4 ms·

Keep in mind, things are not as simple as some talking heads would have you believe: * More than a fifth of the treasury bond debt owed by the federal governme

by cs702 4y ago

Keep in mind, things are not as simple as some talking heads would have you believe: * More than a fifth of the treasury bond debt owed by the federal government is owed to... none other than the Federal Reserve, which is part of the federal government. Every year, more than a fifth of the debt payments made by the US Treasury go to the US Federal Reserve, which dutifully sends them all back to the US Treasury every year. * If you own any US treasury bonds (whether directly, in a 401(k), in some other kind of retirement or pension plan, or in an index fund), that's your share of the US national debt: It's the amount the federal government owes you. * Every dollar spent by the government at home is a dollar earned by the private sector (who else?). Every dollar the government spends at home goes to private companies (healthcare providers, aerospace/weapons makers, government contractors, etc.) or to private citizens (government employees, military officers and their families, individuals receiving tax refunds, etc.).

A4ET8a8uTh0 4y ago
<<treasury bond debt owed by the federal government is owed to... none other than the Federal Reserve First time I saw that I was genuinely dumbfounded. I honestly can't find an explanation of it other than 'stability of the system', but even that appears to be something of a stretch since to a person like me just appearance of that kind of meddling creates hesitation. I think US is really milking the whole 'the only game in town' in terms of stability. The issue is.. that will not always be the case. At some point, reality will set in. And I am saying all this as ( minor compared to the rest of stuff ), US bond holder.
- comte7092 4y ago
  The fed purchases treasuries in order to fulfill several different goals, all under the broader umbrella of monetary policy. It isn’t nefarious and is something that is done by central banks all over the world. This isn’t some sort of “only game in town” type of a deal. Just as an example, what would you suppose would be a better mechanism to expand/contract the money supply? Just handing out money to random individuals? Randomly taking it away?
  - A4ET8a8uTh0 4y ago
    <<just handing out money to random individuals? Randomly taking it away? I do not want to derail this thread, but one could argue that post-2008 FED response almost exactly just that[1]. Granted, I guess I myself am stretching word random here as it is highly likely that criteria for selection for cash infusion were almost certainly not random at all. <<It isn’t nefarious and is something that is done by central banks all over the world. It may not be inherently, or even intentionally, nefarious, but it does undermine investor's view a little bit. It is not the same, but it is a little like me trying to pump shares of my own company to give it an appearance of strength. And just because everyone does it, does not make right. << The fed purchases treasuries in order to fulfill several different goals, all under the broader umbrella of monetary policy. I would have been willing to accept this rationale pre-Powell tenure. His clearly political response to badgering from, at the time, Trump WH ( and then Biden WH ), made it clear to me that monetary policy is dangerously aligned with political issues ( where by design it was supposed to be apolitical or at least independent of political pressures ). [1]https://www.federalreserve.gov/newsevents/speech/kohn20100513a.htm https://www.federalreserve.gov/newsevents/speech/kohn2010051...
    - comte7092 4y ago
      I’m confused here, in your first comment you suggested that you had a problem with the Fed using treasuries as it’s primary monetary policy instrument, and now this comment would appear to suggest that you are put off buy activity that falls outside of that scope? What exactly would you like to see the Fed do? Also, keep in mind that the fed is quasi private. It is the central bank. While it is governed by a publicly appointed board, its primary responsibility is undergirding the banking system (and fulfilling its “dual mandates” by congress). It’s creating was bought on in response to numerous banking panics in the 19th century.
      - A4ET8a8uTh0 4y ago
        <<What exactly would you like to see the Fed do? You are not going to like my answer ( and it is the same as my answer for Treasury, HUD and multiple other agencies ). I would like FED to do less. I do not want it constantly engaged in trying ( and failing ) to follow signals it cannot or will not comprehend. Frankly, if we are going to have politicians run monetary policy, we might as well move it back to congress where it belongs. <<It’s creating was bought on in response to numerous banking panics in the 19th century. I know the rationale, but isn't that FDIC's job now to basically say to people 'your money is fine; don't panic'? Oh, you say, 'yes, but that does not preclude general market panic.' And this is where I have a problem. To a reasonable person, 2008 shockwaves for any other type of business, would have created a massive pain for everyone involved. Somehow, there were only few casualties from that event. Instead of actual wave of bankruptcies that would have made people think twice before putting entire system at a precipice of oblivion, we had government effectively reward bad behavior. I personally would argue that a system, where incentives reward dangerous behavior is a bad system. And the most amusing piece is that we are still paying for it ( not in money either, but the bad system that encourages that dangerous behavior remains in place, which means we will eventually deal with another like market panic sooner rather than later ) edit: all while the original reason for the instability was never really addressed.
- bioemerl 4y ago
  It's just money printing with extra steps. I wouldn't worry too much about it, because games like this are almost always going to happen in politics. It's when the system gets rigid and these games stop being played that you have more issues.
- danielschonfeld 4y ago
  Should be very interesting to see a world where the USD isn’t the only game in town. A new world reserve currency sounds like a dream.
  - mywittyname 4y ago
    The USD isn't the "only game in town." It just happens to be the best game in town because it's backed by a successful, resource rich country with a mighty military and a massive, diverse economy, and no capital flight controls. No other country can match it. Switzerland has an economy that's far too small, China has capital controls in place, and middle eastern countries are too reliant on oil.
    - danielschonfeld 4y ago
      Right and while being the best within the choice of currencies we currently have, it has proven time and again that it’s pretty miserable at balancing the needs of the world while acting as a global reserve currency vs balancing the domestic needs as acting as “our” (US’s) currency.
    - A4ET8a8uTh0 4y ago
      <<No other country can match it. <<The USD isn't the "only game in town." The two statements are at odds with one another. I am not disagreeing with your assessment of US capabilities, but those clearly only create the situation, where US is, in fact, the only game in town.
- noobermin 4y ago
  The year that the US isn't the only game in town, there will be far more to worry about beyond just the national debt.
willhslade 4y ago
Federal Reserve is not strictly part of the federal government.
- cs702 4y ago
  It's independently run, but part of it. Specifically, any money it makes (or loses) goes to the US Treasury: https://www.wsj.com/articles/higher-interest-rates-fuel-losses-at-the-federal-reserve-11667208602 https://www.wsj.com/articles/higher-interest-rates-fuel-loss...
  - NovemberWhiskey 4y ago
    https://www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...
    - snowwrestler 4y ago
      > While the Board of Governors is an independent government agency…
      - NovemberWhiskey 4y ago
        OK, I mean, sure, focus on that part rather than: >The Federal Reserve Banks are not a part of the federal government [...]
      - throwaway0asd 4y ago
        The board is 7 people, and yes those 7 people are government employees. However, the remaining many thousands of people that comprise the Federal Reserve system are not government employees. Quite the straw man.
        snowwrestler 4y ago
        “The Board of Governors of the Federal Reserve” is the name of the agency. It covers the governors themselves but also the agency staff, the police force, etc.
throwaway0asd 4y ago
The federal reserve is not a part of the federal government in any form or capacity. They are a nonprofit business operating under a government charter defined by the Federal Reserve Act of 1913 and are completely separated from the US Treasury Department and the US Department of Commerce.
- cs702 4y ago
  The Fed is independently run, but part of the federal government. Specifically, any money it makes or loses goes to the US Treasury: https://www.wsj.com/articles/higher-interest-rates-fuel-losses-at-the-federal-reserve-11667208602 https://www.wsj.com/articles/higher-interest-rates-fuel-loss...
  - throwaway0asd 4y ago
    According to the FED they are not part of the government: The Federal Reserve Banks are not a part of the federal government. https://www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...
- snowwrestler 4y ago
  The Board of Governors of the Federal Reserve is a independent federal agency with regulatory powers. They even have a federal police force. You are correct it is completely separated from the Treasury Department and the Department of Commerce.
  - throwaway0asd 4y ago
    https://www.federalreserve.gov/aboutthefed/bios/board/default.htm https://www.federalreserve.gov/aboutthefed/bios/board/defaul... So, those 7 people are government employees, but the remaining thousands that comprise the entirety of the Federal Reserve system are not.
mywittyname 4y ago
Don't forget social security trust fund is only allowed to invest in treasury bonds. That's $3,000,000,000,000 (trillion) of the debt right there. Then there's the fact that the Treasury is the only place where it's possible to deposit something like a billion dollars. So the Treasury acts as a bank for companies with large cash reserves. The country can never eliminate its debt. And the country wouldn't want to anyway.
deleted 4y ago
[deleted]

by cs702 4y ago

A4ET8a8uTh0 4y ago

<<treasury bond debt owed by the federal government is owed to... none other than the Federal Reserve First time I saw that I was genuinely dumbfounded. I honestly can't find an explanation of it other than 'stability of the system', but even that appears to be something of a stretch since to a person like me just appearance of that kind of meddling creates hesitation. I think US is really milking the whole 'the only game in town' in terms of stability. The issue is.. that will not always be the case. At some point, reality will set in. And I am saying all this as ( minor compared to the rest of stuff ), US bond holder.

comte7092 4y ago
The fed purchases treasuries in order to fulfill several different goals, all under the broader umbrella of monetary policy. It isn’t nefarious and is something that is done by central banks all over the world. This isn’t some sort of “only game in town” type of a deal. Just as an example, what would you suppose would be a better mechanism to expand/contract the money supply? Just handing out money to random individuals? Randomly taking it away?
- A4ET8a8uTh0 4y ago
  <<just handing out money to random individuals? Randomly taking it away? I do not want to derail this thread, but one could argue that post-2008 FED response almost exactly just that[1]. Granted, I guess I myself am stretching word random here as it is highly likely that criteria for selection for cash infusion were almost certainly not random at all. <<It isn’t nefarious and is something that is done by central banks all over the world. It may not be inherently, or even intentionally, nefarious, but it does undermine investor's view a little bit. It is not the same, but it is a little like me trying to pump shares of my own company to give it an appearance of strength. And just because everyone does it, does not make right. << The fed purchases treasuries in order to fulfill several different goals, all under the broader umbrella of monetary policy. I would have been willing to accept this rationale pre-Powell tenure. His clearly political response to badgering from, at the time, Trump WH ( and then Biden WH ), made it clear to me that monetary policy is dangerously aligned with political issues ( where by design it was supposed to be apolitical or at least independent of political pressures ). [1]https://www.federalreserve.gov/newsevents/speech/kohn20100513a.htm https://www.federalreserve.gov/newsevents/speech/kohn2010051...
  - comte7092 4y ago
    I’m confused here, in your first comment you suggested that you had a problem with the Fed using treasuries as it’s primary monetary policy instrument, and now this comment would appear to suggest that you are put off buy activity that falls outside of that scope? What exactly would you like to see the Fed do? Also, keep in mind that the fed is quasi private. It is the central bank. While it is governed by a publicly appointed board, its primary responsibility is undergirding the banking system (and fulfilling its “dual mandates” by congress). It’s creating was bought on in response to numerous banking panics in the 19th century.
    - A4ET8a8uTh0 4y ago
      <<What exactly would you like to see the Fed do? You are not going to like my answer ( and it is the same as my answer for Treasury, HUD and multiple other agencies ). I would like FED to do less. I do not want it constantly engaged in trying ( and failing ) to follow signals it cannot or will not comprehend. Frankly, if we are going to have politicians run monetary policy, we might as well move it back to congress where it belongs. <<It’s creating was bought on in response to numerous banking panics in the 19th century. I know the rationale, but isn't that FDIC's job now to basically say to people 'your money is fine; don't panic'? Oh, you say, 'yes, but that does not preclude general market panic.' And this is where I have a problem. To a reasonable person, 2008 shockwaves for any other type of business, would have created a massive pain for everyone involved. Somehow, there were only few casualties from that event. Instead of actual wave of bankruptcies that would have made people think twice before putting entire system at a precipice of oblivion, we had government effectively reward bad behavior. I personally would argue that a system, where incentives reward dangerous behavior is a bad system. And the most amusing piece is that we are still paying for it ( not in money either, but the bad system that encourages that dangerous behavior remains in place, which means we will eventually deal with another like market panic sooner rather than later ) edit: all while the original reason for the instability was never really addressed.
bioemerl 4y ago
It's just money printing with extra steps. I wouldn't worry too much about it, because games like this are almost always going to happen in politics. It's when the system gets rigid and these games stop being played that you have more issues.
danielschonfeld 4y ago
Should be very interesting to see a world where the USD isn’t the only game in town. A new world reserve currency sounds like a dream.
- mywittyname 4y ago
  The USD isn't the "only game in town." It just happens to be the best game in town because it's backed by a successful, resource rich country with a mighty military and a massive, diverse economy, and no capital flight controls. No other country can match it. Switzerland has an economy that's far too small, China has capital controls in place, and middle eastern countries are too reliant on oil.
  - danielschonfeld 4y ago
    Right and while being the best within the choice of currencies we currently have, it has proven time and again that it’s pretty miserable at balancing the needs of the world while acting as a global reserve currency vs balancing the domestic needs as acting as “our” (US’s) currency.
  - A4ET8a8uTh0 4y ago
    <<No other country can match it. <<The USD isn't the "only game in town." The two statements are at odds with one another. I am not disagreeing with your assessment of US capabilities, but those clearly only create the situation, where US is, in fact, the only game in town.
noobermin 4y ago
The year that the US isn't the only game in town, there will be far more to worry about beyond just the national debt.

willhslade 4y ago

Federal Reserve is not strictly part of the federal government.

cs702 4y ago
It's independently run, but part of it. Specifically, any money it makes (or loses) goes to the US Treasury: https://www.wsj.com/articles/higher-interest-rates-fuel-losses-at-the-federal-reserve-11667208602 https://www.wsj.com/articles/higher-interest-rates-fuel-loss...
- NovemberWhiskey 4y ago
  https://www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...
  - snowwrestler 4y ago
    > While the Board of Governors is an independent government agency…
    - NovemberWhiskey 4y ago
      OK, I mean, sure, focus on that part rather than: >The Federal Reserve Banks are not a part of the federal government [...]
    - throwaway0asd 4y ago
      The board is 7 people, and yes those 7 people are government employees. However, the remaining many thousands of people that comprise the Federal Reserve system are not government employees. Quite the straw man.
      - snowwrestler 4y ago
        “The Board of Governors of the Federal Reserve” is the name of the agency. It covers the governors themselves but also the agency staff, the police force, etc.

throwaway0asd 4y ago

The federal reserve is not a part of the federal government in any form or capacity. They are a nonprofit business operating under a government charter defined by the Federal Reserve Act of 1913 and are completely separated from the US Treasury Department and the US Department of Commerce.

cs702 4y ago
The Fed is independently run, but part of the federal government. Specifically, any money it makes or loses goes to the US Treasury: https://www.wsj.com/articles/higher-interest-rates-fuel-losses-at-the-federal-reserve-11667208602 https://www.wsj.com/articles/higher-interest-rates-fuel-loss...
- throwaway0asd 4y ago
  According to the FED they are not part of the government: The Federal Reserve Banks are not a part of the federal government. https://www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...
snowwrestler 4y ago
The Board of Governors of the Federal Reserve is a independent federal agency with regulatory powers. They even have a federal police force. You are correct it is completely separated from the Treasury Department and the Department of Commerce.
- throwaway0asd 4y ago
  https://www.federalreserve.gov/aboutthefed/bios/board/default.htm https://www.federalreserve.gov/aboutthefed/bios/board/defaul... So, those 7 people are government employees, but the remaining thousands that comprise the entirety of the Federal Reserve system are not.

mywittyname 4y ago

Don't forget social security trust fund is only allowed to invest in treasury bonds. That's $3,000,000,000,000 (trillion) of the debt right there. Then there's the fact that the Treasury is the only place where it's possible to deposit something like a billion dollars. So the Treasury acts as a bank for companies with large cash reserves. The country can never eliminate its debt. And the country wouldn't want to anyway.

deleted 4y ago

[deleted]