Thursday, March 26, 2009

This is troubling

This concerns me -
It has been mentioned that the Government - Treasury and the Fed - have begun to monetize the national debt. First sale was today and drew a less than enthusiastic turnout (oh, also today - In Great Britain, a routine sale of Government bonds today fell short. The Treasury failed to find buyers for £120million worth of debt.
It was the first time since 2002 that the Government has been unable to sell its debt, and this will be seized on by those who have warned that there is insufficient demand for the volume of debt being sold by the Treasury.
However, our loaning ourselves money has gone on for a while ... according to a piece at
"the biggest holder of US government debt is the United States itself. The Federal Reserve system of banks and other US intragovernmental holdings account for a stunning $4.806 trillion in US Treasury debt. And with recent announcements from the Fed, potentially another $1 trillion could be added... About a decade ago, this number was "only" $2.5 trillion."
Now let’s add this - moving this morning on Bloomberg
“Federal Reserve Bank of San Francisco President Janet Yellen said the central bank wants authority to issue its own debt, a move that would bolster its efforts to raise interest rates as the credit crisis abates.
The Fed normally raises interest rates by selling Treasuries on its balance sheet, draining reserves from the banking system. That task is tougher with the Fed’s commitment last week to buy more than $1 trillion in mortgage-backed securities, which are harder to sell quickly without roiling markets. The central bank cut its main rate to almost zero in December and switched its focus to emergency credit programs.
On the power to sell debt, “I would feel happier having it now” so the Fed could use that authority to adjust its balance sheet, Yellen told reporters yesterday after a New York speech. Even without that tool, “there is a great deal we can do,” she said, “but it would certainly be a nice thing to have.” “

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