Episode 137: Tank Man
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The Fed Purchases Treasury Bills to Increase the Money Supply
The way the federal reserve holds interest rates down, or another way of saying it is increase the money supply, is to purchase treasury bills. The Fed purchases the same type of treasury bills that financial institutions use for repurchase agreements. So you kind of get the federal reserve inadvertently pushing forward on financial markets with one hand and pulling backward on them with the other. That sounds exactly like something I would expect to find if I dug into it really hard.That's what's bubbling up in this past week. Of the federal reserve trying to increase the money Supply by buying up treasury bills, and in the process, removing these shock absorbers from the financial institutions. And so they find it harder
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