The US Has Already Monetized $4.4 Trillion of Debt, Four Times as Much as Is Held by China

In March and April alone more debt was monetized ($1.5 trillion) than is held by China ($1.1 trillion)

The US government has borrowed $4.2 trillion in the last 12 months, pushing the total national debt to over $27 trillion. In order for Uncle Sam to borrow, somebody has to lend. So, who is buying all of these government bonds? Foreign and domestic investors, commercial banks and US government entities all buy US debt, but increasingly, the Federal Reserve is backstopping the market and making this borrowing binge possible.

In Q3, the Fed bought $240 billion in US Treasuries. That brought its total Treasury holdings to $4.44 trillion. The central bank now holds a record 16.5% of the US debt load.

In the last 12 months, the Fed has doubled its holdings of Treasuries, adding a staggering $2.4 trillion in US government bonds to its balance sheet – most of that since March. The Fed’s total share of US debt has spiked from 9.3% in Q1 to 16.5%.

In March and April alone, the Fed bought $1.56 trillion in Treasuries. During that same time period, the US Treasury issued $1.56 trillion in bonds. In other words, the Fed effectively monetized 100% of the new federal debt accumulated in March and April.

Without the Fed soaking up trillions in Treasuries, the glut of bonds on the market would crash the price and push interest rates up – something the Federal Reserve cannot allow to happen. So, the Fed monetizes the debt via quantitative easing. The central bank buys bonds on the open market with money created out of thin air. This creates artificial demand and pushes interest rates artificially low.

Without the Fed’s intervention in the bond market, it would be virtually impossible for the US government to borrow money at the current level. Interest rates would have to soar in order to entice average investors to buy US Treasuries. The market would collapse.

When the Federal Reserve launched quantitative easing for the first time in the wake of the 2008 financial crisis, then-Fed ChairBen Bernanke promised that it was not debt monetization. He called it a temporary emergency measure and promised the central bank would sell the Treasuries it was adding to its balance sheet after the crisis passed. He said the difference between QE and debt monetization was that the Fed was not providing a permanent source of government funding.

We know better today.

The Fed ballooned its balance sheet from about $880 billion before the Great Recession to over $4.5 trillion by the time it finished the third round of quantitative easing. When it eventually did try to shrink its balance sheet and normalize interest rates years later, the stock market tanked (in the fall of 2018) and the central bank quickly abandoned balance sheet reduction. It was only able to shrink its balance sheet to around $3.7 trillion before doing a complete 180 and launching QE (that it claimed wasn’t QE). By the time the pandemic hit, the Fed balance sheet was already back over $4 trillion.

As we have said before, the Federal Reserve had no exit strategy from its extraordinary monetary policy in 2008 and it certainly has no exit strategy today.

Federal Reserve Chair Jerome Powell insists the Fed isn’t monetizing the debt. During testimony before the Senate Committee on Banking, Housing, and Urban Affairs back in June, Powell flatly denied the central bank is buying assets in order to facilitate the Treasury’s sale of debt. “That certainly is not our intention,” Powell said.

It wasn’t in any way about meeting Treasury supply and it continues not to be. We really don’t think about it.”

Powell then claimed that the demand for Treasuries was “robust.”

But when you look at the actual numbers, the demand is only robust because the Fed is in the marketplace. It’s unfathomable how Powell could claim with a straight face that the Fed isn’t monetizing the debt even as it effectively monetized 100% of the debt in March and April.

The Fed has slowed its Treasury purchases somewhat since April, but as the Q3 numbers show, it remains a huge player in the market. And as the US government continues to borrow to fund its massive deficits, there is no doubt it will continue to be one.

The reality is the Fed is backstopping US government borrowing. Were the Fed not in the marketplace, the federal government would find it impossible to sell all of these bonds. With no sign that spending will ever end, how will the Fed ever exit from these QE programs? This is why Peter calls it QE infinity.

The national debt is not going to stop growing faster than the economy. That’s just not going to happen. I mean, not until there’s a crisis to force it. But as long as we keep on going the way we’re going, the debt is always going to grow faster than the economy, which means the Fed is always going to have to monetize these bonds. So, I don’t even see where there’s ever going to be a point in time where the Fed can stop buying, because the minute the Fed stops buying, who is going to replace the Fed?”

Source: Schiff Gold

  1. plamenpetkov says

    once again, this simply proves what a total fake the so called “Capitalist” system is. The whole “Capitalist” system is based on nothing more than lies and exploitation. Without anybody or anything left to exploit it collapses. But of course, nobody has the guts and/or the smarts to point that out.

    1. Ron Liebermann says

      I disagree. Capitalism isn’t perfect, but it’s the best deal going. It’s funny that leftists consider making a profit “exploitation” but if the government taxes people at a high rate, that’s not exploitation. What’s the difference? Companies hire employees, and then hope to manage their activities in such a way as to cover the salary expense, and then some. So the employee is actually paying a company for an opportunity to make money. The employer works on commission. And nobody forces an employee to remain at a job. Everybody shops around for the best deal. When looking for a job, most people consider the salary, the location, the industry, the benefits, etc. In a communist country, people aren’t allowed to choose a job. They are assigned to a job, and that’s it.

      The problem with Capitalism is that it tends to allow a great deal of financial inequality. First, black people are lazy, and they’re not very smart. That puts them at a huge disadvantage. Then you have “Crony Capitalism” which is rampant in America. It’s the Mafia, the Unions, and Washington D.C. all rolled into one. Getting rid of that problem means getting rid of the unions, the Mob (such as the Pelosi Crime Family) and defaulting on our outstanding national debt. The kids didn’t borrow that money. And nobody owes the military, or the unions one penny in pensions. Again, the kids didn’t promise that money. With zero debt on the books, and no social security or medicare or pension expenses, Capitalism will be able to do what its supposed to do: create a huge social network of friends, who sometimes compete and sometimes cooperate. But in a capitalist country, there’s no room for foreigners; because that interferes with the social process of creating a healthy, cohesive culture.. A robot is not a friend. Nor is Facebook. Nor is Tyrone the “African American”.

      America needs to expel around forty percent of its population from the country. The Hispanics, the Africans, the Indians, the Asians, and the Redskins. After they’re gone, the next step is to go to the Nursing Homes, and release the old people from their bondage. Washington has no money for them, and neither do their children. So then we’ll have a much safer and friendlier country, which is a great starting point. The kids will learn to mow grass, to buy and sell and trade, and also how to save-up for something they want. After twenty years, they’ll be in charge, knowing that there’s always something for people to do; as long as the country isn’t crippled by a money hungry government, old people, blacks, communists, feminists, and pharmaceutical companies. As adults, it’s our job to give them that new beginning. So if the Fed wants to print a zillion dollars, let them. That will take us one step closer to a fresh start.

  2. h5mind says

    Well over 95% of U.S. dollars are never printed- they exist only on Federal Reserve computers. So all of this “lending and borrowing” we read about is bogus. The U.S. Treasury could just as easily use their own computers to generate any amount they needed right out of thin air. No loans, no interest, no multi-trillion dollar deficits, no banksters running our government.

  3. Bob says


  4. Raptar Driver says

    United States is running a classic pyramid scheme.
    It is anyone’s guess as to when it will run out.

  5. disqus_3BrONUAJno says

    If “The US Has Already Monetized $4.4 Trillion of Debt,” what happened to the inflation?

    1. Antipodean58 says

      Asset price inflation of the stock market to number well beyond the true valuation of the companies.

  6. ke4ram says

    This is criminal no matter how you look at it. Hell, you might as well counterfeit in your basement,,, whats the F-N difference. They have no intention of paying it back so they’re just printing it up.

    Only that last 2-3 generations are stupid enough to believe government can print to its hearts desire without consequence. Hell, even Martin Armstrong,,, economist extraordinaire,,, implies it won’t hurt a thing. Of course history states otherwise but hey,,, we’re smarter,,, we have computers,,, yes we have found the secret of turning lead into gold. You wanna know what it is? Well, normally I wouldn’t divulge such things but gee, just this once! Okay, here goes….

    They load the lead into their weapons and rob the wealth from (here it comes)…!. Yes, that’s the secret and it works until it don’t.

    So, while you are getting your $1200 checks they are getting trillions and screwing all of us. The only good thing is soon the dollar will be history. They’ll trade them in for the new currency. You will be limited on how much you can exchange. Yes, those nice folks you elect in your fake elections will screw you once more. History never, ever lies.

    1. disqus_3BrONUAJno says

      I doubt that much, if any, of it was ever physically printed, existing only as ledger entries in the Fed’s computer.
      According to treasury dot gov/resource-center/faqs/Currency/Pages/edu_faq_currency_production.aspx , “During Fiscal Year 2014, the Bureau of Engraving and Printing delivered approximately 6.6 billion notes to the Federal Reserve, producing approximately 24.8 million notes a day with a face value of approximately $560 million.”
      If the $4.4 trillion had been printed, it would have taken 177419.354839 days at the rate of 24.8 million notes a day, assuming I haven’t botched a calculation, FWIW.

    2. plamenpetkov says

      haha, how silly you are. the fed has been in existence since 1913, so the criminality has been around ever sicen your grandparents were alive. But NOW you’re complaining? It was fine for a long time but NOW it’s criminal? shut the fuck up, asshole.

      1. Tim says

        tsk,tsk….ameriCuns. your expiry date is near curse all you can

Leave A Reply

Your email address will not be published.