Glossary

BIS

• Bank for International Settlements

  • Purpose: An international financial institution that serves as a bank for central banks, providing them with a forum for cooperation in monetary and financial stability.

Bonds

• Definition: Long-term debt securities with maturities typically greater than 10 years issued by corporations or governments to raise capital, paying periodic interest and returning the principal at maturity.

BTFP

• Bank Term Funding Program

  • Purpose: A Federal Reserve program that allows banks to borrow against their assets as collateral at par value, enhancing liquidity in the banking system.

CFTC

• Commodity Futures Trading Commission

  • Purpose: A U.S. government agency that regulates the futures and options markets, ensuring the integrity of the marketplace and protecting market participants from fraud, manipulation, and abusive practices.

Credit Crisis

• Definition: A severe shortage of liquidity in the financial system, where banks restrict lending to each other due to mistrust of the collateral backing loans (e.g., the mortgage-backed securities crisis in 2008)

Credit Crunch

• Definition: A situation where banks reduce lending to individuals and businesses due to increased risk, leading to reduced access to credit

ETF

• Exchange-Traded Funds

  • Purpose: A type of pooled investment security that holds multiple underlying assets, allowing investors to buy shares that represent a diversified portfolio.

FATF

• Financial Action Task Force

  • Purpose: An intergovernmental organization that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats.

FDIC

• Federal Deposit Insurance Corporation

  • Purpose: An independent agency of the U.S. government that insures deposits in banks and thrift institutions for at least $250,000, thus maintaining public confidence and encouraging stability in the financial system.

FED

• Federal Reserve Bank

  • Purpose: The central bank of the United States, which conducts the nation's monetary policy, regulates banks, maintains financial stability, and provides banking services.

FSB

• Financial Stability Board

  • Purpose: An international body that monitors and makes recommendations about the global financial system to promote financial stability.

Futures Market (Asset)

• Definition: A financial market where participants can buy and sell futures contracts, which are agreements to buy or sell an asset at a predetermined price at a specified time in the future.

G20

• Group of 20

  • Members: 19 countries and the European Union, including Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States.

  • Purpose: The G20 aims to bring together the world’s major economies to discuss policy issues that promote international financial stability.

G7

• USA, UK, Germany, Italy, France, Japan, Canada

  • Influence: These countries are influential in major international financial organizations such as the FATF (Financial Action Task Force), FSB (Financial Stability Board), IMF (International Monetary Fund), and BIS (Bank for International Settlements).

IMF

• International Monetary Fund

  • Purpose: An international organization that aims to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.

IOU

• Definition: Informal documents acknowledging a debt owed. It stands for "I owe you" and specifies the amount owed and the terms of repayment.

M2

• M2 Money Supply

  • Purpose: The Federal Reserve's estimate of the total money supply that includes cash, checking accounts, savings accounts, and other short-term savings.

MMF

• Money Market Funds

  • Purpose: These funds involve the purchase and sale of large volumes of very short-term debt products, such as overnight reserves or commercial paper. They play a role in traditional finance (TradFi) and involve stablecoins and repos (repurchase agreements).

Notes

• Definition: Debt securities with maturities typically between 1 and 10 years issued by the government or corporations to raise capital.

OECD

• Organisation for Economic Co-operation and Development

  • Purpose: An international organization that works to build better policies for better lives. The OECD’s goal is to shape policies that foster prosperity, equality, opportunity, and well-being for all.

  • Crypto Influence: The OECD is involved in creating global tax rules for cryptocurrencies.

QE

• Quantitative Easing

  • Definition: A monetary policy where the central bank purchases longer-term securities from the open market to increase the money supply and encourage lending and investment.

QT

• Quantitative Tightening

  • Definition: The opposite of quantitative easing, where the central bank reduces its balance sheet by selling government bonds or letting them mature, thus reducing the money supply

Recession

• Definition: A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

SEC

• Securities and Exchange Commission

  • Purpose: A U.S. government agency responsible for enforcing federal securities laws, regulating the securities industry, the nation's stock and options exchanges, and other related activities and organizations.

SEP

• Summary of Economic Projections

  • Purpose: A quarterly publication by the Federal Reserve that provides forecasts for key economic indicators like GDP growth, unemployment, and inflation.

Spot Market (Asset)

• Definition: A financial market where financial instruments or commodities are traded for immediate delivery and payment. The spot price is the current market price at which an asset is bought or sold for immediate delivery.

Treasury

• Definition: Refers to government debt securities issued by the U.S. Department of the Treasury to finance government spending. Includes Treasury bonds, notes, and bills.

Yield Curve

• Revert: When the yield curve returns to its normal upward-sloping shape after having been inverted.

• Invert: When short-term interest rates are higher than long-term rates, indicating potential economic downturns.

WEF

• World Economic Forum

  • Purpose: An international organization for public-private cooperation that engages the foremost political, business, cultural, and other leaders of society to shape global, regional, and industry agendas.

Treasury Bonds

• Definition: Long-term debt securities issued by the U.S. Department of the Treasury with maturities greater than 10 years, up to 30 years.

• Interest Payments: Pay interest every six months.

• Purpose: Used to finance government spending.

• Key Features:

  • Long-term investment.

  • Relatively low risk.

  • Fixed interest rate.

Treasury Notes

• Definition: Medium-term debt securities issued by the U.S. Department of the Treasury with maturities ranging from 1 to 10 years.

• Interest Payments: Pay interest every six months.

• Purpose: Used to finance government spending.

• Key Features:

  • Medium-term investment.

  • Fixed interest rate.

  • Available in various maturities (e.g., 2-year, 3-year, 5-year, 7-year, and 10-year notes).

Treasury Bills (T-Bills)

• Definition: Short-term debt securities issued by the U.S. Department of the Treasury with maturities of one year or less (e.g., 4 weeks, 8 weeks, 13 weeks, 26 weeks, and 52 weeks).

• Interest Payments: Do not pay periodic interest. Instead, they are sold at a discount to their face value and the investor receives the face value at maturity.

• Purpose: Used to finance short-term government funding needs.

• Key Features:

  • Short-term investment.

  • Sold at a discount.

  • The difference between the purchase price and face value represents the interest earned.

Summary

• Treasury Bonds: Long-term, maturities greater than 10 years, pay interest every six months.

• Treasury Notes: Medium-term, maturities from 1 to 10 years, pay interest every six months.

• Treasury Bills: Short-term, maturities of one year or less, sold at a discount, no periodic interest payments.

These Treasury securities are considered safe investments as they are backed by the full faith and credit of the U.S. government, making them attractive to investors seeking low-risk options.