The United States Federal Reserve has suddenly injected $53 billion in short term lending markets by buying US Treasuries and other securities for the first time since 2008.
They are to print another $75 billion today as money seemingly dries up with the culprit apparently being too much government debt offerings.
“There is often not enough cash on hand at major Wall Street firms to meet the funding demands of a market trying to absorb record Treasury bond sales needed to cover U.S. budget deficits,” Bloomberg says.
Short term lending rates jumped to 10% before FED intervened, with suggestions now they might have to turn on quantitative easing printing presses. According to Bloomberg’s own commentary:
“These wild few days show that there’s not enough reserves — or excess money that banks park at the Fed — in the banking system. That means traders are this week having to pay up to get these funds, even as bank reserves total more than $1 trillion. And it suggests the Fed may again have to grow its $3.8 trillion balance sheet through quantitative easing, or debt purchases that create fresh reserves.”
The government is borrowing about a trillion a year, and that borrowing rate is increasing, with much of it going towards paying interest rates on some $21 trillion previously borrowed.
There appears to be no substantial plan to do anything about this record breaking borrowing, but the President of the United States, Donald Trump, does appear to have a tactical plan.
The first part of it was to effectively order FED to cut interest rates, which after some reluctance they did do.
Then, he asked them to cut it further as well as to turn on the printing presses, or quantitative easing in the financial jargon.
This latest news may well suggest the FED will do that too, meaning in a way the United States may well monetize its debt as a devaluation race to the bottom continues globally.