been an extraordinary year for American government debt. The Treasury market is usually the world’s most liquid bond market and a haven in stormy times. But in March it seized up as panic about the pandemic led to fire sales and failed trades. The Fed fixed the problem by buying, in two months, nearly as many Treasuries as it did during five years of quantitative easing after the global financial crisis.
There are two fault lines. When Uncle Sam issues debt a group of middlemen known as “primary dealers”—mostly banks—are obliged to buy it up at “reasonably competitive” prices. Primary dealers also act as intermediaries for investors who wish to trade with one another. In a crunch Treasuries can pile up on dealers’ balance-sheets, causing them to swell and pushing the banks closer to breaching the capital requirements set by regulators.
It would be wise to mend the pipes before the next torrent of issuance gushes down them. Some quick fixes are obvious. A temporary exemption of cash and Treasuries from banks’ leverage ratios should be made permanent. Banks should not have to hold capital against assets which are all but risk-free. And the number of primary dealers could also be expanded, so that it matters less if any one of them gets into trouble.
If central banks stop buying govt debt interest rates go up & recession/depression. If they keep buying inflation takes, then interest rates have to go up & we have recession/depression. You can't deny the law of value.
Number 3: U going to dissapear :p
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Y'all really wanna trust sleepy joe with this... tears in my eyes
poll
Yea, bring back T-Bills instead of junk bonds as the basis for our economy. (simplified explanation).