Earlier this year the Wall Street Journal reported that the Federal Reserve is buying 61% of US debt. That’s up from 0.9% before the financial crisis.
Yes, this is boring financial news. Bear with me here.
Consider this headline earlier today at MarketWatch, 10 Year Treasury Notes Hold Gains after Auction.
Basically, the Federal Reserve is printing money to buy 61% of the Treasury bills sold to finance the U.S. debt. The Fed has a longstanding policy of buying $45 billion in T-bills every month. 61% of that over a year equals $330 billion.
So, (1) the Fed prints money, (2) the Fed buys T-bills, which become (3) part of their portfolio.
And so, (4) the U.S. Treasury pays the Fed 3% for those notes, which the Fed (a group of the largest U.S. banks) uses to line their pockets.
And you thought the bailout of the big banks was over? Doh!
Image courtesy of FX Street dot com
