8 Months of Stimulus: Repurchase Agreements and Overnight Cash Rate

The video tutorial explains secured short-term loans, focusing on repurchase agreements (repos) and reverse repos. It describes how companies use repos to manage cash flow by temporarily selling assets to banks with an agreement to repurchase them later. The tutorial also covers how banks use similar agreements with the Federal Reserve to maintain liquidity. The focus then shifts to reverse repos, where banks deposit money with the Fed, and the potential concerns arising from increased cash flow back to the Fed.

What is a secured very short term loan and how does it function in a business context?

Explain the process and benefits of a repurchase agreement between a bank and the Federal Reserve.

How does the cash rate influence the lending capabilities of banks?

What are reverse repos and how do they differ from regular repos?

Discuss the implications of a spike in cash going back to the Federal Reserve.