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The Fed Has Spent $1.5T On ‘Quantitative Easings’

From CNS News:

$2,001,093,000,000: Fed’s Ownership of U.S. Debt Breaks $2T for First Time

By Terence P. Jeffrey | August 19, 2013

(CNSNews.com) – The Federal Reserve’s holdings of publicly traded U.S. Treasury securities—federal government debt—pushed above $2 trillion for the first time last week, hitting approximately $2,001,093,000,000 as of Aug. 14, according to the Fed’s latest weekly accounting.

The Fed’s accounting for the previous week showed that it had owned approximately $1,993,375,000,000 in U.S. Treasury securities as of Aug. 7.

Back on Dec. 31, 2008, before the Fed began its strategy of “Quantitative Easing," the Fed owned only $475.9 billion in U.S. Treasury securities. Since then, the Fed’s holdings of U.S. government debt have more than quadrupled.

Which means that The Fed has spent roughly $1,5 trillion dollars on its three ‘Quantitative Easings’ since Obama took office. And what do we have to show for it? A GDP of 1.7%. Unemployment at 7.4%.

Launched in 2009, the Fed’s Quantitative Easing (QE) efforts have attempted to stimulate the economy.

“Under QE,” explains a February 2013 Congressional Research Service report, “the Fed attempts to lower long-term Treasury and MBS [mortgage-backed security] yields directly through purchases that drive down their yields, in the hope that lower Treasury and MBS yields will indirectly filter through to reductions in other private long-term yields…

By law, the Fed is not permitted to buy U.S. Treasury securities directly from the Treasury. Instead it buys them in the secondary market. However, when the Fed buys U.S. government debt even on the secondary market it creates a closed circle: The Treasury pays the Fed the interest owed on that part of the federal government’s debt, and almost all of that interest–considered “profit” by the Fed–is paid back to the Treasury.

“Monetizing the deficit refers to financing the budget deficit through money creation rather than by selling bonds to private investors,” said the CRS. “Hyperinflation in foreign countries has consistently resulted from governments’ decision to monetize large deficits…

Such as what happened during the Weimar Republic in Germany. Or Zimbabwe. But it can’t happen here.

The $2,001,093,000,000 in Treasury securities now owned by the Fed equals 16.7 percent of the U.S. government’s debt held by the public. Another $5.6006 trillion in U.S. Treasury securities is owned by foreign entities, according to the Treasury’s latest report on foreign holders of U.S. debt. The combined $7,601,693,000,000 in U.S. Treasury securities owned the Fed and foreign entities equals about 64 percent of all extant U.S. Treasury securities.

After the Fed, entities on Mainland China are the largest owners of U.S. government debt, holding $1.2758 trillion as of the end of June.

Which also makes us wonder if The Fed didn’t have to step in because the US was afraid China and other foreign countries would no longer buy US debt.

Anyway, just try to think what is going to happen when this torrent of money flowing into the financial markets finally stops. And it has to stop. And it will stop very soon.

This article was posted by Steve on Tuesday, August 20th, 2013. Comments are currently closed.

2 Responses to “The Fed Has Spent $1.5T On ‘Quantitative Easings’”

  1. GetBackJack says:

    And not one GD dime landed on my house

    Not one

  2. Noyzmakr says:

    “By law, the Fed is not permitted to buy U.S. Treasury securities directly from the Treasury. Instead it buys them in the secondary market.”

    So someone, somewhere at some point in time thought it was a bad idea for the Fed to buy treasury securities and they made it illegal for them to do so by forbidding them from buying securities from the treasury. Then the Fed just started buying them from a secondary market. but that’s not illegal?
    I wonder who owns the secodary market that they buy from? That entity must be making out like bandits. What is the commision on $2 trillion in treasury securities sales? Hummm??

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