Navigating Yield Curves and Financial Strategies

This chapter explores how flat yield curves influence bank practices and arbitrage opportunities, highlighting banks' strategies for funding treasuries with minimal risk. The discussion also covers regulatory arbitrage, monetary policy mechanics, and misconceptions regarding the Federal Reserve and money supply, particularly focusing on M2 and its growth implications. Additionally, it examines the dynamics between banks and non-banks, emphasizing the effects of quantitative easing and fiscal stimulus on lending practices and the broader financial landscape.