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Until recently the Treasury was draining TGA, which was equivalent to doing QE. In other words, it was spending money which it got earlier from Fed by selling i
by fuoqi 3y ago
Until recently the Treasury was draining TGA, which was equivalent to doing QE. In other words, it was spending money which it got earlier from Fed by selling it treasuries. Now Fed does not buy treasuries anymore, so the Treasury has to refill TGA by attracting liquidity from the open market. It's equivalent to QT, which will be added to tightening performed by the Fed. Yes, it will lower money supply, but not without serious risks for the economy.
- cs702 3y agoMinor nitpicking: The Fed cannot buy bonds directly from the US Treasury. It can only buy them from third parties in the open market. Otherwise, you're right.
- fuoqi 3y agoYou are right, but I think that everyone understands that today it's nothing more than a formality which feeds those intermediate banks at the expense of taxpayers.