HSU-T: U.S. Fed isn't tightening even close to the rate it announced
Aug 6, '22
So far this month the daily cash reports from the U.S. Treasury are demonstrating reasonably consistent cash outflows and debt buildup. There is a huge amount of noise in daily cash movements, but the gross debt is close to $30.6 trillion versus a statutory debt limit of $31.38 trillion, compared to an amount of $28.43 trillion on October 1, 2021. So there is not too much headroom with the debt and it looks like the time is near when efforts will be made to obfuscate the real position.
Resetting the debt limit has become something of a charade, with neither political party wanting to be blamed for the federal government's being unable to pay its bills, but negotiations will need to be well underway before too long.
An interesting point that gets lost in the general noise is that the Federal Reserve has now contributed more than $100 billion to the government in the current fiscal year, which is meant mainly to reflect the Fed's earnings on the assets it holds as part of its "quantitative easing" program. Essentially this means that the federal government is paying no interest on the debt owned by the Fed.
The extent of "quantitative tightening" reported by the Fed yesterday is still far below the Fed's initial claim that it would be running off $60 billion of government debt per month and $35 billion of mortgage debt. The Fed's assets appear to have peaked in the weekly reports on March 23 at $9,012 billion and yesterday's report was $8,924 billion. The Fed's holdings of mortgage securities was $2,718 billion and of federal Treasury securities was $5,719 billion as of August 3.
This compares to mortgage securities debt of $2,739 billion and Treasury securities of $5,759 billion as of March 23.
So in 19 weeks the Fed has reduced its holdi ngs of government debt by $40 billion and of mortgage securities by $21 billion -- nothing like the speed promised.
In the five weeks since June 29 there has been a reduction of $44 billion in the Fed's holdings of government securities, from $5,763 billion, and an increase of $9 billion in its holdings of mortgage securities, from $2,709 billion. Again, it looks like there is no real evidence of QT being used in recent weeks at anything like the pace that was suggested. It still seems highly unlikely that QT can be used at anything like the rate forecast, but the next few weeks will reveal more.
That QT is already behind the forecasts recently offered by Fed Chairman Jerome Powell, and that federal government debt is seemingly still increasing reinforces the view that current dollar prices of gold and silver are totally detached from reality.
Robert Lambourne |
