Slide deck from a May 11, 2020 webinar on who is buying the federal debt resulting from the COVID-19 economic relief efforts. Watch the video of the webinar at http://www.crfb.org/events/6-trillion-dollar-question-who-will-buy-our-debts.
6. CRFB.org
The U.S. Is Issuing Trillions in New Debt
Billions of Dollars of Net Debt Increases
Source: Treasury Department
-$12
$9
-$14
$23
$386
$212
$172
$124
$65 $42
$200
$262
$1,379
-$200
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20
6
7. CRFB.org
How is Higher Federal Debt Financed?
1. Greater savings (actors spend less and buy bonds)
2. Asset reallocation (actors buy fewer stocks and private
investments and more government bonds)
3. Foreign bond purchases (foreign governments, central
banks, individuals, or companies buy U.S. bonds)
Foreign purchase of private investment can also spur asset reallocation
4. Central bank purchases (the Fed buys bonds)
7
8. CRFB.org
Who Is Buying Our Debt?
Source: Federal Reserve Board of Governors, Treasury Department
8
Japan
China
Other Foreign
State & Local Governments
Mutual Funds
Depository Institutions
Other Domestic Holdings
Federal Reserve
$0
$4
$8
$12
$16
$20
Sept. 2019
Trillions
FOREIGN
40%
DOMESTIC
47%
FED
13%
9. CRFB.org
Who Is Buying Our Debt?
Japan Japan Japan
China China China
Other Foreign Other Foreign Other Foreign
State & Local Governments
Mutual Funds
Depository Institutions
Other Domestic Holdings
Domestic Holdings Domestic Holdings
Federal Reserve Federal Reserve Federal Reserve
$0
$4
$8
$12
$16
$20
Sept. 2019 Dec. 2019 Feb. 2020
Trillions
Source: Federal Reserve Board of Governors, Treasury Department
9
10. CRFB.org
Who Is Buying Our Debt?
Japan Japan Japan
China China China
Other Foreign Other Foreign Other Foreign
State & Local Governments
Mutual Funds
Depository Institutions
Other Domestic
Holdings
Domestic Holdings Domestic Holdings
Foreign & Domestic
Holdings
Federal Reserve Federal Reserve Federal Reserve
Federal Reserve
$0
$4
$8
$12
$16
$20
Sept. 2019 Dec. 2019 Feb. 2020 Apr. 2020
Trillions
Source: Federal Reserve Board of Governors, Treasury Department
10
14. CRFB.org
Feb. 26th:
$4.16 trillion
May 6th:
$6.68 trillion
$0
$1
$2
$3
$4
$5
$6
$7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mortgage Backed
Securities
U.S. Treasuries
Other
Quantitative Easing or Debt Monetization?
Trillions
Source: Federal Reserve Board of Governors
$4.02
trillion
$1.61
trillion
$1.06
trillion
14
15. CRFB.org
Mortgage Backed
Securities
U.S. Treasuries
Other
Quantitative Easing or Debt Monetization?
Trillions
Source: Federal Reserve Board of Governors
-$7
-$5
-$3
-$1
$1
$3
$5
$7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Other Liabilities
Non-Reserve
Deposits
Reserve Deposits
Currency
Treasuries
Mortgage-Backed
Securities
Other Assets
15
16. CRFB.org
Quantitative Easing or Debt Monetization?
Nominal Interest Rates
0%
5%
10%
15%
20%
25%
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020
Past Recessions
Effective Federal Funds Rate
Source: Federal Reserve Bank of New York 16
17. CRFB.org
The U.S. Central Bank Isn’t Alone
Billions of Monthly Net Purchases
-$200
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Federal Reserve
European Central Bank
Bank of Japan
Bank of England
Bank of Canada
Source: Bloomberg Economics
17
18. CRFB.org
Will The Fed Keep Buying?
The Federal Government will likely issue $2 trillion more in debt
over the next five months (FY2020), alone
Six weeks ago, the Federal Reserve has said they would buy up to
$75 billion in Treasuries per day.
But purchases are slowing - The Federal Reserve has been
tapering purchases and will buy just $7 billion in Treasuries per
day this week
Meanwhile, China has threatened to reduce it’s debt holdings…
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