The U.S. government has officially reopened after a 43-day shutdown, marking the return of major fiscal operations and setting the stage for significant market movements. Macro analyst Raoul Pal predicts that the reopening will unleash a wave of liquidity that could reshape markets, interest rates, global spending, and even the future of cryptocurrencies.

Government Spending Returns to the System

The first major impact comes from the Treasury General Account (TGA). With government operations back online, TGA spending will resume, steadily injecting liquidity into financial markets. Pal expects this inflow to continue for several months, providing crucial support to the economy.

At the same time, the Federal Reserve is preparing to end Quantitative Tightening (QT) in December. Once QT stops, the Fed’s balance sheet will stop contracting and begin expanding, adding further liquidity to the system. As money supply rises, the U.S. dollar may weaken, a typical response to increased liquidity.

Preventing a Year-End Funding Squeeze

Pal warns that the year-end often brings funding pressure on banks. To avoid this, regulators are expected to deploy temporary liquidity tools such as Term Funding programs and the Standing Repo Facility (SRF). These measures aim to maintain smooth cash flow and prevent market disruptions.

Looking further ahead, Pal anticipates structural changes in early Q1, including adjustments to the Supplementary Leverage Ratio (SLR). This would allow banks to hold more bonds and expand their balance sheets, a move Pal describes as a “liquidity bazooka” capable of pushing interest rates lower.

Global Stimulus and Crypto Outlook

Globally, China continues to expand its balance sheet, while Europe is preparing additional fiscal stimulus. In the U.S., new stimulus payments and increased spending under the so-called “Big Beautiful Bill” are likely, particularly with mid-term elections approaching.

In the crypto sector, Pal believes the U.S. is approaching the final stages of the CLARITY Act, a bill designed to provide a clear regulatory framework for digital assets.

Federal Reserve Rate-Cut Debate

Despite the expected rise in liquidity, Federal Reserve officials remain divided on the December interest-rate decision.

• Governor Stephen Miran supports a 50-basis-point cut, arguing that halting rate reductions could slow economic progress.
• Mary Daly is undecided for the first time due to mixed economic signals.
• Minneapolis Fed President Neel Kashkari also remains uncertain.

This uncertainty has contributed to a temporary softening in crypto markets, with Bitcoin falling below $100,000 and several altcoins pulling back. Market participants are closely watching the December 10 FOMC meeting, where the final rate-cut decision will set the tone for financial markets heading into 2025.

Key Takeaways

• Government reopening restores TGA spending, injecting liquidity into markets.
• Ending Quantitative Tightening allows the Fed to expand liquidity again, easing financial conditions.
• Global stimulus from China, Europe, and the U.S. could further support risk assets.
• Crypto markets remain sensitive to policy decisions, awaiting clarity from both regulatory and monetary developments.