Skip to comments.The Federal Reserve Now Owns 15 Percent of the U.S. Treasury Market; At Its Current Rate, It Could Own the Whole Market in Less than Two Years
Posted on 03/28/2020 5:38:53 PM PDT by NRx
According to the U.S. Treasury, as of February 29, 2020, there was $16.9 trillion in marketable U.S. Treasury securities outstanding. Of that amount, at the end of February, the Federal Reserve held $2.47 trillion or 14.6 percent making it, by far, the largest single holder of U.S. Treasuries anywhere in the world.
...But exactly how can a so-called free market function smoothly if the countrys own central bank is cornering the market. Salomon Brothers paid a $290 million fine and came close to getting slapped with criminal charges by the U.S. Department of Justice in 1992 for manipulating prices in the Treasury market. And make no mistake about it, the Feds massive purchases are having a demonstrative impact on driving up prices in the Treasury market while driving down yields meaning the income that determines if senior citizens in America can buy real groceries or have to live on one pot of soup for the week.
At the end of 2007, before the Wall Street crash in 2008, a senior citizen could invest $10,000 in a 10-year Treasury note and get $400 a year in income, or 4 percent. Today, that same $10,000 generates just 0.67 percent or $67. Seniors who were living on their Treasury income have experienced an 83 percent drop in income while food costs and pharmaceutical costs have soared.
If the Fed keeps up this pace of Treasury buying, it will own the entire Treasury market in about 22 months. If you look at the New York Feds list of the Treasury securities that are being submitted to it for sale by Wall Streets trading houses versus the amounts the New York Fed is buying, you will see that Wall Street is puking up Treasuries in something akin to projectile vomiting.
(Excerpt) Read more at wallstreetonparade.com ...
Last week it was toilet tissue and hand sanitizer
The inflation is exploding out of control!
Perhaps better than China, but who knows?
If the Dow Jones continues falling like it did in the last month, in 6 months it will be negative.
It’s not going to happen, and neither is the FED going to buy up the entire treasury market.
Likewise, shutting the economy down tends to be deflationary. So is the oil price drop. Monetary policy is reversible. Fiscal policy to the extent that it’s loans is too.
Not at all clear to me where we come out on inflation.
Im confused. I thought it was the other way around
Then we will be like Japan and next thing you know the Fed will be buying stock and corporate bonds like the BOJ also.
I donkt know if Id be so sure of that. Barring another act of Congress, the Federal Reserve is only beholden to itself. Its just sometimes that the Federal Reserve and the government have interests that are aligned.
How do they get the money to buy the bonds? They simply print it!
Yup it appears the the Treasury is gaining control of the FED. Because the FED is using spv’s to buy up things that they would otherwise not be legally entitled to buy. I stopped trusting the WSJ a long time ago.
This is not the WSJ.
Monetizing the debt...not good
That would essentially mean no interest on the debt. Because the FED sends the interest on the debt back to the government minus a small fee. Essentially refinancing the debt. Something President Trump has talked about.
What ever happened to the concept of “calling in loans” when liquidity is needed? Guess they really WERE all “liar loans”.... And, so much for assurances they’ve been “stress testing” all the banks....
Trump is nationalizing the Federal Reserve. Driving them to zero interest in effect made them irrelevant. Now he’s merging them with the US Treasury department with the endgame being the end of the Fed.
This new $2 trillion stimulous package consists of dollars being issued at zero interest. They carry no debt and will be put into circulation to start paying off old dollars that carry debt.
So no the Fed is not buying the US Treasury.
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