Planet Money
The U.S. economy's biggest superpower, explained
Dec 11, 2023
Yesha Yadav, a Professor at Vanderbilt University Law School and a financial regulation expert, dives deep into the intriguing world of U.S. Treasuries. She discusses how the U.S. government borrows cheaply through these securities and their crucial role in economic stability. Yadav highlights the possible fragility of the Treasury market and its implications for global finance. Additionally, she explores the lack of regulatory oversight in this sector and the innovative potential of blockchain technology to bolster transparency and trust.
13:49
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Quick takeaways
- The US treasury market's lack of transparency and collateralization practices creates inherent fragility and suggests the need for increased monitoring and regulation.
- Treasuries serve as the linchpin that unlocks credit and liquidity, providing stability and security to the financial system.
Deep dives
The Importance of US Treasuries in the Financial System
US Treasuries play a crucial role in the economy, providing the ability for the government to borrow at low costs. This asset is considered risk-free, which allows people to invest in them during times of crisis. They are the foundation of the financial system, providing stability and liquidity. Regulated financial firms are required to hold treasuries as high-quality liquid assets to maintain their stability. Treasuries are also used as collateral in private financial transactions, such as the repo market, where they ensure the safety of credit relationships.
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