U.S. Budget and Economy

On April 5, it was reported that the Federal Reserve wants to start unwinding the $4.5 trillion in bonds on its balance sheet this year. This revelation came from a summary of the Federal Open Market Committee meeting held in March. The composition of the Fed's balance sheet can be seen in the following chart: Note: In the following charts, click on the chart to see its data and sources. As can be seen from the purple area in the chart, about 2.5 of the 4.5 trillion in assets are Treasuries. Also visible is that these levels have remained stable since the end of 2014, when QE3 ended. In any event, there has been much discussion on what will happen when the Fed starts selling its Treasuries. More specifically, who will step in and buy the Treasuries that the Fed is selling plus any additional debt being created? To judge this, it helps to look at how the holders of Treasuries have changed over time. The following chart shows the holders of Treasury securities since...

In an interview with the Wall Street Journal published on Wednesday, April 12th, President Trump said "I do like a low-interest rate policy, I must be honest with you" . This view has reportedly changed over time with Trump saying that "Janet Yellen should have raised the rates" on November 3, 2015. In any event, it seems worth looking into why Trump may be supportive of a low-interest rate policy now. This blog post lists winners and losers from low interest rates in the United Kingdom. The third item listed under winners is government debt payments and the first chart shows that bond yields are declining but then states the following: This fall in bond yields is occurring, despite a rise in government debt to GDP, and a persistent budget deficit. It is important for limiting the percentage of tax revenue spent on debt interest payments. This same statement could be made about the United States. The following chart shows various treasury interest rates si...