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80% of US debt purchased by the Fed in 2009?!
- Thread starter DrPepper
- Start date
Quote from scriabinop23:
Quote from Misthos:
I wouldn't discount this either. We live in a world of lies, always have, but we're reaching new heights.
Look at British banks - they're still a mess and were recently downgraded. They're leading this recent charge of UST purchases? I would doubt it. [/QUOTE
All we need to do is allocate an increase of 450B domestic treasury holdings.. Lets get the data and reconcile this.
Thats great but the comment by cnbc that the US is buying 80% of the debt went unchallenged by the two guests. In fact it was said as if it was common knowledge.
Quote from jficquette:
Thats great but the comment by cnbc that the US is buying 80% of the debt went unchallenged by the two guests. In fact it was said as if it was common knowledge.
We've just shown with some simple research that there is only 450B left out of 1300B issuance, which is 35%. Sounds like the two guests just didn't know much (sorry I wasn't watching cnbc at the time).
I think it is believable private investors took up the rest. Bond fund inflows were $396B in 09.
http://www.pionline.com/article/20100114/DAILYREG/100119929
Then think about all of the corporate debt that was issued. Those companies that are sitting on cash they received from investors likely bought up treasuries as well, to get a return on some of the funds they've raised (but won't immediately use).
Corporate balance sheets are strong all over the world, and I imagine they buy up plenty of short term to intermediate UST debt. (0-5 yr)
My gut feeling tells me the US corporate cash hoard is as substantial (if not moreso) a funding source for the US govt debt than the private investor.
This would be something to research.
(Reuters) - U.S. companies hurt by the global credit crisis are continuing to hold more cash, even as the economy begins to show signs of improvement, the Wall Street Journal said, citing its analysis of company filings.
In the second quarter, the 500 largest non-financial U.S. companies by total assets held about $994 billion in cash and short-term investments, or 9.8 percent of their assets, according to the paper's analysis of corporate filings.
http://www.reuters.com/article/idUSTRE5A10QK20091102
Just from that headline, we can now easily understand why 0-interest rate t-bills are possible. As well, between 396B of bond fund inflows and this 994B of money in cash equiv., it is now easy to understand how we can fill that 450B gap pretty easily, for 2009 at least.
The gap will be appreciably larger in 2010, though. I think it is time the Fed unleashes the money multiplier effect on the 1.1B of excess reserves to ramp up the money supply to continue financing this debt.
In the second quarter, the 500 largest non-financial U.S. companies by total assets held about $994 billion in cash and short-term investments, or 9.8 percent of their assets, according to the paper's analysis of corporate filings.
http://www.reuters.com/article/idUSTRE5A10QK20091102
Just from that headline, we can now easily understand why 0-interest rate t-bills are possible. As well, between 396B of bond fund inflows and this 994B of money in cash equiv., it is now easy to understand how we can fill that 450B gap pretty easily, for 2009 at least.
The gap will be appreciably larger in 2010, though. I think it is time the Fed unleashes the money multiplier effect on the 1.1B of excess reserves to ramp up the money supply to continue financing this debt.
Quote from scriabinop23:
(Reuters) - U.S. companies hurt by the global credit crisis are continuing to hold more cash, even as the economy begins to show signs of improvement, the Wall Street Journal said, citing its analysis of company filings.
In the second quarter, the 500 largest non-financial U.S. companies by total assets held about $994 billion in cash and short-term investments, or 9.8 percent of their assets, according to the paper's analysis of corporate filings.
http://www.reuters.com/article/idUSTRE5A10QK20091102
Just from that headline, we can now easily understand why 0-interest rate t-bills are possible. As well, between 396B of bond fund inflows and this 994B of money in cash equiv., it is now easy to understand how we can fill that 450B gap pretty easily, for 2009 at least.
The gap will be appreciably larger in 2010, though. I think it is time the Fed unleashes the money multiplier effect on the 1.1B of excess reserves to ramp up the money supply to continue financing this debt.
This says that the top 500 companies had a net build of $150 Billion during 2009.
It also includes money they put into money market funds.
We are still missing a ton of money.
FWIW, companies with truely excess money would be more apt to buy back stock then buy Treasuries at this time.
PS. There was a video of the cnbc interview posted a few posts ago. Why don't you watch it.
http://plus.cnbc.com/rssvideosearch/action/player/id/1380339595/code/cnbcplayershare
Quote from jficquette:
This says that the top 500 companies had a net build of $150 Billion during 2009.
It also includes money they put into money market funds.
We are still missing a ton of money.
FWIW, companies with truely excess money would be more apt to buy back stock then buy Treasuries at this time.
I don't think we're missing a ton of money at all.
1.3B = 500B (foreign) + 300B (Fed) + 50B (Deposit Banks) + Misc new $$$ from bond funds ($396B inflow total), pensions, corporate stock sales ($400B or so in 09 from my flawed memory) + outright investor treasury purchases + the included supply of corporate cash being ready to park somewhere.
That 450B made up of all those sources indicates we aren't likely missing anything.
2010 is a different game, I believe. But we'll see.
Remember, treasury managers (at corporations) generally don't have the fear of inflation like private investors. They have a built in inflation hedge: their product inventories and service offerings. Therefore they are deflationary biased and cash loving (and debt loving).
Those are the facts.
In other words, there is no conspiracy and I'm with martinghoul on this.
Quote from scriabinop23:
I don't think we're missing a ton of money at all.
1.3B = 500B (foreign) + 300B (Fed) + 50B (Deposit Banks) + Misc new $$$ from bond funds ($396B inflow total), pensions, corporate stock sales ($400B or so in 09 from my flawed memory) + outright investor treasury purchases + the included supply of corporate cash being ready to park somewhere.
That 450B made up of all those sources indicates we aren't likely missing anything.
2010 is a different game, I believe. But we'll see.
Remember, treasury managers (at corporations) generally don't have the fear of inflation like private investors. They have a built in inflation hedge: their product inventories and service offerings. Therefore they are deflationary biased and cash loving (and debt loving).
Those are the facts.
I don't think you know enough about how the accounting works to add up any numbers.
Quote from jficquette:
I don't think you know enough about how the accounting works to add up any numbers.
I thought we were on the same team here? Why get nasty? I just showed you $396B of bond fund inflows, $400B of corporate debt raises, and $1T of corporate cash to more than make up for any 450B shortfall in treasury supply for 09.
My CFA work (level 2 in June coming soon) is progressing along well, thank you very much.
Quote from scriabinop23:
I thought we were on the same team here? My CFA work (level 2 in June coming soon) is progressing along well, thank you very much.
We are but you don't know how the numbers are added up or how the process works, at least to the extent to disprove cnbc. I say someone needs to disprove cnbc and no one here can.
Quote from jficquette:
We are but you don't know how the numbers are added up or how the process works.
For instance, where does this come into play.
I say someone needs to disprove cnbc and no one here can.
I just don't see what you are asking. Those paragraphs specify the money raise rates, none of which is incongruent with our previous analysis. What specifically about "the process" am I not getting?
I just showed sources of 65% of treasury purchases for 2009, and attributed likely to where the remainder 35% came from. This disproves the 80% Fed purchase cnbc claim automatically.