flow5

Shorting Treasuries: What's the Rationale?

"there's no net flow due to investors actions" Monetary savings are impounded within the commercial banking system. CBs do not loan out deposits. CBs create new money in the lending process. Flows to the intermediaries increase the supply of loan-funds. However, this money does not leave the CB system. The funds just change ownership, from saver/investor to intermediary. The reverse process, which is called “disintermediation”, has the opposite effect: the intermediaries shrink in size, but the size of the CBs remains the same.