys less, and affordability worsens.

There's no clean exit. Only trade-offs (but I wager they’ll choose the inflation option 9/10 times).

The increased money supply now likely guarantees fragility – because you can’t stop.

• It props up asset prices (creating wealth effects which fuel spending), widens inequality (those who own assets vs don’t), and forces central banks to play the role of reluctant dealers in a market addicted to debt.

The flood has reached the shore - and the world is just beginning to feel the current.

Beware.

Figure 3: Econovis.net, October 2025

Anyway, who knows how this will all play out?

This is just some food for thought as we watch how these trends develop.

We’ll be keeping a close eye on things. Enjoy the rest of your weekend.

Sources:

1. CEOs Sound Least Worried About an Economic Slowdown Since 2007 - Bloomberg
2. Car Loan Delinquencies Hit Record For Riskiest Borrowers - Bloomberg
3. Late Rent Trends Show Financial Strain Among US Renters - CRE Daily
4. Insights | Econovis
5. Global Productivity Growth Remains Weak, Extending Slowing Trend
6. Global debt hits record of nearly $338 trillion, says IIF | Reuters

Disclosures:

This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.

Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information.