A fascinating set of circumstances has been created with the Fed’s ballooning of their balance sheet. With the end of QE2 in sight and, if we believe what we hear, the ‘non-probability’ of QE3 materializing, I believe that we shall experience some very interesting times ahead. With our country’s debt level, governmental spending habits, growing level of unfunded liabilities and our apparent proclivity to ignore peril until it is upon us, one could not ask for much better drama – the ultimate question being; how will the final act of this traveling show be resolved and how will that effect our country! Also, what will history have to say about our ‘unique’ times?
prb
June 9, 2011
prb
June 9, 2011
The Fed Is the Biggest Holder of US Debt
This isn’t new news, but today’s flow of funds report has one nugget that is getting some attention today, so we might as well offer this reminder: The Fed is the world’s biggest holder of US debt.
UniCredit economist Harm Bandholz put together this chart that puts it in perspective.
China is not surprisingly the second-biggest holder of debt. In one hopeful sign, U.S. households are the third-biggest holders. This group includes hedge funds, so we’re not exactly talking the US version of Mrs. Watanabe here.
But you could argue that hedge funds represent wealthy households. And you could more easily argue that US households still hold fewer Treasurys than they did in the past. The hope is that their appetite for Treasurys picks up as they age, helping to make up for some of the demand that will inevitably fade from China and Japan in the years to come.
UniCredit economist Harm Bandholz put together this chart that puts it in perspective.
China is not surprisingly the second-biggest holder of debt. In one hopeful sign, U.S. households are the third-biggest holders. This group includes hedge funds, so we’re not exactly talking the US version of Mrs. Watanabe here.
But you could argue that hedge funds represent wealthy households. And you could more easily argue that US households still hold fewer Treasurys than they did in the past. The hope is that their appetite for Treasurys picks up as they age, helping to make up for some of the demand that will inevitably fade from China and Japan in the years to come.
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