Had to laugh at this propaganda article about the Fed and inflation.....

[Thatsright19]

Originally Posted by TwoByFour

In 2017 the Federal Reserve held $2.54 trillion in US Treasuries. In 2018 that had decreased to $2.30 trillion for a net loss of $240 billion. In other words they sold that amount of US Treasuries. The US deficit in that period was $780 billion. So the Fed sold rather than bought securities and did not at all buy all the US deficit.

The Fed is not buying US debt and the Chinese and Japanese , who have been huge consumers of debt, are selling, not buying, and this is actually a huge problem for the US. It is going to drive bond yields up to attract buyers which means even more debt to service the interest on those bonds. For long term investors high interest is good but mortgages and other consumer debt will become more expensive.

You say the Fed is selling and the Chinese and Japanese are also selling and not buying....

But...someone bought to absorb those 240 billion of fed decline. Someone bought to fund the 780 billion deficit.

[Hoonose]

Originally Posted by TwoByFour

In 2017 the Federal Reserve held $2.54 trillion in US Treasuries. In 2018 that had decreased to $2.30 trillion for a net loss of $240 billion. In other words they sold that amount of US Treasuries. The US deficit in that period was $780 billion. So the Fed sold rather than bought securities and did not at all buy all the US deficit.

The Fed is not buying US debt and the Chinese and Japanese , who have been huge consumers of debt, are selling, not buying, and this is actually a huge problem for the US. It is going to drive bond yields up to attract buyers which means even more debt to service the interest on those bonds. For long term investors high interest is good but mortgages and other consumer debt will become more expensive.

Japan is still a net buyer, as is the world. And as the world expands it will most likely continue to be a net buyer, as there is no other good replacement for the necessary volume of UST debt paper.

https://ticdata.treasury.gov/Publish/mfh.txt

[EDS_]

Originally Posted by TwoByFour

In 2017 the Federal Reserve held $2.54 trillion in US Treasuries. In 2018 that had decreased to $2.30 trillion for a net loss of $240 billion. In other words they sold that amount of US Treasuries. The US deficit in that period was $780 billion. So the Fed sold rather than bought securities and did not at all buy all the US deficit.

The Fed is not buying US debt and the Chinese and Japanese , who have been huge consumers of debt, are selling, not buying, and this is actually a huge problem for the US. It is going to drive bond yields up to attract buyers which means even more debt to service the interest on those bonds. For long term investors high interest is good but mortgages and other consumer debt will become more expensive.

Not sure about China but Japan has been a net buyer of US debt recently.

ETA - sorry Hoonose beat me to the punch.

[TwoByFour]

Originally Posted by Thatsright19

You say the Fed is selling and the Chinese and Japanese are also selling and not buying....

But...someone bought to absorb those 240 billion of fed decline. Someone bought to fund the 780 billion deficit.

Most of that Fed decline was previous debt that matured and was retired. But the Fed chose not to repurchase new debt with the money they made off the old debt.

New debt is increasingly being bought by American investors. And the biggest purchaser of US debt is still the US government. Social Security and Medicare hold a lot of it.

[TwoByFour]

Originally Posted by EDS_

Not sure about China but Japan has been a net buyer of US debt recently.

ETA - sorry Hoonose beat me to the punch.

Japan has ticked back up in 2019 in their ownership of US debt but as a percentage of total debt ownership they are declining as are the Chinese. Japan has gone from owning 6% of total US debt in 2016 to about 5% in 2019.

[TwoByFour]

Originally Posted by Hoonose

Japan is still a net buyer, as is the world. And as the world expands it will most likely continue to be a net buyer, as there is no other good replacement for the necessary volume of UST debt paper.

US debt is still attractive because it is viewed as zero risk. But it is losing appeal because of low interest rates. As buyers retract, yields will have to climb in order to sell the debt. Rising interest rates are great for investors but private debt will follow suit so eventually it will slow the economy. US interest rates are still determined by market forces.