Arthur Hayes: Fed rate hikes may expand the money supply in a high-debt environment.

Arthur Hayes stated that amid high government debt, Federal Reserve interest rate hikes could have a stimulative effect: rising interest on bank reserves and US Treasury yields will increase income for banks and asset holders, driving consumption and the allocation of financial assets. Although the Fed ended related asset purchases in mid-August, the expansion of bank balance sheets has still driven growth in total assets across the Federal Reserve and the banking system, thereby increasing the money supply.