Fed Treasury Holdings Pass $1.5 Trillion

Tyler Durden's picture

It seems like it was only yesterday that the Fed passed the $1 trillion mark in total Treasury holdings (actually it was on that memorable Winter Solstice of 2010 but who's counting). Well it is not even 5 full months later, and the Fed has already added $500 billion in holdings. Following today's $6.94 billion Pomo, total Fed holdings of US Treasurys have now passed $1.5 trillion (which is ironic because the net new cash tendered to the Treasury per total Bond, Note and Bill issuance and redemption in 2011 through the most recent settled auction is $350 billion, in other words the Fed has funded about 140% of the total Treasury cash needs). As a reminder there is just under 6 weeks left until QE2 ends, at which poin the Fed's Treasury holdings will be about $1.6 trillion, and the Treasury will be without its primary (over and above the maximum) source of capital.

The Fed's lead over China continues. It is probably irrelevant that official Chinese holdings of US debt have now declined for the 5th consecutive month.

And here are the details of the most recent weekly Fed balance sheet power expansion exercise.

  • Total holdings increased by $21.2 billion in the week, as Treasury holdings increased by $29 billion, offset by $7.8 billion in MBS/Agency repayments.
  • Excess reserves declined by $8 billion, even as the Adjusted Monetary Base increased once again, albeit this is delayed so rather irrelevant.
  • Total foreign custodial holdings declined by $11.1 billion primarily due to a $16 billion reduction in Agency debt.

For those concerned about the surge in excess reserves in recent weeks, as we have noted there has been nothing odd about this (the SFP unwind was the primary driver). In fact, the cumulative change in reserves and Fed asset holdings is now precisely zero, meaning the two are in perfect alignment.

Repayments of Agency and MBS holdings continue to be at a very slow rate. Once again, just as we expected.

And lastly, while "Other Fed Assets" dipped in the last week by $6.3 billion, although this appears to be a bimonthly event, where there seems to be a reindexing event occuring. Look for a jump in this series next week.

Source: H.4.1, TIC

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Hard1's picture

Exponential bitchez!!

Herd Redirection Committee's picture

Left hand of government, meet your new best friend, the right hand of government.  Why is the right hand severed at the shoulder, and in the hands of an international banking cartel, I cannot say definitively!

But I can say, check out the latest from the Capital Research Institute "United States of Corruption & Injustice"

http://www.capitalresearchinstitute.org

America isn’t the only country with serious problems, but the US dollar is still the world’s reserve currency (for now), so what happens in America invariably impacts the entire world.  As such, its problems are typical of those found across the entire world.  Problems such as:

  • Incredible disparity in income and wealth between the poorest and richest members of society.
  • Unbelievable levels of injustice, with two sets of rules.  The one you get depends on how expensive your team of lawyers is.
  • Large amounts of financial fraud, following the death of free markets
  • Government in devote service to ‘special interests’, AKA Corporatism, instead of the people

 The nation has completely lost sight of its founding ideals...

tired1's picture

I've asked before on other posts and I asking again. What is the end game? How does the Beast intend to extricate itself? Is history going to rhyme?

Gene Parmesan's picture

You were supposed to write "Sure."

 

Rhyme fail.

MyKillK's picture

Retired General Wesley Clark said that within weeks after 9/11, the gameplan was to take out 7 countries in 5 years.

 

http://www.youtube.com/watch?v=SXS3vW47mOE

spartan117's picture

Iraq, Afghanistan, Libya, Pakistan...

Who's next?  Iran?  Syria?  Who's the seventh? 

MyKillK's picture

Pakistan wasn't on the list (at the time)

 

It was Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and then Iran.

tickhound's picture

Venezuela, Yemen and anyone else who doesn't play Monopoly.

tired1's picture

War with China could reduce US Treasury debt, the Fed could just create some more to fill in the void.

Captain Planet's picture

didn't you catch the haarp attack on the foxconn factory?

Gene Parmesan's picture

Surprising that the General hasn't had any boating accidents yet.

NOTW777's picture

unnecessary - no one listens to him. even bill fired him

MyKillK's picture

The end game is a new reserve currency being created and the US economy dying a slow painful death.

LawsofPhysics's picture

...and slowly becomes just another third world country.  So get yours while you can because "on a long enough timeline the survival rate for everyone drops to zero".

Freewheelin Franklin's picture

"The end game is a new reserve currency being created and the US economy dying a slow painful death."

 

^^This^^

FLETCH's picture

Simple:  anyone who owns paper is going to get paid back 10 cents (max) on the dollar. 

Doesn't matter what type, all paper assets are ultimately a claim on someone else's future output.

We have a bubble in claims on a shrinking amount of real human output.  We can play games with the financial (accounting) system for a while, but at some point the work output needs to pay the creditors.  

 

The current "paper era" will end in tears..  then we'll get back to doing real work and wondering what the hell we were thinking....

 

FLETCH's picture

Simple:  anyone who owns paper is going to get paid back 10 cents (max) on the dollar. 

Doesn't matter what type, all paper assets are ultimately a claim on someone else's future output.

We have a bubble in claims on a shrinking amount of real human output.  We can play games with the financial (accounting) system for a while, but at some point the work output needs to pay the creditors.  

 

The current "paper era" will end in tears..  then we'll get back to doing real work and wondering what the hell we were thinking....

 

FLETCH's picture

Simple:  anyone who owns paper is going to get paid back 10 cents (max) on the dollar. 

Doesn't matter what type, all paper assets are ultimately a claim on someone else's future output.

We have a bubble in claims on a shrinking amount of real human output.  We can play games with the financial (accounting) system for a while, but at some point the work output needs to pay the creditors.  

The current "paper era" will end in tears..  then we'll get back to doing real work and wondering what the hell we were thinking....

CH1's picture

There are two choices for the end game: 

1. Denial. They will ride it out to the bitter end, al la the Western Roman Empire.

2. Global government. Let the thing crash, then REALLY whip up the publicity machine and ride in with the new "man with a plan" to erase the fractuous foolishnesses of the past and bring in a modern, technological, efficient super-state. Throw in a new currency and a base level of welfare for everyone.

Actually, the 'plan' is probably 1 + 2.

HamyWanger's picture

The Honorable Dr. Ben S. Bernanke has made an incredible job so far, in financing a gargantuan government deficit with printed money leveraged x10 by the PDs without producing a single % of consumer inflation. 

LawsofPhysics's picture

or a single % of real added value.  Can price discovery be ignored forever?  Stay tuned.

LawsofPhysics's picture

Ah come on, entertainment purposes only, I promise.  Even a train chimp won't dance if you don't feed him from time to time.

sabra1's picture

ask the minkey, he's the businessman!

monkeys.pick.bottoms's picture

I am pretty certain Mr. HamyWanger is just pulling our leg with all these comments:D

faustian bargain's picture

On a long enough timeline, the number of ZH posters who know HamyWanger is a parody of a troll drops to zero.

Captain Planet's picture

When did HarryWags kill himself?

I guess the real answer is many times over

spartan117's picture

Treasury Debt, the real bubble.

Keri at Bankster Report's picture

And why can't people see this?  It is so apparent.

CH1's picture

They don't want to see it. That would require them to make a choice: Either to be a coward or a hero. They flee such choices.

plocequ1's picture

Gold is up, DXY is up, Stocks are down, oil is up... On a technical analysis, It looks like one big lump of shit

FunkyMonkeyBoy's picture

Boy oh boy, the FED must be one of the wealthy institutions on the planet... they even lend money to governments! Anyone know where they got their wealth from? Did they make a genius product/invention in the past which revolutionized the world and made them hugely wealthly that they could lend money to governments and buy debt from countries as big as the USA... Boy oh boy, they must have gold and silver by the truck load down there at the FED.

LawsofPhysics's picture

Even the Fed won't fight the Fed.  What happens if the Fed defaults? 

sabra1's picture

you're forgeting pensions, ss, 401ks. it's all your money (i'm canadian) and you let them take it without a fight? did i subscribe to CNN for naught?

Captain Planet's picture

+1

CNN is great for the obscene

Mom botoxing 8 year old girl?

Our society fell apart a long ago, and CNN is the freak show

MyKillK's picture

How much longer before the Fed holds more treasuries than the rest of the world combined?

tickhound's picture

We'll be hitting the nitrous button soon and blowing the competition away... A 1st place finish to make us all proud.

Binko's picture

I have a very simple question. If the Federal Reserve is buying US Treasurys, what are they buying them WITH? I assume they are buying them with borrowed money. But who do they borrow from? Member banks? And do these banks then borrow from the Feds in order to lend to the Feds? 

Funds are created out of thin air at some point. But how does it all get recorded on the books?

Looking at the process from the outside it looks as if Vinnie and Charlie are both broke, so they get together and agree to lend each other $1000 bucks and then go off happy because now they both are flush. 

HamyWanger's picture

The money is created ex nihilo since the start. The FED buys back USTs from the primary dealers at a privileged price in fresh cash money. 

If you believe USTs have the intrinsic value at which the FED buys them back (i.e. if you're a Keynesian liberal like me), then no money is really printed. But for redneck libertarians, USTs have a real value close to zero, so it's like money has been printed out of thin air. 

akak's picture

You should have chosen the handle "HamishWanger", and then you could have delivered all your mock posts in Scots, and had us all REALLY confused!

OccamsNationalRazor's picture

then Rutledge would've had to shoot him.

css1971's picture

Keynsian Liberals don't believe in Intrinsic value. You have just outed yourself as a closet Austrian.