The PJ Tatler

Math am Hard

I know it sounds impossible at first blush, but the so far this year Fed has bought more federal debt than the Treasury has actually issued. Here’s the New Stimulus:

By the close of business on Wednesday, Feb. 6, according to the U.S. Treasury, the total federal debt had climbed to $16.4799 trillion—an increase of $47.2 billon for the calendar year.

At the close of business on Jan. 2, the Federal Reserve had owned $1.661 trillion in U.S. Treasury securities. By the close of business on Feb. 6, it owned $1.7172 trillion—an increase of $51.1 billion for the calendar year.

Thus, the Federal Reserve’s purchases of U.S. government debt in this calendar year have exceeded the Treasury’s net debt issues by about $3.9 billion.

And here’s how it works:

f the Fed continues to purchase $45 billion in additional federal debt each month in 2013 it will buy up another $540 billion in federal debt this year alone.

The CBO currently estimates that the federal deficit for fiscal 2013 will be $845 billion. If the Fed were to buy debt at a pace of $540 billion a year, and the Treasury were to issue it at $845 billion per year, the Fed would be buying the equivalent of about 64 percent of all debt the government issued.

The Fed’s balance sheet recently surpassed $3 trillion. That’s a three followed by twelve zeroes, along with a few billion-dollar bills Uncle Ben keeps stashed under the sofa cushions or wherever. Nearly a third of those trillions is just in mortgage-backed securities nobody in their right minds would buy. And the number is growing. The Fed’s balance sheet is on track to grow to $5,000,000,000,000 over the next few years, including multi-multi-billions more in those mortgages.

So it’s going to be a grand old time watching Bernanke try and sell of all those assets, when the recovery finally arrives and he has to Hoover up all that excess liquidity he’s been pumping into the economy.

What do you think is going to happen to the value of your assets and securities when Bernanke holds his Five Trillion Dollar Fire Sale?