The national debt pushed above $26 trillion last week. In just a little over two months, the US government has added over $2 trillion to the debt. The budget deficit has already set an all-time record with four months left in the fiscal year. In April, the US Treasury sold $1.287 trillion in additional US debt.
So, who is buying all of this debt?
Foreign investors are actually shedding US Treasuries. According to the latest data, “foreign official” holders, including central banks and foreign private-sector investors, dumped $44 billion in US Treasury securities in April. China alone unloaded $19 billion in April.
US government funds dumped $91 billion in Treasuries in April. This includes the Social Security Trust Fund and pension funds for federal civilian employees and the military.
US commercial banks shed $51 billion in Treasuries from their holdings in April.
Other US entities including institutional investors, bond funds, pension funds, insurers, corporations and individuals took up some of the slack, buying $948 billion in Treasuries in April.
But who has been the biggest buyer over the last several months?
The Federal Reserve.
The central bank did most of its work in March, gobbling up $1.02 trillion in Treasuries. It slowed its pace in April, buying up a mere $526 billion in US bonds. That brought the 2-month total to $1.56 trillion. During that same time period, the US Treasury issued $1.56 trillion in Treasuries.
In other words, the Fed monetized 100% of the new federal debt accumulated in March and April.
Meanwhile, Federal Reserve Chair Jerome Powell insists the Fed isn’t monetizing the debt. During testimony before the Senate Committee on Banking, Housing, and Urban Affairs, Powell flatly denied the central bank is buying assets in order to facilitate the Treasury’s sale of debt. “That certainly is not our intention,” Powell said.
It wasn’t in any way about meeting Treasury supply and it continues not to be. We really don’t think about it.”
Powell then claimed that the demand for Treasuries remains “robust.”
But when you look at the actual numbers, the demand is only robust because the Fed is in the marketplace. It’s unfathomable how Powell could claim with a straight face that the Fed isn’t monetizing the debt even as it monetized 100% of the debt in March and April.
Source: Michael Maharrey | SchiffGold
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