Jul 17 • General discussion
New video is up!
When a government spends more than it taxes, that deficit creates reserves in the banking system.
Banks then get offered a swap at auction: trade those low-yield reserves for higher-yield, tradeable bonds.
The central bank sets it up so bonds always pay more.
That is why not a single US primary bond auction has ever been undersubscribed. 🫢
Steve just uploaded a video walking through this step by step in Ravel(c) with double entry bookkeeping tables.
He shows exactly why the people panicking about bond market collapse are confusing secondary market trading with primary market auctions, two completely different things.
Watch it here : https://www.youtube.com/watch?v=vyLnDop6Ux4&views
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New video is up!
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