80% of US debt purchased by the Fed in 2009?!

I didn't say they were infallible. I just said that they made a claim that they undoubtedly got from a source while amateurs here think they can browse through the Internet for a few minutes and disprove what they say.

 

Of course... How could I be so blind!! It's all one huge massive conspiracy, isn't it? An audit isn't an audit, the Fed has been buying trillions of USTs (as well as equities, as the PPT) on the sly, without anyone detecting a single shred of evidence, and Britney is an alien. Thanks for clearing that one up, I finally see the light!

Overwhelming majority of Congresspeople are famous idiots, who a) got us into this mess in the first place; b) have a political incentive to mis-direct the public and avoid taking any responsibility; c) continue to play their political games, while the good ol' USA is going down the drain. So tell me again why I should listen to what the members of congress are discussing?

How do you know Grayson is very bright? Do you know with absolute certainty that he's the same guy that graduated Harvard summa cum laude? What if, as part of a Republican conspiracy, the original Alan Grayson been replaced by an evil doppelgänger? Prove that it's not the case and there's no conspiracy. And, by the way, we still haven't concluded our Britney business ...

Forgot that I need to respectfully address you as Mr. Professional, seeing as how we're all clueless amateurs here.

 

I don't think trying to trivialize an issue that a lot of people consider to be a very serious situation assists your cause in terms of trying to educate people.

In terms of the bigger picture, nobody needs to prove that the Fed are the architects of some kind of conspiracy, as if enough people begin to believe that "something is going on" which the Fed are responsible for and become determined for change to occur, take to the streets and begin rioting en masse (homeless working class backlash), society as we know it could become a very unpleasant place in a very short period of time. If you don't find that possibility remotely alarming then I quite simply don't understand your thought processes, as I certainly do find it alarming.

 

No. Where did I say that? I am disputing the #s. They bought 1T of agency MBS and 300B of treasuries.

The fed did not buy 80% of the deficit though.

 

With the increase in M1 last year, it is plausible...I don't think likely.

 

The female announcer in the CNBC video in my original post stated that PIMCO did an analysis that determined that 80% of the $1.5 trillion of new US debt issued in 2009 was purchased by the Federal Reserve. I appreciate the input from those of you who know a lot more about this subject than me, especially MartinG, who works in the industry.

I tried to find something on the internet about the PIMCO analysis she mentioned, but was unsuccessful.

Thus far, I have concluded from the discussion that it is highly unlikely that the Fed truly purchased anything close to 80% of the US debt, which is certainly reassuring.

However, there has been a lot of discussion regarding the transparency and trustworthiness of the Fed. Since many of the Federal Reserve and Treasury officials have direct ties to the financial industry, especially Treasury officials who have worked for companies such as GS, a lot of people still believe that the Fed and the Treasury bailed out all of their buddies in the financial industry at the expense of the US taxpayer. I know, they paid back the TARP money, but I don't think that GS paid back the money they got from AIG. In addition, GS and MS were both granted holding company status by the Fed, allowing them to take advantage of the TARP money, while many smaller banks have been allowed to fail.

My question, especially for MartinG, is as follows: Do you believe that the decisions of the Fed and the Treasury, such as granting holding company status to GS and MS to allow them access to TARP money during a financial crisis while letting their biggest competitors (Lehman Bros and Merrill Lynch) as well as smaller banks fail, are influenced by extremely wealthy individuals who profited enormously from the use of TARP money? Or do you believe that these have all been rational decisions made without preferential treatment done for the best interest of our country? A lot of people believe that super-rich individuals, especially those associated with GS, are pulling the strings of the Fed and Treasury for their own financial interest at the expense of the American taxpayer. Is this ridiculous conspiracy theory or may there be some basis in fact?

 

No not all audits are alike. Fed Monetary policy has never been Audited.

Here is some detail about the bill they are trying to pass now about conducting the first audit of this type of the Fed.


http://www.bloomberg.com/apps/news?pid=20601087&sid=aqe8koHXjMrU&pos=5

 

Rightie-o, this was fun, but all fun has to come to an end, sooner or later... It was a pretty brutal day for me, so I am not in the mood to keep the entertainment going.

wavel, I am not trivializing the issue. I am merely making a rather obvious point about conspiracy theories.

jfc, if you think it would be a good idea to allow Congress to audit and influence monetary policy decisions, we don't really have anything to discuss. May god help us all, if people like you have their way.

Again, peace, y'all...

 

I think I found the source of that 80% "purchased" by the Federal Reserve.

From Bill Gross' monthly investment outlook, Jan 2010, "Let's get Fisical"

Here’s the problem that the U.S. Fed’s “exit” poses in simple English: Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but as shown in Chart 2, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve. Of course they purchased more 30-year Agency mortgages than Treasuries, but PIMCO and others sold them those mortgages and bought – you guessed it – Treasuries with the proceeds. The conclusion of this fairytale is that the government got to run up a 1.5 trillion dollar deficit, didn’t have to sell much of it to private investors, and lived happily ever – ever – well, not ever after, but certainly in 2009. Now, however, the Fed tells us that they’re “fed up,” or that they think the economy is strong enough for them to gracefully “exit,” or that they’re confident that private investors are capable of absorbing the balance. Not likely.

Chart 2



http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Let’s+Get+Fisical+January+2010.htm


So correct me if I'm wrong, but the Fed bought Agency debt (a lot) from investors that basically wanted to "exchange" agencies for treasuries. Thus, but for the agency debt purchases by the Fed, the treasuries would not have been sold. A logical conclusion, no?

So my question is - how did the Fed buy the agency debt?

 

The Fed has bought about 1T of agency mbs debt so far. they print money to do that, and expand the balance sheet. Then they've trapped that money from being circulated, by essentially setting policies to disincentize lending.


The Fed buying agencies from Pimco, enabling Pimco to buy treasuries does not count as the Fed buying treasuries. Sorry. That was Pimco buying treasuries. And I'm sure those purchases (given his outlook) were weighted to the short term. So he'll be rolling over.