How is the US financial system doing?

Let's take a look at the FED funds.

The Fed is holding close to US$8.3T assets now but this amount is down from a peak of US$8.9T.

Let's take a look at the Fed balance sheet breakdown.

The US treasury department has accumulated slightly more than US$530B cash by issuing US treasuries so that it can fund its operations.  From another financial perspective, the US treasury department is draining money from the US financial system as the public money flows into the government account.

However, the reduction in the US money supply is still insignificant as there is excessive money in the financial system that is shown in the reverse repo market.

There is still an excessive US$1.77T liquidity in the financial system that the banks can't deploy to other investment opportunities except to park the funds in the reverse repo market.

Thus, our conclusion is that the Fed will continue to drain the monetary liquidity in the financial system by selling down its US$8.3T assets and issuing more debts to fund its social and security programmes.  Last but not least, we do not see any liquidity risk in the US yet.