So this right here is a Treasury bond or bill.

And because it's a junkier rating, no one is going to want to buy it.

But if the Fed wants to inject more cash, it can now buy different types of securities.

We would create incentives for securitization.

It can do it through debt or equity.

I have 4 billion in residential CDOs, collateralized debt obligations.

My next presentation, I'm going to take it to a further

So that's what we're going to show you in the presentation on collateralized debt obligations.

I have a whole video on mortgage backed securities.

So first, a little bit of definitions.

So a security in the equity world is a stock.

And maybe it also does some longer term treasury securities, or whatever else.

So it's going to be 6,000 times 1,000 bond certificates.

And this non traditional type of intervention, where the Fed is no longer concerned about a target rate, because the target rate is already at zero, where the Fed is not purchasing short term debt, but is trying to buy longer term debt, things further down the yield curve, and maybe things that aren't Treasury securities to begin with, maybe they're starting to buy corporate debt, maybe they're starting to buy mortgage backed securities, this is called quantitative easing quantitative easing.

But you should watch the videos on mortgage backed securities and collateralized debt obligations, if you want to get a better understanding of exactly how the money flows go.

And then at some future date, the U.S. Treasury is going to pay them a larger amount of money than they put back in.

Of course, if enough people start defaulting, even these people start to get hurt.

Actually, I believe the one year itself is a note.

What is even a treasury?

T bill if it's a shorter duration,

Treasury bond if it's a longer duration.

But hopefully at this point you have a sense of what the yield curve is.

It can buy Treasury securities, so instead of short term Treasury securities, maybe it could be longer term Treasury securities.

Savings bonds.

That's why it's called open market operations.

This is an example here

So the 300 million from equity, they're going to get 55 million assuming that there are no defaults or pre payments or anything shady happens with the securities.

So these treasury securities, whether they're T Bills, treasury bills, treasury notes, or treasury bonds.

The 400 million senior tranche we raised from 1000 senior securities, collateralized debt obligations.

So I will give the government 1,000, the government would give me a treasury bill.

And we said there's different kinds of debt.

They're savings bonds.

So what you do is you have, let's say, the 6 million.

Traditionally, when the fed is more focused on short term interest rates, on overnight borrowing rates between banks, it will use these to buy shorter term debt that increases the amount of currency out there the amount of dollars out there, and so it will

And I'm doing this just to show you a point

And if buying debt seems like a weird thing to say, buying debt is the same thing as lending money (lending money).

And so when the Federal Reserve or any Central Bank prints money, and it buys debt, it goes out into debt markets and it buys it, it usually buys the safest kind of debt, but that affects all of the debt markets, it goes out and buys in the debt market, they're essentially shifting the supply curve of money to the right, they shift the supply curve to the right.

And maybe the fed is able to, through intervention, first they're able to print money, normally they buy shorter term debt, maybe they start buying longer term treasury debt, and maybe that helps get the yield curve, for longer term treasuries down a little bit.

And we learned that debt securities are often called bonds.

So let me draw them over here.

But this I just want to show you some data here.

And let's visualize what a bond certificate could look like.

They are going to issue Treasury bills, when they essentially just need to borrow money.

You can't get it on Yahoo!

Annual rate of security