20. Banks And Their Role as Shadow Central Bankers

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Banks And Their Role as Shadow Central Bankers

March 10, 2022

Banks are major holders of U.S. Treasuries. If Treasury spreads remain wide, banks will continue to invest in Treasuries, generating profit with no credit risk.
This builds capital, enabling the purchase of yet more Treasury debt. This has the same monetary inflationary effect as if it were being done by the central bank.

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