Been awhile since I posted on this platform. I'm back to ask sales savages why a temporary government program is well anything but temporary lol. To provide a lil more detail I'm sure most have seen the recent bank failures of SVB, silvergate, and signature. Well in response the Fed implemented a Bank Term Funding Program which means banks can lend their bonds to the Fed and receive the par value of these securities despite there being over 600 billion in unrecorded losses across the banks. https://pbs.twimg.com/media/Frcng5maIAA12ZS?format=png&name=900x900
The BTFP is essentially a repackaged version of Yield Curve Control (YCC), a policy that was first implemented by the Bank of Japan. With YCC, the central bank targets a specific interest rate on government bonds and uses bond purchases to keep that rate from rising above a certain level. The BTFP takes a similar approach, but instead of targeting a specific interest rate, it targets the overall availability of credit in the market.
One of the key advantages of the BTFP is that it allows the Fed to control the flow of credit to specific sectors of the economy. This is particularly important during times of economic crisis, when some sectors may be struggling while others are doing well. By targeting specific sectors with its lending, the Fed can help ensure that credit is available where it is most needed.
Another advantage of the BTFP is that it allows the Fed to operate more flexibly than it would be able to with traditional monetary policy tools. Because the program is not tied to a specific interest rate or inflation target, the Fed can adjust the program as needed to respond to changing economic conditions. As much as I dislike Central Banks this is pretty damn creative finance stuff.
While the BTFP was initially introduced as a temporary program, there is a growing sense that it may actually become a permanent feature of the financial landscape. If it becomes permanent I'd argue this means infinite money printing and mas inflation. Maybe I'm wrong but I couldn't resist asking fellow savages what they think and what they are doing to try and protect themselves.