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US Treasuries as loans and payback options

DaveFagan

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I posted this in POLLS, but thik would be better discused here. In polls, the conclusion is that these loans must be paid back. Any arguments? Alternatives?


Stocks rally as Fed mulls end to balance sheet reduction



'Stocks rose Friday as traders looked past a poor Intel earnings report and hoped a government shutdown solution would come soon, as well as a resolution to the U.S.-China trade war.
Speculation that the Federal Reserve may end it's balance sheet unwind sooner than expected also added to the bullish tone, as that's been a major concern of investors.
The Dow was up 240 points, aiming for its fifth consecutive week of gains. The S&P 500 rose 1 percent, while the Nasdaq added 1.3 percent as Starbucks gained on strong earnings.
The Wall Street Journal reported that the Federal Reserve is closer than expected to ending its balance sheet unwind. The Fed's decision is a key consideration for investors as they gauge the extent to which the central bank will tighten its monetary policy.".....

Does this mean the USA must payback US Treasury LOANS/TBills?

Yes!
No!
I don't Know!
Other, please explain!
 
This is Post # 13
"Thank you. The way I read that is what I thought. The FED loaned the US Treasury by buying TBills to support QE. That would be billions of dollars. The FED carries the TBills in their asset column jsut as if they have a deposit of money and the "juiced reserves". TBills, justify more loans. Now it is payback time, or obfuscatively stated as "unwinding" by all pertinent players. The recent $40 billion one month unwinding spooked the markets, so if QE debt by TBills is $2+ trillion, perhaps 4 trillion, then NASA "we have a problem." Unwinding is "payback" as I previously stated. Taxpayers must pay back the debts(TBills). I perceive this as catastrophic and may cause a lack of "confidence" that supports the US "fiat" Currency. The FED is a "private" Central Bank, technically not part of the US Gov't. If I am wrong, please enlighten me and again many thanks for the attachment."
 
This is Post # 15
"Note:For the Poll question, the answer is unequivocally YES!

The attachment by Xelor points out unwinding the Balance sheet. Collecting loans is the same term, including and especially TBills. One month "unwinding," getting paid back on loans, of $40 billion spooked the markets. Discussion consider returning to $6 billion/month payback, "unwinding." So let's just use $20 billion/month payback to do some calculating. USA debt $22 trillion. Payback @ $20 billion/month. $22 trillion is 22x109E12. $20 billion is 20x10E9. Divide the 22 trillion by 20 billion equals 1.1x10E3. We can pay it back in 1,100 years at that rate for the total deficit. The $4.5 trillion owed the FED would only take about 220+ years.
The point being that YES the TBills are loans and must be paid back and by the taxpayers. I post the figures because I know our currency is supported by "confidence," and think everyone should know that."
 
I posted this in POLLS, but thik would be better discused here. In polls, the conclusion is that these loans must be paid back. Any arguments? Alternatives?


Stocks rally as Fed mulls end to balance sheet reduction



'Stocks rose Friday as traders looked past a poor Intel earnings report and hoped a government shutdown solution would come soon, as well as a resolution to the U.S.-China trade war.
Speculation that the Federal Reserve may end it's balance sheet unwind sooner than expected also added to the bullish tone, as that's been a major concern of investors.
The Dow was up 240 points, aiming for its fifth consecutive week of gains. The S&P 500 rose 1 percent, while the Nasdaq added 1.3 percent as Starbucks gained on strong earnings.
The Wall Street Journal reported that the Federal Reserve is closer than expected to ending its balance sheet unwind. The Fed's decision is a key consideration for investors as they gauge the extent to which the central bank will tighten its monetary policy.".....

Does this mean the USA must payback US Treasury LOANS/TBills?

Yes!
No!
I don't Know!
Other, please explain!

Government debt does not get "paid off" and extinguished the same way that private sector debt does. Government liabilities are only extinguished by running a tax surplus. And tax surpluses don't claw back government bonds, they come out of the taxes we pay - which comes out of the active economy, the money that everybody earns and spends. That's why federal surpluses are often a disaster economically.

Governments do not need to extinguish their debt; they can simply roll it over, create more debt, and/or tax away whatever they want. People are happy to hold those government liabilities as assets. Private sector debts, on the other hand, must be extinguished by being paid off, because banks transfer real assets (reserves) up front, then hope that the loan is repaid, which recoups those reserves, and more.

When a bank creates a loan for $1000, they "expand their balance sheet" by increasing your account balance (a bank liability) by $1000 (or writing a $1000 check in your name, same thing), and they hold your promissory note (for $1000 + interest) as an asset. Because your account balance went up by $1000, the M1 money supply went up by $1000, too. As you pay down the principal, dollars are extinguished; when the loan is paid in full, not only is your promissory note extinguished, but your payments have extinguished $1000 of account balances as well. M1 returns to where it was before your loan. The net result is that you have given the bank some money (the interest) for their service.

The government spends (over and above tax receipts) by simply issuing liabilities, which are held by the private sector as assets. And the story really ends right there.

Treasury issues bonds; the private sector buys those bonds with reserves, via banks; the reserves are transferred from buyer's bank's reserve account to Treasury's reserve account; government spends those proceeds right back into the economy (deficit spending). The net result is an increase in government liabilities (bonds) held by the private sector as assets, plus the aggregate demand due to the spending. No private sector assets are used up or ties up in this transaction; the dollars used to buy the bonds end up right back in the private sector, via government spending.

In this process, the Fed merely buys and sells Treasury bonds in order to adjust the number of reserves in the system. The Fed can't change the number of government liabilities in the private sector, it can only adjust the makeup of those liabilities (bonds, reserves, and cash). When the Fed buys bonds (or MBSs, or any other asset), it does so by increasing the reserve balance of a bank; if the Fed were to buy a bond from you, it would do so by marking up your bank's reserve account, and your bank would, in turn, mark up your bank account. The Fed would then hold the bond as an asset.

The Fed is just a middleman, and really shouldn't be the focal point here. When it buys assets, reserves are added to the system (MB increases), and account balances also increase (M1 increases); when it sells assets ("unwinds"), the opposite happens. But neither one has a big effect on the economy. "Unwinding" will put some more assets on the market, and pull some money out of bank accounts, but it really doesn't affect consumption and investment much, if at all. They are tinkering with rich guys' money, and rich guys' money really isn't part of the real economy anymore.
 
Government debt does not get "paid off" and extinguished the same way that private sector debt does. Government liabilities are only extinguished by running a tax surplus. And tax surpluses don't claw back government bonds, they come out of the taxes we pay - which comes out of the active economy, the money that everybody earns and spends. That's why federal surpluses are often a disaster economically.

Governments do not need to extinguish their debt; they can simply roll it over, create more debt, and/or tax away whatever they want. People are happy to hold those government liabilities as assets. Private sector debts, on the other hand, must be extinguished by being paid off, because banks transfer real assets (reserves) up front, then hope that the loan is repaid, which recoups those reserves, and more.

When a bank creates a loan for $1000, they "expand their balance sheet" by increasing your account balance (a bank liability) by $1000 (or writing a $1000 check in your name, same thing), and they hold your promissory note (for $1000 + interest) as an asset. Because your account balance went up by $1000, the M1 money supply went up by $1000, too. As you pay down the principal, dollars are extinguished; when the loan is paid in full, not only is your promissory note extinguished, but your payments have extinguished $1000 of account balances as well. M1 returns to where it was before your loan. The net result is that you have given the bank some money (the interest) for their service.

The government spends (over and above tax receipts) by simply issuing liabilities, which are held by the private sector as assets. And the story really ends right there.

Treasury issues bonds; the private sector buys those bonds with reserves, via banks; the reserves are transferred from buyer's bank's reserve account to Treasury's reserve account; government spends those proceeds right back into the economy (deficit spending). The net result is an increase in government liabilities (bonds) held by the private sector as assets, plus the aggregate demand due to the spending. No private sector assets are used up or ties up in this transaction; the dollars used to buy the bonds end up right back in the private sector, via government spending.

In this process, the Fed merely buys and sells Treasury bonds in order to adjust the number of reserves in the system. The Fed can't change the number of government liabilities in the private sector, it can only adjust the makeup of those liabilities (bonds, reserves, and cash). When the Fed buys bonds (or MBSs, or any other asset), it does so by increasing the reserve balance of a bank; if the Fed were to buy a bond from you, it would do so by marking up your bank's reserve account, and your bank would, in turn, mark up your bank account. The Fed would then hold the bond as an asset.

The Fed is just a middleman, and really shouldn't be the focal point here. When it buys assets, reserves are added to the system (MB increases), and account balances also increase (M1 increases); when it sells assets ("unwinds"), the opposite happens. But neither one has a big effect on the economy. "Unwinding" will put some more assets on the market, and pull some money out of bank accounts, but it really doesn't affect consumption and investment much, if at all. They are tinkering with rich guys' money, and rich guys' money really isn't part of the real economy anymore.

I disagree. US Treasury notes are loans to the USA gov't. Admittedly they have not been paid back, but the expectation of a loan is eventual payback. You suggest the US does not have to payback and can just print more money. They can do that until the "Confidence" expires on an inflated currency. Your definition would be grounds for a perfect Ponzi scheme. I have noted the length of time necessary to pay back the US Deficit at $20 billion/month. Again, US Treasuries are LOANS. I know the FED digitally adds liquidity to its balance sheet when it acquires a debt owed to it by the USA a/k/a US Treasury. I know "fiat" money is money because we say it is, with no intrinsic backing a/k/a "Full faith and credit," but loans MUST be repaid.
/
 
Government debt does not get "paid off" and extinguished the same way that private sector debt does. Government liabilities are only extinguished by running a tax surplus. And tax surpluses don't claw back government bonds, they come out of the taxes we pay - which comes out of the active economy, the money that everybody earns and spends. That's why federal surpluses are often a disaster economically.

Governments do not need to extinguish their debt; they can simply roll it over, create more debt, and/or tax away whatever they want. People are happy to hold those government liabilities as assets. Private sector debts, on the other hand, must be extinguished by being paid off, because banks transfer real assets (reserves) up front, then hope that the loan is repaid, which recoups those reserves, and more.

When a bank creates a loan for $1000, they "expand their balance sheet" by increasing your account balance (a bank liability) by $1000 (or writing a $1000 check in your name, same thing), and they hold your promissory note (for $1000 + interest) as an asset. Because your account balance went up by $1000, the M1 money supply went up by $1000, too. As you pay down the principal, dollars are extinguished; when the loan is paid in full, not only is your promissory note extinguished, but your payments have extinguished $1000 of account balances as well. M1 returns to where it was before your loan. The net result is that you have given the bank some money (the interest) for their service.

The government spends (over and above tax receipts) by simply issuing liabilities, which are held by the private sector as assets. And the story really ends right there.

Treasury issues bonds; the private sector buys those bonds with reserves, via banks; the reserves are transferred from buyer's bank's reserve account to Treasury's reserve account; government spends those proceeds right back into the economy (deficit spending). The net result is an increase in government liabilities (bonds) held by the private sector as assets, plus the aggregate demand due to the spending. No private sector assets are used up or ties up in this transaction; the dollars used to buy the bonds end up right back in the private sector, via government spending.

In this process, the Fed merely buys and sells Treasury bonds in order to adjust the number of reserves in the system. The Fed can't change the number of government liabilities in the private sector, it can only adjust the makeup of those liabilities (bonds, reserves, and cash). When the Fed buys bonds (or MBSs, or any other asset), it does so by increasing the reserve balance of a bank; if the Fed were to buy a bond from you, it would do so by marking up your bank's reserve account, and your bank would, in turn, mark up your bank account. The Fed would then hold the bond as an asset.

The Fed is just a middleman, and really shouldn't be the focal point here. When it buys assets, reserves are added to the system (MB increases), and account balances also increase (M1 increases); when it sells assets ("unwinds"), the opposite happens. But neither one has a big effect on the economy. "Unwinding" will put some more assets on the market, and pull some money out of bank accounts, but it really doesn't affect consumption and investment much, if at all. They are tinkering with rich guys' money, and rich guys' money really isn't part of the real economy anymore.

I thank you for your contribution. Sincerely.
/
 
I disagree. US Treasury notes are loans to the USA gov't. Admittedly they have not been paid back, but the expectation of a loan is eventual payback. You suggest the US does not have to payback and can just print more money. They can do that until the "Confidence" expires on an inflated currency. Your definition would be grounds for a perfect Ponzi scheme. I have noted the length of time necessary to pay back the US Deficit at $20 billion/month. Again, US Treasuries are LOANS. I know the FED digitally adds liquidity to its balance sheet when it acquires a debt owed to it by the USA a/k/a US Treasury. I know "fiat" money is money because we say it is, with no intrinsic backing a/k/a "Full faith and credit," but loans MUST be repaid.
/

In the gold standard days, they used to represent a claim on the limited gold that backed (restricted) dollar creation. The government needed to borrow back gold-backed dollars in order to deficit spend without overextending their gold obligations. That was true debt, because it was not a sure thing that the govt. could acquire that gold.

But today, there is no such restriction. Bond issuance is not even an operational necessity; the government could easily just decide (change a few laws) to issue dollars directly, without bothering with bonds. There is no logical reason to think that a government that can issue its own currency would ever need to borrow in order to do so. In the case of monetarily sovereign governments with fiat currencies, bonds are just a tool for effecting monetary policy.

Re-read that paragraph where I went over how the government deficit spends. There are no private sector assets involved. It's just the government exchanging one form of govt. liability for another, then re-spending back into the economy. The government fulfills all of its bond obligations, of course, but it costs them nothing to do so.

I have noted the length of time necessary to pay back the US Deficit at $20 billion/month.

What you described isn't "paying back the debt," it is merely replacing bonds with account balances and reserves. Bondholders don't want that. They prefer to hold bonds. Otherwise, they never would have bought them.
 
In the gold standard days, they used to represent a claim on the limited gold that backed (restricted) dollar creation. The government needed to borrow back gold-backed dollars in order to deficit spend without overextending their gold obligations. That was true debt, because it was not a sure thing that the govt. could acquire that gold.

But today, there is no such restriction. Bond issuance is not even an operational necessity; the government could easily just decide (change a few laws) to issue dollars directly, without bothering with bonds. There is no logical reason to think that a government that can issue its own currency would ever need to borrow in order to do so. In the case of monetarily sovereign governments with fiat currencies, bonds are just a tool for effecting monetary policy.

Re-read that paragraph where I went over how the government deficit spends. There are no private sector assets involved. It's just the government exchanging one form of govt. liability for another, then re-spending back into the economy. The government fulfills all of its bond obligations, of course, but it costs them nothing to do so.



What you described isn't "paying back the debt," it is merely replacing bonds with account balances and reserves. Bondholders don't want that. They prefer to hold bonds. Otherwise, they never would have bought them.

They didn't buy them. The US Treasury borrowed the money. It's not really semantics. The wording is precise. Loans.
/
 
Who initiated the transaction?

The US Treasury. That's why they write the Bond paper because they need to borrow for the deficit. The FED authorizes printing of currency or digital entry when the loan is agreed upon. I see TBills maturing as the loan being called in. Or when a Nation sells its' Treasuries it is calling in the loan.
/
 
The biggest issue is the servicing of the debt....the amount of interest necessary each year to pay off the holders of the debt, because that number keeps rising

And as rates continue to rise, and old cheaper debt is replaced with higher interes5 more expensive newer debt, the interest payments will continue to soar

Don’t know the latest figures, but when the interest, Medicare, and social security take up 75-80% of the annual revenues, you are in trouble before you start
 
The US Treasury. That's why they write the Bond paper because they need to borrow for the deficit. The FED authorizes printing of currency or digital entry when the loan is agreed upon. I see TBills maturing as the loan being called in. Or when a Nation sells its' Treasuries it is calling in the loan.
/

People buy bonds as an investment, not as a loan. There is zero risk of losing their investment. It is akin to buying a Certificate of Deposit at a commercial bank. You could look at that as a "loan to the bank," because the bank then owes you money. But it's not a loan. The bank doesn't need your

The only reason Treasury "has to" issue bonds is because of some outdated laws from the gold standard era. Operationally, Treasury could simply issue their own dollars, or deposit a trillion-dollar platinum coin in their account at the Fed, then use Fed notes.

In the same vein, the only reason Treasury has to run their bonds through the private sector is because of those same outdated laws. In practice, the Fed is perfectly able to buy up any and all of the bonds that Treasury wants to issue.



Allow the Fed to buy bonds directly, and the private sector is taken out of the equation completely. The government simply does not need private sector assets. In 2008, did Citibank bail out the government, or did the government bail out Citibank?
 
People buy bonds as an investment, not as a loan. There is zero risk of losing their investment. It is akin to buying a Certificate of Deposit at a commercial bank. You could look at that as a "loan to the bank," because the bank then owes you money. But it's not a loan. The bank doesn't need your

The only reason Treasury "has to" issue bonds is because of some outdated laws from the gold standard era. Operationally, Treasury could simply issue their own dollars, or deposit a trillion-dollar platinum coin in their account at the Fed, then use Fed notes.

In the same vein, the only reason Treasury has to run their bonds through the private sector is because of those same outdated laws. In practice, the Fed is perfectly able to buy up any and all of the bonds that Treasury wants to issue.



Allow the Fed to buy bonds directly, and the private sector is taken out of the equation completely. The government simply does not need private sector assets. In 2008, did Citibank bail out the government, or did the government bail out Citibank?


The US issued US Treasuries to the FED for loans credited to give liquidity to the bailout. The FED, "the buyer of last resort" loaned the US Treasury that money, technically with a digital entry in their reserves. I'm suggesting that when one examines closely these transactions, one sees a house of cards supported by "Confidence" like in a "Con Game." Ponzi Scheme. As long as nobody rocks the boat the banking ship afloat on the deep ocean of fiat money doesn't sink due to swamping at the gunwales. Precarious.
/
 
The biggest issue is the servicing of the debt....the amount of interest necessary each year to pay off the holders of the debt, because that number keeps rising

And as rates continue to rise, and old cheaper debt is replaced with higher interest more expensive newer debt, the interest payments will continue to soar

Don’t know the latest figures, but when the interest, Medicare, and social security take up 75-80% of the annual revenues, you are in trouble before you start

The last I heard, debt service was between $500-600 Billion. That's just interest on debt.
Everyone acts as if the debt does not require repayment.. Loans. Keyword. Loans. Loan/USTreasury Bond-synonyms.
/
 
The last I heard, debt service was between $500-600 Billion. That's just interest on debt.
Everyone acts as if the debt does not require repayment.. Loans. Keyword. Loans. Loan/USTreasury Bond-synonyms.
/

So if our budget is roughly 4 trillion annually, and we use 500b as the number that is 12%....and it isn’t getting lower

If I spent 12% on debt service alone I would be in big trouble
 
The US issued US Treasuries to the FED for loans credited to give liquidity to the bailout. The FED, "the buyer of last resort" loaned the US Treasury that money, technically with a digital entry in their reserves.

That's not how the bailout worked. The Fed fixed the liquidity problem (and the capital problem) by simply buying up "toxic" assets from the banks. The Fed got a bunch of MBSs, and the banks got reserves. It didn't cost the taxpayers, or the government, a cent.

Treasury gets its spending money by issuing bonds to the private sector. And the Fed only buys bonds to effect monetary policy, adjusting reserve levels and defending interest rates, etc.

I'm suggesting that when one examines closely these transactions, one sees a house of cards supported by "Confidence" like in a "Con Game." Ponzi Scheme. As long as nobody rocks the boat the banking ship afloat on the deep ocean of fiat money doesn't sink due to swamping at the gunwales. Precarious.
/

I have examined these transactions as much as anybody I know, and I come away with a very different picture. In my experience, people who see federal finance as a Ponzi scheme or other illegitimate venture simply have not studied it enough. Plus, there is a large contingent of conspiracy theorists who loudly beat the national debt drum, and you may have been influenced by that very loud (but very wrong) voice.

There was nothing terrible different about the gold standard, if you think gold made a difference. It cost the government quite a bit just to be able to say that they had a pile of gold locked away. It was seldom touched, though. Americans didn't bother to convert their dollars into gold when they had the chance; there was no need to do so. Paper dollars were, and are, what people use for transactions. That didn't change when we went off of the gold standard. Banks have always lent money by creating credit, not by accumulating dollars.

Explain how you think this house of cards will fall down.
 
That's not how the bailout worked. The Fed fixed the liquidity problem (and the capital problem) by simply buying up "toxic" assets from the banks. The Fed got a bunch of MBSs, and the banks got reserves. It didn't cost the taxpayers, or the government, a cent.

Treasury gets its spending money by issuing bonds to the private sector. And the Fed only buys bonds to effect monetary policy, adjusting reserve levels and defending interest rates, etc.



I have examined these transactions as much as anybody I know, and I come away with a very different picture. In my experience, people who see federal finance as a Ponzi scheme or other illegitimate venture simply have not studied it enough. Plus, there is a large contingent of conspiracy theorists who loudly beat the national debt drum, and you may have been influenced by that very loud (but very wrong) voice.

There was nothing terrible different about the gold standard, if you think gold made a difference. It cost the government quite a bit just to be able to say that they had a pile of gold locked away. It was seldom touched, though. Americans didn't bother to convert their dollars into gold when they had the chance; there was no need to do so. Paper dollars were, and are, what people use for transactions. That didn't change when we went off of the gold standard. Banks have always lent money by creating credit, not by accumulating dollars.

Explain how you think this house of cards will fall down.

My apology for not replying sooner. Let's examine the bailout. The US Treasury printed out of thin air $4+ Trillion for bailout liquidity. The Federal Reserve would have given the US Treasury Credit on account for payment, but the US is going to use the credit to bail out AIG, Banks, etc. The Federal Reserve has permission/orders from US Treasury to further credit those funds to the targets, many of which are Federal Reserve Banking System. The money is gone with those credits and now the US Treasury owes the $4+ Trillion to the Fed and the Fed is holding those Tbills. The very large CORPORATE targets for the funds are saved. The FED is holding USTreasuries in the asset column. Unless the FED can offload those TBills to others, the US Treasury owes $4+ Trillion to the FED. To reduce that $4+ Trillion the FED must receive payment for those NOTES/Debts/Tbills. a/k/a Unwinding. Do we agree so far?
/
 
My apology for not replying sooner. Let's examine the bailout. The US Treasury printed out of thin air $4+ Trillion for bailout liquidity. The Federal Reserve would have given the US Treasury Credit on account for payment, but the US is going to use the credit to bail out AIG, Banks, etc. The Federal Reserve has permission/orders from US Treasury to further credit those funds to the targets, many of which are Federal Reserve Banking System. The money is gone with those credits and now the US Treasury owes the $4+ Trillion to the Fed and the Fed is holding those Tbills. The very large CORPORATE targets for the funds are saved. The FED is holding USTreasuries in the asset column. Unless the FED can offload those TBills to others, the US Treasury owes $4+ Trillion to the FED. To reduce that $4+ Trillion the FED must receive payment for those NOTES/Debts/Tbills. a/k/a Unwinding. Do we agree so far?
/

No, we don't.

Treasury doesn't "print" money; the Fed "prints" money when it buys assets in exchange for reserve balances (new reserves). Treasury cannot supply liquidity; liquidity is reserves, and the Fed creates reserves. So generally what happened is that the Fed bought up "toxic" assets from shaky banks to shore up their books. Those toxic assets eventually paid off for the Fed. Either money came back to the Fed as MBSs paid dividends, or the Fed sold the MBSs back to the private sector at a later date.

The Fed did loan money to the Maiden Lane companies that were created for the purpose of winding down risky Bear Stearns and AIG assets - but it was nowhere near $4 trillion. AIG's bailout package was $182 billion, for which the govt. got a controlling share of AIG, and Treasury ended up making a $23 billion profit when it sold off its last AIG shares. source

Whatever Treasuries the Fed holds, who cares? The Fed is part of the government. It's like your left pocket owing your right pocket money.
 
No, we don't.

Treasury doesn't "print" money; the Fed "prints" money when it buys assets in exchange for reserve balances (new reserves). Treasury cannot supply liquidity; liquidity is reserves, and the Fed creates reserves. So generally what happened is that the Fed bought up "toxic" assets from shaky banks to shore up their books. Those toxic assets eventually paid off for the Fed. Either money came back to the Fed as MBSs paid dividends, or the Fed sold the MBSs back to the private sector at a later date.

The Fed did loan money to the Maiden Lane companies that were created for the purpose of winding down risky Bear Stearns and AIG assets - but it was nowhere near $4 trillion. AIG's bailout package was $182 billion, for which the govt. got a controlling share of AIG, and Treasury ended up making a $23 billion profit when it sold off its last AIG shares. source

Whatever Treasuries the Fed holds, who cares? The Fed is part of the government. It's like your left pocket owing your right pocket money.

Poor choice of words by me. I don't see the Bonds as currency, but as LOANS or as you describe Securities. If it doesn't appear secure, I have trouble describing them as securities. Let's say the USTreasury originated the loans, TBills, to the tune of $4+ Trillion. The FED, a private Central Bank credits that aceepts the loans and credits $4+ Trillion liquid reserves, and the USTreasury owes the Fed $4+ Trillion. Now the liquid reserves start moving to other Reserve banks to save those banks from bankruptcy. Fannie Mae and Freddie Mac ended up with the toxic Mortgage backed securities. Probalby paid face value and are worth about 10-20% of that. The USTreasury has not paid back the FED because they still hold the Bonds. That's obvous from the balance sheet. This all starts with TBills/money from "thin air." LOANS. a/k/a the Deficit.
 
Poor choice of words by me. I don't see the Bonds as currency, but as LOANS or as you describe Securities. If it doesn't appear secure, I have trouble describing them as securities. Let's say the USTreasury originated the loans, TBills, to the tune of $4+ Trillion. The FED, a private Central Bank credits that aceepts the loans and credits $4+ Trillion liquid reserves, and the USTreasury owes the Fed $4+ Trillion. Now the liquid reserves start moving to other Reserve banks to save those banks from bankruptcy. Fannie Mae and Freddie Mac ended up with the toxic Mortgage backed securities. Probalby paid face value and are worth about 10-20% of that. The USTreasury has not paid back the FED because they still hold the Bonds. That's obvous from the balance sheet. This all starts with TBills/money from "thin air." LOANS. a/k/a the Deficit.

Treasury didn't originate the bailout loans; "toxic" bank assets were used, and in the case of AIG, ownership of the company was used.

The only reason for Treasury to issue bonds is for deficit spending. Treasury would issue bonds to pay for stimulus - infrastructure projects and other government spending that are straight-up purchases of goods and services by the government. If the government was going to simply give the banks money, then Treasury would have to issue bonds to pay for that. But everything I have read on the subject says that the bank bailouts were financed with bank assets, including "toxic" assets (which were not nearly as worthless as you think). A "serious" bank problem is just when assets barely exceed liabilities; and in 2008, a lot of those problems were just the result of some bank assets slipping in value, which itself was largely the result of all banks being in the same boat (because other banks are normally the main market for such assets). When the Fed stepped in and bought those assets, it also buoyed the value of those assets. And in the end, they paid off, and the Fed lost nothing in the deal.

No reserve bank is ever in danger of bankruptcy. If you meant that reserves were moving to commercial banks, then fine, but that wasn't via Treasury, that's just what happens when the Fed buys assets from the bank. A simple swap of assets that costs the Fed, and the taxpayers, nothing.

If you are worried about Treasury bills on the Fed's books, stop worrying. They came from QE, when the Fed bought up assets, including Treasuries, from banks, in return for reserves. The situation is really no different than before QE, when banks held Treasuries instead of excess reserves. They are basically interchangeable.

Treasury bonds on the Fed's books will never be completely retired, they will merely be replaced. The more reserves in the system, the more Treasuries the Fed has to hold on its asset side. If the Fed ever bothers to "wind down," they will do so by selling Treasuries to commercial banks in exchange for reserves; this operation will lower Fed assets (Treasuries) and extinguish Fed liabilities (reserves) at the same time. But there is no good reason to do this.
 
Treasury didn't originate the bailout loans; "toxic" bank assets were used, and in the case of AIG, ownership of the company was used.

The only reason for Treasury to issue bonds is for deficit spending. Treasury would issue bonds to pay for stimulus - infrastructure projects and other government spending that are straight-up purchases of goods and services by the government. If the government was going to simply give the banks money, then Treasury would have to issue bonds to pay for that. But everything I have read on the subject says that the bank bailouts were financed with bank assets, including "toxic" assets (which were not nearly as worthless as you think). A "serious" bank problem is just when assets barely exceed liabilities; and in 2008, a lot of those problems were just the result of some bank assets slipping in value, which itself was largely the result of all banks being in the same boat (because other banks are normally the main market for such assets). When the Fed stepped in and bought those assets, it also buoyed the value of those assets. And in the end, they paid off, and the Fed lost nothing in the deal.

No reserve bank is ever in danger of bankruptcy. If you meant that reserves were moving to commercial banks, then fine, but that wasn't via Treasury, that's just what happens when the Fed buys assets from the bank. A simple swap of assets that costs the Fed, and the taxpayers, nothing.

If you are worried about Treasury bills on the Fed's books, stop worrying. They came from QE, when the Fed bought up assets, including Treasuries, from banks, in return for reserves. The situation is really no different than before QE, when banks held Treasuries instead of excess reserves. They are basically interchangeable.

Treasury bonds on the Fed's books will never be completely retired, they will merely be replaced. The more reserves in the system, the more Treasuries the Fed has to hold on its asset side. If the Fed ever bothers to "wind down," they will do so by selling Treasuries to commercial banks in exchange for reserves; this operation will lower Fed assets (Treasuries) and extinguish Fed liabilities (reserves) at the same time. But there is no good reason to do this.

Green-2008 Then why did $4+Trillion of US Treasuries be issued. Only US Treasury can initiate the loan requests.

Red-So the US Treasury owes the FED $4+Trillion. A private Central Bank is owed $4+Trillion by the taxpaying citizens of the USA, because these US Treasuries are always LOANS. We also owe China $1+Trillion. Japan $1+Trillion. India $1+Trillion. Plus another $15+Trillion of loans owned by the US Public/Corporate and other Natiosn.
 
Green-2008 Then why did $4+Trillion of US Treasuries be issued. Only US Treasury can initiate the loan requests.

Red-So the US Treasury owes the FED $4+Trillion. A private Central Bank is owed $4+Trillion by the taxpaying citizens of the USA, because these US Treasuries are always LOANS. We also owe China $1+Trillion. Japan $1+Trillion. India $1+Trillion. Plus another $15+Trillion of loans owned by the US Public/Corporate and other Natiosn.

Where are you getting your $4 trillion number?
 
Where are you getting your $4 trillion number?

https://www.reuters.com/article/us-...h-to-trimming-u-s-bond-holdings-idUSKCN1BV2NW

"

Federal Reserve Chairman Janet Yellen speaks during a news conference after a two-day Federal Open Markets Committee (FOMC) policy meeting, in Washington, U.S., September 20, 2017. REUTERS/Joshua Roberts

The Fed said on Wednesday it would begin the years-long process of trimming its $4.5 trillion in assets, most of them amassed to encourage investment and growth in the wake of the 2007-09 financial crisis and recession."
/
 
Red-So the US Treasury owes the FED $4+Trillion. A private Central Bank is owed $4+Trillion by the taxpaying citizens of the USA, because these US Treasuries are always LOANS. We also owe China $1+Trillion. Japan $1+Trillion. India $1+Trillion. Plus another $15+Trillion of loans owned by the US Public/Corporate and other Natiosn.

It's $2.2 trillion in treasury bills.
 
https://www.reuters.com/article/us-...h-to-trimming-u-s-bond-holdings-idUSKCN1BV2NW

"

Federal Reserve Chairman Janet Yellen speaks during a news conference after a two-day Federal Open Markets Committee (FOMC) policy meeting, in Washington, U.S., September 20, 2017. REUTERS/Joshua Roberts

The Fed said on Wednesday it would begin the years-long process of trimming its $4.5 trillion in assets, most of them amassed to encourage investment and growth in the wake of the 2007-09 financial crisis and recession."
/

OK, that's what I thought - you were looking at the Fed's books, and not the national debt.

Like I said before, the Fed got that balance sheet from QE - meaning, they bought those treasuries and MBSs from the private sector in exchange for (newly-created) reserves and increased bank account balances. Those treasuries already existed, and were held by private sector parties.

Before QE, the private sector held x in dollar savings, with lots of that in bonds and less in reserves/account balances. After QE, the private sector still held x in dollar savings, but with less of it in bonds and more of it in reserves/account balances. Treasury's financial position did not change.
 
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