Yield curve control, or YCC, may sound like an obscure technical policy.
It is not.
It is one of the most important tools of financial repression.
In plain English, yield curve control means the central bank decides what interest rate the government should pay on its debt—and then uses its money-printing power to enforce that rate.
If the free market demands 6% to lend to the government, but the central bank wants the government to borrow at 3%, the central bank steps in and buys enough bonds to force the yield down.
In other words, YCC is price fixing for government debt.
And like all forms of price fixing, it creates distortions, misallocations, and unintended consequences.
Of course, they may not call it “yield curve control.” They will probably invent some new euphemism or acronym. They may call it financial stability policy, emergency asset purchases, market functioning support, temporary intervention, or something else entirely.
But the label does not matter. The result is the same. The central bank buys government bonds with fake money it creates out of thin air to suppress yields and stop the system from breaking.
Remember, the Fed has only two tools in its toolkit: currency debasement and gaslighting.
That explains how YCC works mechanically. But the more important question is why politicians and central bankers would be able to get away with it.
It is not hard to imagine how YCC would also be politically popular.
Rising yields mean lower home prices. Home prices are especially important to Baby Boomers—about 22% of the population—and other politically active demographics because home equity is a major component of their wealth. So a policy that keeps yields from rising, and therefore helps keep home prices stable, could easily be sold to them. They would cheer YCC.
Likewise, YCC could be spun as a positive for younger voters because it would keep mortgage rates lower and make housing appear more affordable.
Of course, this is a Faustian bargain. There is no free lunch.
The benefits are illusory because Boomers and younger voters alike would end up paying for it through inflation. But perhaps not 1 in 100 would understand the dynamics. And that is why I think YCC would be politically popular.
That is the political sales pitch.
But beneath the slogans and euphemisms, YCC suffers from the same fatal flaw as every other central bank policy.
With any discussion about the Fed and central banks, it is essential to keep the basics in mind.
Start with the most fundamental point: central planning does not work.
That is the first principle.
Central planning of shoes does not work. Central planning of wheat does not work. And central planning of fake money does not work.
Central banks in general—and the Fed in particular—are on a mission impossible.
They do not know what the 10-year Treasury yield should be. Nobody does. That is an exclusive function of a voluntary market of savers and borrowers.
A politburo cannot centrally plan interest rates any more than it can centrally plan potatoes.
It will inevitably fail and cause enormous damage.
And once the monetary central planners start with YCC, there is no reason to believe they will stop there. YCC would likely be only the initial step in financial repression.
If YCC does not suffice, the US government will turn toward more aggressive measures.
Capital controls. Mandates forcing banks, pension funds, and insurance companies to buy government bonds. Regulations that make Treasuries appear “safe” or “risk-free” on institutional balance sheets. And countless other policies designed to trap capital inside the system and push it toward unwanted government debt.
It's nice that politicians are pandering to bitcoiners, but promises are cheap. There is a major insurmountable obstacle to the US govt buying bitcoin: The US govt does NOT own or control the US Federal Reserve, which is a cartel of private banks. The US President can't just tell this cartel what to do with their reserves. The US dollar is the sacred cow of this cartel, and it's how they rob the entire planet. They're not about to give up this racket because some politician made a promise whose implications he doesn't understand. They're not going to buy a million bitcoins, because a commitment to purchase bitcoin will just encourage everyone to dump their dollars and buy bitcoin, and destroy the value of the dollar and their ability to rob the world with it. If you think they managed to build this century-old cartel while being stupid enough to fall for this or powerless enough to stop it, you're going to be disappointed to find out they're actually just evil.
But can't the US government buy bitcoin itself, without the Fed? With whose money exactly? The US government is fiscally irresponsible and its biggest expense is debt servicing. There are good reasons your irresponsible debt slave friends never get bitcoin and keep laughing at you when you bring it up. Irresponsible high time preference people and institutions don't understand the concept of long term savings. More importantly, the US government needs the Fed to buy its debt and keep its Treasury ponzi going. Buying bitcoin in spite of the Fed's opposition is a full-on declaration of war by the US government against the Fed and the fiat dollar, and that's just not something that Trump, or Kennedy, is up for. Trump has repeatedly praised the Fed. Kennedy wants to implement some ridiculous low interest rate subsidized home lending scheme only possible with the Fed creating cheap money. These men are not Andrew Jackson, nor are they even trying to be him.
The real enemy of bitcoin, and humanity, is the Fed. The US government is just its tool, and politicians are interchangeable actors that haven't mattered in decades. You're not going to destroy the Fed by promising to vote for one actor over another. Your only chance of destroying it is for bitcoin to grow larger than the dollar and Treasury bonds, and for dollar users to continue to get impoverished into oblivion while bitcoiners thrive with their superior technology. I humbly suggest you not waste time and sats on the politics circus, and work hard to stack sats instead.
"When I am 80 years old, I want to have minimized the number of regrets that I have in my life. Most of our regrets are acts of omission, things we didn't try, it's the path untraveled - those are the things that haunt us. - @JeffBezos
It is Monday the Twitter Discussion Space with @Barndog_Solana .
Make sure to follow us on twitter. Like, retweet and comment below to get the chance to win a BSC Genesis NFT Common Shoebox.
Time to hit half a million followers milestone! We are giving away $1.5 million worth of NFT once we reach 500k Twitter followers (50 pairs BNBChain Genesis Sneakers):
1⃣ Follow us
2⃣ Retweet
3⃣ Tag 3 friends & comment below
If you are working in fields like AI or web3 or VR right now, you are living through and creating important history.
Enjoy it and keep notes.
May victory be yours.