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Speaker 1: When you hear the words bank bailout, what exactly comes

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Speaker 1: to mind? Is it the Great Recession? The financial crisis?

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Speaker 1: Is it the movie The Big Short? Maybe it reminds

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Speaker 1: you of the time that a bunch of greedy, dumb

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Speaker 1: banks used customer deposits, loaded up on worthless assets, and

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Speaker 1: then when they all realized they were worthless, the Federal

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Speaker 1: Reserve comes in buys those assets from the banks at

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Speaker 1: full price, letting the banks off the hook without realizing

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Speaker 1: any of the losses. Well, you may not be surprised

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Speaker 1: to hear that what I just described, while it does

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Speaker 1: fit what happened during the financial crisis, is also the

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Speaker 1: description of what has been happening behind the scenes in

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Speaker 1: the banking system since March of twenty twenty three. And

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Speaker 1: not only has it been happening continuously since then, it

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Speaker 1: has only been growing. In two thousand and eight, the

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Speaker 1: worthless asset was mortgage backed securities. Today it's United States treasuries.

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Speaker 1: But while this bailout of the banking system continues to

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Speaker 1: grow to record highs on a weekly basis, it is

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Speaker 1: scheduled to end in just a few months in March

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Speaker 1: of twenty twenty four. So the question is what happens

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Speaker 1: to banks, to treasuries, to the bond market and everybody

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Speaker 1: else once this bailout finally ends. Well to find out,

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Speaker 1: we have to take a little bit of a trip

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Speaker 1: back in time to when the crazy money printing started

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Speaker 1: in twenty twenty. It's actually incredible how fast the time

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Speaker 1: has gone. But that was almost four years ago now,

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Speaker 1: and you probably remember the frenzy that is accompanied by

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Speaker 1: a loose money environment when the money printers turn on,

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Speaker 1: when the interest rates drop, everybody's trying to spend money

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Speaker 1: like crazy and make money like crazy. Massive frauds, massive bubbles,

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Speaker 1: the scammers come out of the woodworks, and everybody is

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Speaker 1: trying to get extraordinary returns. And as it turns out,

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Speaker 1: banks are obviously no different. During twenty twenty and twenty

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Speaker 1: twenty one, banks were sitting on this cash trying to

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Speaker 1: figure out what is it that we should do with

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Speaker 1: this cash. And if you remember, at that time, the

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Speaker 1: Federal Reserve, specifically Powell was saying things like, we're not

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Speaker 1: even thinking about thinking about raising interest rates. We're here

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Speaker 1: to try and stabilize the economy, make sure a crash

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Speaker 1: doesn't happen. We're gonna keep the money printers on and

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Speaker 1: keep interest rates low. So what did the banks do.

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Speaker 1: They believed the Fed who was telling the truth, and

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Speaker 1: so they loaded up on US treasuries. Because if you

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Speaker 1: think that interest rates are going to stay low, and

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Speaker 1: you're sitting on a bunch of newly printed cash, why

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Speaker 1: would you not put it in the safest place possible,

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Speaker 1: buy US treasuries and get that risk free return. And

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Speaker 1: that's exactly what banks did. They gorged on treasuries. So

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Speaker 1: here's why that's a problem. The price of a bond

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Speaker 1: and the interest rate, the yield on bonds is inversely correlated.

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Speaker 1: Consider the fact that if I borrow one hundred dollars

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Speaker 1: from you at five percent interest rate, then I'm gonna

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Speaker 1: have to pay you back one hundred five dollars. Let's

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Speaker 1: say a couple of months from now, interest rates everywhere

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Speaker 1: else go up, So now instead of the going interest

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Speaker 1: rate being five percent, the new going interest rate is

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Speaker 1: ten percent. Let's also say at the exact same time,

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Speaker 1: you need to get out of this arrangement. You can't

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Speaker 1: wait until a whole year passes for me to pay

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Speaker 1: you back the one hundred five dollars, so you need

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Speaker 1: to sell this debt to somebody else, well, you're not

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Speaker 1: going to be able to sell this debt, this contract

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Speaker 1: between us for one hundred dollars, because if you sell

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Speaker 1: it for one hundred dollars to somebody else, I'm going

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Speaker 1: to pay them back one hundred five dollars, which means

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Speaker 1: they're only going to get a five percent return. But

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Speaker 1: if they take that same one hundred dollars and loan

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Speaker 1: it out to somebody else, they'll get the going rate

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Speaker 1: of ten percent, which would give them one hundred ten dollars.

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Speaker 1: So the only way that you're going to convince anybody

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Speaker 1: to buy this debt from you is if you increase

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Speaker 1: the yield or in other words, decrease the price, because

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Speaker 1: no matter what happens at the end, I'm paying back

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Speaker 1: one hundred five dollars to whoever I owe it to you,

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Speaker 1: whether it's you or somebody else, which means if you

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Speaker 1: you want to sell this debt to somebody, you're probably

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Speaker 1: going to have to sell it for ninety five dollars

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Speaker 1: because then when somebody pays ninety five dollars to buy

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Speaker 1: that debt from you, they're going to get one hundred

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Speaker 1: five dollars back from me, which is roughly ten percent.

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Speaker 1: We're just rounding here to make the math easier. So

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Speaker 1: you loaned me one hundred dollars expecting to get a

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Speaker 1: five percent return, but because you had to exit the

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Speaker 1: debt before maturity, before I paid you back, you had

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Speaker 1: to sell it at a loss of five dollars for

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Speaker 1: a total of ninety five. So now you see where

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Speaker 1: the problem arises with banks loading up on US treasuries

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Speaker 1: during twenty twenty and twenty twenty one. During that time period,

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Speaker 1: interest rates were at rock bottom levels. The ten year

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Speaker 1: Treasury was trading under one percent until January of twenty

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Speaker 1: twenty one, and even into twenty twenty one, it barely

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Speaker 1: got above one and a half percent. And as long

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Speaker 1: as these banks can hold that debt until maturity, there's

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Speaker 1: no problem. They're gonna collect back the principle plus the interest.

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Speaker 1: That's the problem because in fl stuck around far longer

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Speaker 1: and far higher than anyone at the FED or anybody

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Speaker 1: in charge of monetary or fiscal policy you could have

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Speaker 1: ever imagined, because apparently they don't know how these things work.

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Speaker 1: And so the FED panicked and they embarked on one

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Speaker 1: of the fastest and most aggressive cycles of rate hikes

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Speaker 1: in history. And we saw the yield on the ten

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Speaker 1: year Treasury go from a bottom of a half percent

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Speaker 1: in August of twenty twenty and it climbed and climbed

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Speaker 1: and climbed as the Federal Reserve raised interest rates until

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Speaker 1: it peaked at five percent in October of twenty twenty three.

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Speaker 1: Going from a half percent to five percent is a

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Speaker 1: ten x increase in the interest rate, which means at

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Speaker 1: the same time, you have catastrophic destruction of the values

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Speaker 1: the prices of those bonds, those previously existing bonds that

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Speaker 1: were issued at half a percent, one percent, or one

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Speaker 1: and a half percent, they're worth far less than they

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Speaker 1: were worth when those loans were made because the going

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Speaker 1: interest rates now are much higher. So if you need

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Speaker 1: to get out of those old bonds, you must sell

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Speaker 1: them at a much lower price, otherwise nobody will buy

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Speaker 1: them now. Again, this is no issue. If you just

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Speaker 1: hold on to the bonds until maturity, the borrower will

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Speaker 1: simply pay back the principle plus interest, and this is

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Speaker 1: what the banks were hoping for. But obviously in March

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Speaker 1: of twenty twenty three, this all blew up in banks'

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Speaker 1: faces and The new banking crisis erupted in March of

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Speaker 1: twenty twenty three, starting with Silicon Valley banks collapse. What

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Speaker 1: banks were not anticipating was a bank run, where individuals decide,

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Speaker 1: we're going to pull all of our cash out, and

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Speaker 1: the reason why banks were not banking on this is

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Speaker 1: because bank runs rarely happen. The reason why bank runs

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Speaker 1: rarely happen, though, is because bank runs themselves are in

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Speaker 1: many cases not possible. If all the people go to

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Speaker 1: withdraw their funds from the bank, the bank will be

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Speaker 1: able to meet those withdrawal requests, which means those people

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Speaker 1: don't have to worry about taking their money out now

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Speaker 1: because they know they can get it out. Ironically, the

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Speaker 1: only times that bank runs happen is when people can't

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Speaker 1: get their money out because somebody on the inside gets

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Speaker 1: wind to the fact that the banks don't have enough

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Speaker 1: to meet those withdrawal requests, which means that that first

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Speaker 1: person takes their money out, then they call up the

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Speaker 1: people they're closest to and say you should go get

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Speaker 1: your money out, and the bank run erupts. The problem

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Speaker 1: with this is that it wasn't just Silicon Valley Bank.

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Speaker 1: Every single bank was in the exact same situation. There

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Speaker 1: was no bank in America that was not underwater on

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Speaker 1: its portfolio of assets, which means if a bank run

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Speaker 1: happened anywhere else, the exact same thing would happen, the

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Speaker 1: bank would fold. As a result, the Federal Reserve stepped

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Speaker 1: in and created a new bailout facility called the Bank

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Speaker 1: Term Funding Program. This is the chart that I showed

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Speaker 1: you earlier of the Bank Term Funding Program. You can

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Speaker 1: see it was never in use as far back as

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Speaker 1: this chart goes, because when it was created in March

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Speaker 1: of twenty twenty three, that was the first time it

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Speaker 1: was able to be used, and the usage of this

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Speaker 1: facility skyrocketed within one month to eighty billion dollars. So

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Speaker 1: what exactly is the Bank Term Funding Program? Why is

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Speaker 1: it a bailout of the banks, and even farther, why

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Speaker 1: is it a bailout of the treasury market and the

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Speaker 1: entire bond market? Real quick, I am running a fifty

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Speaker 1: percent off sale for Herese Financial University, But there are

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Speaker 1: only ten slots available for this sale. First come, first serve.

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Speaker 1: It is only open to the first ten people who

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Speaker 1: sign up. If you're interested, I'll explain more at the

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Speaker 1: end of this video, so stick around if you want

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Speaker 1: the details. So what exactly is the BTFP the Bank

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Speaker 1: Term Funding Program. Well, according to the Federal Reserve, this

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Speaker 1: facility was created to support American businesses and households by

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Speaker 1: making additional funding available to eligible depository institutions. Oh how

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Speaker 1: nice they're doing this to support American households and businesses.

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Speaker 1: This facility offers loans of up to one year in

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Speaker 1: length to banks or other eligible depository institutions. Institutions can

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Speaker 1: pledge collateral like US treasuries, mortgage backed securities, or other

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Speaker 1: forms of debt, and most importantly, these assets will be

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Speaker 1: valued at par. If you don't know what that is,

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Speaker 1: that is the biggest deal of the BTFP. So I'm

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Speaker 1: going to explain. Imagine we rewind the clock and the

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Speaker 1: year is two thousand and nine. You bought your house

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Speaker 1: for five hundred thousand dollars, but if you were to

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Speaker 1: sell it on the market today, you could only get

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Speaker 1: two hundred and fifty thousand for it. So you're sitting

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Speaker 1: on a fifty percent loss, which is the same position

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Speaker 1: that banks were in with most of their US Treasury portfolios.

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Speaker 1: The Bank Term Funding Program at the FED would be

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Speaker 1: like the FED going to you in two thousand and

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Speaker 1: nine and saying, hey, I know you bought your house

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Speaker 1: for five hundred grand, and I know if you sold

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Speaker 1: it to anybody else on the open market right now,

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Speaker 1: you'd get two hundred and fifty grand. But if you

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Speaker 1: sell it to us, we will pay you the full

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Speaker 1: five hundred grand, because that's what you paid for it,

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Speaker 1: so that's what it's worth. So we'll buy it from

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Speaker 1: you at full price so that you don't have to

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Speaker 1: sell it on the open market and take a loss

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Speaker 1: and affect the prices of the other houses in your neighborhood.

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Speaker 1: Sounds pretty nice, right. The only caveat to this is

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Speaker 1: that you have to repurchase the house back from them

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Speaker 1: in one year. And according to this fact cheep from

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Speaker 1: Federalreserve dot org, the BTFP is a temporary facility and

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Speaker 1: will shut down on March eleventh of twenty twenty four,

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Speaker 1: just a couple months from now, and to me, the

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Speaker 1: wildest part of this whole thing is how banks actually

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Speaker 1: access the BTFP. In order to obtain an advance under

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Speaker 1: the BTFP, eligible borrowers must submit a request using a

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Speaker 1: standard template email to its lending reserve bank at the

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Speaker 1: time it requests its first advance, like literally send an email.

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Speaker 1: Can you imagine sitting there ahead of your bank typing

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Speaker 1: up an email to your federal Reserve bank saying, Hey,

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Speaker 1: can I please access some of that free money and

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Speaker 1: sell you some of my underwater securities at full price

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Speaker 1: so that I don't have to shut down from a

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Speaker 1: bank run. Thanks Jamie Dine. And this is essentially the

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Speaker 1: reason why the BTFP is a bailout for all banks.

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Speaker 1: Because if you are a bank and you are sitting

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Speaker 1: on unrealized losses, assets that are worth less and what

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Speaker 1: you paid for them, you can sell them to the

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Speaker 1: FED right now for full price. Get access to that cash,

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Speaker 1: and do something else with it, anything else with it.

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Speaker 1: The only promise you have to make is that you'll

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Speaker 1: buy that asset back from them in a year. This

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Speaker 1: means banks don't have to worry about all those withdrawal

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Speaker 1: requests the deposit flights. They can meet that as much

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Speaker 1: as it happens, And as we can see from the

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Speaker 1: chart of the Bank Term Funding Program, it is skyrocketing

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Speaker 1: in usage lately. As of January third, the record usage

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Speaker 1: of this facility hit one hundred and forty one billion dollars.

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Speaker 1: So the situation that started in March of twenty twenty three,

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Speaker 1: or at least when we noticed the situation when Silicon

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Speaker 1: Value Bank failed, it is only getting worse under the hood.

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Speaker 1: So the next question is why does this amount to

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Speaker 1: an indirect bailout of the entire treasury market. Well, think

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Speaker 1: about this from the perspective of the house example. If

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Speaker 1: you're sitting on an unrealized loss of two hundred and

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Speaker 1: fifty thousand dollars and you have to say sell your

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Speaker 1: house now, suddenly that affects the comps. That means all

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Speaker 1: the other houses in the area that are equal are

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Speaker 1: probably worth two hundred fifty thousand dollars as well. With bonds,

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Speaker 1: like treasuries, it's even more so because there's one going

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Speaker 1: rate with very very little discrepancy. Bonds are basically fungible,

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Speaker 1: not quite but close enough. And so if banks faced

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Speaker 1: with these withdrawal requests had to start selling all these

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Speaker 1: US treasuries at massive losses, that would have been a

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Speaker 1: fire sale that would have pushed interest rates up extremely

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Speaker 1: quickly as the price of those bonds they were selling

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Speaker 1: started to collapse because every time one bank sold, that

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Speaker 1: would make the losses for everybody else even worse, and

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Speaker 1: that would force some of them to start to have

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Speaker 1: to sell as well, be a downhill spiral. And so

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Speaker 1: the fact that banks can sell these treasuries to the

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Speaker 1: FED at full price without unloading them on the market

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Speaker 1: at all, means that the treasury market doesn't experience a

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Speaker 1: single dollar of selling. It all goes direct to the

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Speaker 1: FED instead of to the open market, meaning that prices

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Speaker 1: are not affected downward. Now this alsounce to an indirect

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Speaker 1: bailout of the entire bond market overall. Because the United

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Speaker 1: States Treasury is considered the safe haven asset, the bedrock

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Speaker 1: the foundation of the financial system, it is considered the

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Speaker 1: risk free asset, which means when you're looking at loaning

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Speaker 1: money to a corporation, whether large or small, or the

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Speaker 1: US government, you're going to expect a higher interest rate

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Speaker 1: a higher yield if you lend money to a corporation

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Speaker 1: or an individual, or a small company or anybody else,

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Speaker 1: because they carry an inherently higher degree of risk. At

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Speaker 1: the end of the day, the US government can always

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Speaker 1: print the money or use this military to collect taxes

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Speaker 1: to pay its debts, and so if you could get

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Speaker 1: five percent from the US government, six percent, seven percent

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Speaker 1: from the US government, you're going to demand more than

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Speaker 1: that from anybody else. Imagine for a moment with me,

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Speaker 1: if the US government was paying twenty percent on its debt, Hypothetically,

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Speaker 1: there'd be zero money invested in the stock market. Everything

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Speaker 1: would sell from the stock market to be lent to

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Speaker 1: the United States government, let alone being lent out to

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Speaker 1: somebody else ast And since we know that when you

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Speaker 1: sell assets, that pushes the prices down, and when the

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Speaker 1: price of bonds goes down, interest rates go up. And

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Speaker 1: if banks were forced to sell all these treasuries on

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Speaker 1: the open market, it would push the prices of treasuries

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Speaker 1: down and the yields on treasuries up. It would have

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Speaker 1: the exact same effect on the rest of the bond market,

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Speaker 1: just to a greater extent. So why is the BTFP

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Speaker 1: skyrocketing in usage right now as we close in with

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Speaker 1: just a couple of months left before the facility expires. Well,

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Speaker 1: the first reason is because there's still massive losses sitting

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Speaker 1: on banks balance sheets right now. Unrealized losses make up

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Speaker 1: almost one third of bank equity capital. Still, this is

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Speaker 1: not a situation that is getting better is a situation

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Speaker 1: that is staying back. The second reason is that this

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Speaker 1: facility expires in March. Now you may think, well that

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Speaker 1: why would anybody be using it right now it's going

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Speaker 1: to be expiring in March. It's because it's not going

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Speaker 1: to be ending the way you think it's going to

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Speaker 1: be ending. According to this fact sheet from Federalreserve dot gov,

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Speaker 1: the program being open until March of twenty twenty four

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Speaker 1: means that advances can be requested until at least March

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Speaker 1: of twenty twenty four, and those advances, those loans, those

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Speaker 1: agreements I'm going to sell you the treasury to get

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Speaker 1: the cash and I'll buy it from you a year later,

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Speaker 1: can begin up until it expires in March of twenty

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Speaker 1: twenty four. So, as we've seen usage of this facility skyrocket,

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Speaker 1: all of these new loans that are being created still

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Speaker 1: have one year of time left on them from the

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Speaker 1: date that they were created. So starting in March of

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Speaker 1: twenty twenty four, no new advances can be made, but

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Speaker 1: the existing ones stay in place until they mature. So

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00:15:39,640 --> 00:15:41,880
Speaker 1: from the bank's perspective, this is literally like the last

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Speaker 1: chance to unload those unrealized losses on the FED and

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Speaker 1: get that full price cash from them until it's no

306
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Speaker 1: longer available. So if we're not going to see all

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Speaker 1: these banks have to buy back all these underwater bonds

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Speaker 1: starting in March of twenty twenty four, then what exactly

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Speaker 1: does happen when this facility expires in US a couple

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Speaker 1: of months. Well. Coincidentally, another facility at the FED that

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Speaker 1: I talk about a lot is also probably going to

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00:16:07,320 --> 00:16:10,800
Speaker 1: be stopping its usage right around March of twenty twenty four.

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Speaker 1: And this facility is the reverse or repurchase facility at

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00:16:14,200 --> 00:16:18,120
Speaker 1: the Federal Reserve, which peaked in about April twenty twenty three,

315
00:16:18,280 --> 00:16:20,440
Speaker 1: and over the course of the rest of that year

316
00:16:20,680 --> 00:16:23,160
Speaker 1: declined in its usage. And as of the day of

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00:16:23,160 --> 00:16:25,760
Speaker 1: this recording, there is only six hundred and seventy nine

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00:16:26,000 --> 00:16:29,480
Speaker 1: billion dollars left in this facility. Considering the rate at

319
00:16:29,520 --> 00:16:32,880
Speaker 1: which funds are leaving this facility, about one point six

320
00:16:33,000 --> 00:16:36,600
Speaker 1: trillion dollars has left this facility in the last nine months.

321
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Speaker 1: This facility will probably be completely empty by the time

322
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Speaker 1: the bank term funding program expires. So why is that

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00:16:44,960 --> 00:16:47,480
Speaker 1: a big deal? What do those two things have in

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00:16:47,480 --> 00:16:50,040
Speaker 1: common with each other? Well, one of the reasons why

325
00:16:50,120 --> 00:16:54,600
Speaker 1: banks were seeing issues with deposit flight is because interest

326
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Speaker 1: rates were going up. Money market funds, new banks offering

327
00:16:58,120 --> 00:17:02,280
Speaker 1: hyled savings accounts, and treasury bills were all paying way

328
00:17:02,360 --> 00:17:04,280
Speaker 1: higher interest rates than what you could get in a

329
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Speaker 1: bank because the bank was locked into assets paying almost nothing,

330
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Speaker 1: so they had almost nothing left over to pass on

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Speaker 1: to depositors. So depositors said, hey, look, you're not going

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Speaker 1: to be able to pay me what I want, but

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Speaker 1: they are, so I'm gonna take my money out and

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00:17:17,440 --> 00:17:20,000
Speaker 1: put it over there. One of the biggest recipients of

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00:17:20,040 --> 00:17:23,560
Speaker 1: this deposit flight from banks went into money market funds.

336
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Speaker 1: So what does the reverse repo facility have to do

337
00:17:25,680 --> 00:17:28,679
Speaker 1: with this, Well, money market funds put most of the

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00:17:28,720 --> 00:17:31,320
Speaker 1: cash that they got into the reverse repo facility, and

339
00:17:31,359 --> 00:17:34,040
Speaker 1: this is because the reverse repo facility was paying a

340
00:17:34,160 --> 00:17:36,720
Speaker 1: risk free rate directly from the FED the money printer

341
00:17:36,920 --> 00:17:39,240
Speaker 1: that was equal to the FED funds rate. So for

342
00:17:39,280 --> 00:17:41,679
Speaker 1: a while, if you were able to get your cash

343
00:17:41,800 --> 00:17:44,680
Speaker 1: into the reverse repo facility at the FED, the FED

344
00:17:44,680 --> 00:17:47,040
Speaker 1: would pay you a better interest rate than you could

345
00:17:47,080 --> 00:17:49,679
Speaker 1: get anywhere. So over the course of twenty twenty one

346
00:17:49,760 --> 00:17:53,680
Speaker 1: and twenty twenty two, this facility attracted trillions of dollars

347
00:17:53,680 --> 00:17:56,640
Speaker 1: in cash, speaking out about two point three trillion dollars

348
00:17:56,680 --> 00:17:59,120
Speaker 1: in March of twenty twenty three. Most of this from

349
00:17:59,160 --> 00:18:01,879
Speaker 1: money market fund people taking money out of the bank,

350
00:18:01,920 --> 00:18:03,960
Speaker 1: putting it in money market funds, and the money market

351
00:18:03,960 --> 00:18:06,360
Speaker 1: fund taking that putting it in the reverse repof facility,

352
00:18:06,400 --> 00:18:09,159
Speaker 1: passing most of those earnings back through to the investors.

353
00:18:09,280 --> 00:18:12,359
Speaker 1: And any dollar held in the reverse repo facility is

354
00:18:12,440 --> 00:18:15,679
Speaker 1: not held inside the banking system. You see, when you

355
00:18:15,840 --> 00:18:18,080
Speaker 1: go to the grocery store to buy a gallon of

356
00:18:18,119 --> 00:18:20,879
Speaker 1: milk and you swipe your debit card, a dollar or

357
00:18:20,920 --> 00:18:24,400
Speaker 1: five dollars leaves your bank account and gets transferred over

358
00:18:24,440 --> 00:18:26,919
Speaker 1: to the bank account of the grocery store. Now this

359
00:18:27,080 --> 00:18:29,560
Speaker 1: might be at the same bank, if you and the

360
00:18:29,560 --> 00:18:31,879
Speaker 1: grocery store both have your bank accounts at the same bank,

361
00:18:32,040 --> 00:18:34,000
Speaker 1: in which case the only thing that happens is that

362
00:18:34,080 --> 00:18:37,040
Speaker 1: bank goes into their Excel spreadsheet and says five dollars

363
00:18:37,119 --> 00:18:39,879
Speaker 1: move from this account to this account. Nothing changed is

364
00:18:40,080 --> 00:18:41,919
Speaker 1: just on paper. But it also might be true that

365
00:18:41,960 --> 00:18:44,160
Speaker 1: they bank at a different bank than you. So all

366
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Speaker 1: day long, you have a bunch of people and a

367
00:18:46,000 --> 00:18:49,160
Speaker 1: bunch of businesses making transactions with each other. And you've

368
00:18:49,200 --> 00:18:52,120
Speaker 1: got trillions of dollars going through the system, and you've

369
00:18:52,119 --> 00:18:54,440
Speaker 1: got money being sent from this account over this account,

370
00:18:54,520 --> 00:18:56,600
Speaker 1: from this bank to this bank. But the reality is

371
00:18:56,680 --> 00:19:00,000
Speaker 1: those dollars never actually move because they're batch set up

372
00:19:00,160 --> 00:19:01,320
Speaker 1: at the end of the day. At the end of

373
00:19:01,320 --> 00:19:04,040
Speaker 1: the day, Chase will look to Bank of America and

374
00:19:04,119 --> 00:19:07,439
Speaker 1: Chase will say, hey, we've got ten billion dollars that

375
00:19:07,520 --> 00:19:09,520
Speaker 1: need to be sent over to you, but you've got

376
00:19:09,600 --> 00:19:11,800
Speaker 1: nine billion dollars that needs to be sent over to

377
00:19:11,920 --> 00:19:14,520
Speaker 1: us because of all of our customers who have transacted

378
00:19:14,520 --> 00:19:16,680
Speaker 1: with each other. So instead, I'm just going to send

379
00:19:16,720 --> 00:19:19,399
Speaker 1: you one billion dollars and we'll call it even. No

380
00:19:19,480 --> 00:19:20,960
Speaker 1: reason for me to send you ten and then you

381
00:19:21,000 --> 00:19:22,879
Speaker 1: to send me back nine. I'll just send you the

382
00:19:22,920 --> 00:19:25,520
Speaker 1: one and it's the same. As a result of this,

383
00:19:26,000 --> 00:19:29,240
Speaker 1: most transactions that happen in the banking system net out

384
00:19:29,400 --> 00:19:30,760
Speaker 1: at the end of the day. Some banks have a

385
00:19:30,800 --> 00:19:32,959
Speaker 1: little bit extra cash, some banks have a little bit

386
00:19:33,040 --> 00:19:35,760
Speaker 1: less cash, but all of the money stays inside the

387
00:19:35,760 --> 00:19:38,560
Speaker 1: banking system. But when you have the reverse repo facility

388
00:19:38,640 --> 00:19:41,720
Speaker 1: sucking cash out of the banking system. You wind up

389
00:19:41,760 --> 00:19:45,280
Speaker 1: with banks on net not having enough cash, you end

390
00:19:45,359 --> 00:19:47,720
Speaker 1: up with bank runs, you end up with deposit flight,

391
00:19:47,760 --> 00:19:49,320
Speaker 1: and then the FED has to step in with their

392
00:19:49,359 --> 00:19:52,640
Speaker 1: other facility to bail those same banks out. But that

393
00:19:52,720 --> 00:19:56,840
Speaker 1: whole situation is unraveling now, and it is undoing itself

394
00:19:56,960 --> 00:19:58,760
Speaker 1: because if you look at the interest rate that the

395
00:19:58,840 --> 00:20:02,080
Speaker 1: US government is paying on short term debt tea bills,

396
00:20:02,119 --> 00:20:05,520
Speaker 1: you can get over five percent by loaning your money

397
00:20:05,560 --> 00:20:08,000
Speaker 1: to the government for even just a couple of months,

398
00:20:08,119 --> 00:20:10,399
Speaker 1: which is better than what you can get by keeping

399
00:20:10,400 --> 00:20:13,200
Speaker 1: your money in the reverse repo facility at the FED.

400
00:20:13,320 --> 00:20:15,960
Speaker 1: And so logically that money is being pulled out of

401
00:20:16,000 --> 00:20:18,760
Speaker 1: the reverse repo facility and being lent to the US

402
00:20:18,840 --> 00:20:21,480
Speaker 1: government instead of what happens when money gets lent to

403
00:20:21,480 --> 00:20:23,879
Speaker 1: the US government, they spend it. And what happens when

404
00:20:23,920 --> 00:20:27,400
Speaker 1: the government spends money it goes into somebody's bank account.

405
00:20:27,520 --> 00:20:30,000
Speaker 1: So over the last six to nine months, we've seen

406
00:20:30,040 --> 00:20:33,120
Speaker 1: the reverse repo facility being drained, which is getting lent

407
00:20:33,160 --> 00:20:35,879
Speaker 1: to the US government through tee bills instead, which the

408
00:20:35,920 --> 00:20:39,440
Speaker 1: government is then spending going into people's bank accounts, which

409
00:20:39,520 --> 00:20:42,280
Speaker 1: is reversing the deposit flights that caused some of the

410
00:20:42,320 --> 00:20:46,000
Speaker 1: issues to begin with, not the unrealized loss issues, but

411
00:20:46,119 --> 00:20:48,200
Speaker 1: the deposit flight issues that would have caused them to

412
00:20:48,240 --> 00:20:50,719
Speaker 1: have to sell those assets at the lower prices. And

413
00:20:50,760 --> 00:20:54,280
Speaker 1: so when the Fed ends the bank term funding program

414
00:20:54,400 --> 00:20:57,040
Speaker 1: in March, that will likely be around the same time

415
00:20:57,040 --> 00:20:59,800
Speaker 1: when the reverse repo facility has been fully drained, which

416
00:20:59,800 --> 00:21:02,439
Speaker 1: means that banks at that time won't necessarily have to

417
00:21:02,440 --> 00:21:05,280
Speaker 1: worry about deposit flight on net because all that cash

418
00:21:05,359 --> 00:21:08,120
Speaker 1: has been recycled and re entered the banking system. Which

419
00:21:08,119 --> 00:21:11,600
Speaker 1: is why despite many people saying that the Federal Reserve

420
00:21:11,680 --> 00:21:14,800
Speaker 1: is just going to extend the BTFP, I don't think

421
00:21:14,840 --> 00:21:17,560
Speaker 1: that they will because they're going to realize they don't

422
00:21:17,600 --> 00:21:20,120
Speaker 1: have to. The only thing that causes a problem when

423
00:21:20,160 --> 00:21:23,280
Speaker 1: a bank has an asset with an unrealized loss is

424
00:21:23,320 --> 00:21:25,120
Speaker 1: being forced to sell it and the only way they're

425
00:21:25,119 --> 00:21:28,520
Speaker 1: forced to sell it at that loss is through deposit withdrawals,

426
00:21:28,600 --> 00:21:31,080
Speaker 1: and that is no longer happening. Instead, we are seeing

427
00:21:31,080 --> 00:21:34,119
Speaker 1: the reversal happen. Now. Unless you are a bank, you

428
00:21:34,320 --> 00:21:37,359
Speaker 1: don't have a bailout, you don't have anybody coming to

429
00:21:37,400 --> 00:21:40,600
Speaker 1: rescue you. Increasing your income and protecting your wealth has

430
00:21:40,720 --> 00:21:43,080
Speaker 1: always been up to only you, So if you'd like

431
00:21:43,119 --> 00:21:45,840
Speaker 1: to work with me, enjoining hundreds of other members of

432
00:21:45,840 --> 00:21:48,480
Speaker 1: Heresy Financial University who are learning how to grow their

433
00:21:48,520 --> 00:21:52,000
Speaker 1: wealth despite the crazy economic storms happening all around us

434
00:21:52,119 --> 00:21:55,080
Speaker 1: pretty much on an ongoing basis. Now, I'm running a

435
00:21:55,160 --> 00:21:58,439
Speaker 1: limited use sale right now. There's ten slots available. You

436
00:21:58,480 --> 00:22:01,920
Speaker 1: have to use code YouTube. This is for the annual

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00:22:02,040 --> 00:22:05,200
Speaker 1: plan only. If you use code YouTube fifty you'll get

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Speaker 1: half off for life. This code can only be used

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00:22:08,119 --> 00:22:11,440
Speaker 1: ten times. It is on a first come, first serve basis,

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00:22:11,520 --> 00:22:12,960
Speaker 1: and so if you miss it, you'll just have to

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00:22:12,960 --> 00:22:14,919
Speaker 1: wait until I open up another ten slots at some

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00:22:14,960 --> 00:22:17,000
Speaker 1: point in the future. As always, thank you so much

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Speaker 1: watching have a great day.