Joey's Blog » debt monetization

US Bailout Pledge up from $7.4 to $11.6 trillion

joey — Fri, 25 Sep 2009 14:43:05 +0000

U.S. bailout has pledged $11.6 trillion as of September 25th 2009 compared to $7.4 trillion as of November 24th 2008. Although down from $12.8 trillion on March 31st 2009.

The Federal Reserve sharing a $5.8 trillion portion as of September 25th 2009. The following table provides details on the announced limit of the capital committed by the Federal Reserve and the current amount used.

All data provided by Bloomberg.

— Amounts (Billions)—
	Limit	Current
All Government Total	11,563.65	3,025.27
———————————————————	————	————-
Federal Reserve Total	5,870.65	1,590.11
Primary Credit Discount	110.74	28.51
Secondary Credit	1	0.58
Primary dealer and others	147	0
ABCP Liquidity	145.89	0.08
AIG Credit	60	38.81
Commercial Paper program	1,200.00	42.44
Maiden Lane (Bear Stearns assets)	29.5	26.19
Maiden Lane II (AIG assets)	22.5	14.66
Maiden Lane III (AIG assets)	30	20.55
Term Securities Lending	75	0
Term Auction Facility	375	196.02
Securities lending overnight	10.42	9.25
Term Asset-Backed Loans (TALF)	1,000.00	41.88
Currency Swaps/Other Assets	606	59.12
GSE Debt Purchases	200	129.21
GSE Mortgage-Backed Securities	1,250.00	693.6
Citigroup Bailout Fed Portion	220.4	0
Bank of America Bailout	87.2	0
Commitment to Buy Treasuries	300	289.22

Bloomberg – Fed’s Strategy Reduces U.S. Bailout Pledges to $11.6 Trillion – http://joeyconway.com/rpyqmf

Fed Follows Through with Quantitative Easing Program

joey — Wed, 12 Aug 2009 19:04:37 +0000

The two day Federal Reserve Open Market Committee meeting ended today. Fed official press release linked below.

The majority of monetary policy programs stayed the same. Fed Funds rate will continue to be held at a record low of 0 – 1/4% for an “extended period.” The programs to purchase up to $1.25 trillion of agency, GSE (Freddie, Fannie, etc), mortgage-backed securities and up to $200 billion of agency, GSE, debt will continue until the end of 2009 as originally stated in the March 18th announcement.

There has been a change in the program regarding the $300 billion of US Department of Treasury Debt to be purchased, essentially debt monetization. “…the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.”

The purchase of $300 billion Treasuries was originally planned to end by September, but now will be extended an extra month. They word the addition of one month to the Treasury purchase program as follows, “the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.”

The statement then ends with the usual reassurance the Committee will continue to monitor and evaluate its actions based on the changes occurring in the markets and will adjust accordingly.

Federal Reserve Open Market Committee Monetary Policy Announcement Aug 12 2009: http://joeyconway.com/hcrgt6

Bloomberg Article: http://joeyconway.com/w87vt8

Government Debt Monetization Explained

joey — Fri, 31 Jul 2009 15:08:04 +0000

When the government wants to spend money it does not have, there are basically three options, raise taxes, print money or borrow money. The Monetization of Debt involves the issuance of debt or simply known as borrowing money done by the Dept of Treasury and the printing of money done by the Federal Reserve.

Monetizing Debt is essentially the Federal Reserve buying government debt, bonds, issued by the Treasury with money the Fed has printed.

The overall picture: One branch of the government, the Treasury, is borrowing money from the public and then the public is being paid back with printed money by another branch of the government, the Fed. The net result of buying government debt with government issued money is an increase of the money supply which can cause inflation.

General concepts and Step by Step breakdown of the debt monetization process found in this article – http://joeyconway.com/4dbrk5