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Can someone not borrow against a bond?
by VirusNewbie 5y ago
Can someone not borrow against a bond?
- JumpCrisscross 5y ago> Can someone not borrow against a bond? Yes. But that cash has to come from somewhere. If there's less cash in the system in aggregate, those with it gain leverage. Which means they can get a higher rate. Which raises rates. The leaky bit in this equation are banks. They can magic money out of nothing to lend against a bond. The patch to the problem is capital requirements.
- VirusNewbie 5y agoso really what likely happens is that for every dollar of bond the fed sells, you're really only reducing pennies in circulation, given capital requirements for secured loans.