Fed’s Treasury Purchases

Monetizing the Debt

Frequently touched on here at SwiftEconomics.com, the Federal Reserve has been purchasing Treasury debt at an unprecedented clip. Just how much Treasury debt? The following graph summarizes activity over the past four months:

<em>Source: Federal Reserve Bank of Atlanta</em>

Source: Federal Reserve Bank of Atlanta

Basically, monetizing debt is a process of lending money to one’s self. The government spends, proceeds to write an IOU (debt contract in the form of a T-bill) and hands it to the Federal Reserve. When the central bank purchases the debt from the public, more money is put into circulation. With an increased money supply and fractional reserve banking, the public is left with high-powered money.

News & Notes:

· The Fed purchased $7.5 billion of Treasury securities on July 14 and tentatively plans to make a TIPS purchase in an operation on July 16.

· The Fed has said it will buy up to $300 billion in Treasuries by autumn.

1 Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

− five = 2

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Enter your email address to get the eBook for free!
Click the image to Purchase Economic Lies, Damned Lies and Statistics only 99 cents!
Click the image to download Stabilizing Hyperinflation: Comparing the German and Hungarian Response

Get the eBook