FED bailout explained for dummies.

BTFP (Bank Term Funding Program) is a covert YCC.

What does YCC mean? First you have to understand what QE is.

QE are programs executed by central banks to buy sovereign debt or other assets.

Obviously this money is printed out of thin air, it is one of the ways in which liquidity is injected into the system producing the Cantillon effect.

What is YCC? It is the purchase by the central bank of sovereign debt, keeping the interest rate at a certain price. If the interest rate rises, the central bank executes purchases to lower the interest rate.

The difference with QE is that QE is temporary and punctual, YCC is continuous.

Let us now explain what the BTFP (Bank Term Funding Program) consists of.

The BTFP needs a guarantee from the banks and now comes the big one, this guarantee is restricted to US Treasury debt (UST) and mortgage-backed securities (MBS). It's a full-fledged YCC in disguise.

If you buy UST (United States Treasury) you have the guarantee that when you need it the government will lend you the same money invested in it, so when the banks have money, what do you think they will buy? The government is telling you that if you buy USTs it will bail you out, if you don't, fuck you, it's great, you have a product with which you get a return and on top of that you get the same liquidity that you invested in it.

But it also means that the FED pays all the current amount of USTs and MBS that exist in the banks' balance sheets, around 4.4 trillion.

Let me translate, with this program, the FED can print up to 4.4 trillion.

And they say it is temporary, only until March 2024, place your bets. Japan was the experiment, now it is the turn of the US and Europe, the YCC is here to stay, unlimited financing for governments, if it was not already, well even more, they will no longer need to invent a crisis to obtain liquidity.

My question is, where do CBDCs fit into all this?