The $27 Trillion Treasury Market Is Only Getting Bigger
More debt, different buyers and increased regulation pose challenges
The world’s largest, most-important financial market is growing by leaps and bounds. On Wall Street, that is making people nervous.
Annual issuance of U.S. Treasurys has exploded, nearly doubling since the pandemic began. The government sold a record $23 trillion worth in 2023. And few think the spree is going to slow soon, given the widespread expectation that government spending will continue to rise regardless of who wins November’s elections.
Rapid growth in markets from tech stocks to mortgage bonds has ended badly in the past. Treasurys are considered the safest and easiest-to-trade securities on Wall Street, and many worry that any instability there could rapidly spread.
he market’s growth isn’t the only thing troubling investors: Some are also concerned about new rules that are changing the way the trading works. That could help alleviate strains but also create unforeseen consequences, such as the cash shortages in 2019 and 2020 that snarled trading and boosted interest rates.
“None of these regulations solves the mounting pile of Treasury debt,” said Steven Kelly, associate director of research at the Yale Program on Financial Stability
.
U.S. Treasury debt outstandingSource: Treasury DepartmentNote: Marketable debt only
'05'10'15'20200105101520$25trillionBondsNotesBillsOther
The mounting pile
When the government doesn’t take in enough from taxes to fund its spending, the Treasury Department issues bonds to fill the gap. The agency raised a net $2.4 trillion last year to finance the deficit, taking into account what it had to sell to repay holders of maturing debt
.
Average interest rate on Treasurys held bythe publicSource: Treasury Department
'05'10'15'2020010246%TotalBills
The Treasury market has grown more than 60% to $27 trillion since the end of 2019. It is roughly sixfold larger than before the 2008-09 financial crisis.
“Running a nearly $2 trillion deficit during a peacetime economic expansion—that’s a lot of bonds for the market to absorb,” said Stephen Miran, an adjunct fellow at the conservative Manhattan Institute and a former Treasury Department senior adviser who assisted with the Covid-19 response.
The Congressional Budget Office anticipates government spending that continues to climb in the coming years, with an aging population raising the cost of programs such as Social Security and Medicare. Rising interest costs could also boost issuance.
The Best “Go Paid” Offers on Substack
I thought the interview above was one of my best ever and valued-added by the amazingly insightful duo of Mark Gober and Alec Zeck. I was so impressed with Mark after the interview that I immediately bought his book: An End to Upside Down Liberty: Turning Traditional Political Thinking on Its Head to Break Free from Enslavement. I was so impressed with the book that I bought copies for the Art of Liberty Foundation bookstore at Government-Scam.com/Store. Become a yearly sponsor of the Art of Liberty Foundation at ArtOfLiberty.org/Sponsor OR "Go Paid" on Substack at the $50 a year level and we will send you a copy as our THANK YOU!
Go paid at the $5 a month level, and we will send you both the PDF and e-Pub versions of “Government” - The Biggest Scam in History… Exposed! and a coupon code for 10% off anything in the Government-Scam.com/Store.
Go paid at the $ 50-a-year level, and we will send you a free copy of Mark Gober’s book An End to Upside Down Liberty: Turning Traditional Political Thinking on Its Head to Break Free from Enslavement if you live in the US. If you are international, we will give you a $10 credit towards shipping if you agree to pay the remainder.
Support us at the $250 Founding Member Level and get Mark Gober’s book: An End to Upside Down Liberty: Turning Traditional Political Thinking on Its Head to Break Free from Enslavement AND an Everything Bundle – The Sampler of Liberty! - Get BOTH free by going paid as a Founding Member!
Eric relates: " The government sold a record $23 trillion worth in 2023." Wrong. Eric has fallen for the narrative. It is the FRBNY that formulates and auctions the securities ---and any related function which they wish to claim.. Ref. 31 CFR §375.3.
TreasuryDirect Institutional tabulations of auction results must have been received from the Bank. They historically listed amounts for redeeming maturing securities and also included for "new cash." New Cash was listed to foist a narrative that it was the money that went to the government. If money from the auctions actually went to the government for deficit spending, it would be the same cash flow as for taxes; i.e., from the market to the govt. Such a flow would not result in inflation nor would it increase the National Debt. New Cash must disappear to a private entity, such as the owners of the Fed system.
Deficit Spending Treasury Securities [DS] are received by the FRBNY [Bank] from the U.S. Treasury and govt ledgers receive fiat book-entry credit added for the govt to spend. The Bank then walks the securities down the hall to the department that is preparing securities for auctions to redeem the securities that have matured from prior years. The DS securities are divided into components and added to those securities being prepared to roll-over mature securities.
TreasuryDirect Institutional tabulations, as supplied by the Bank, historically identified Redeeming while the DS value is listed as ‘New Cash.’ Redeeming, in large part, involves Primary Dealers who are TBTF New York City banks. The auction funds, which currently amount to >$15 trillion annually, are handled exclusively by the Bank and have never been audited. {They are client accounts --- not operational accounts. Only operational accounts have been audited.] Ref. 31 CFR §375.3.
What happens to the New Cash ? Repeated inquiries to TreasuryDirect are not helpful. There is no documentation as to their destination. They certainly do not appear on any government account. If they disappeared by govt buying securities, it would eliminate any increase in the National Debt and would also negate any inflation. If they do not go to the government, then it appears they must go to a private entity---such as shareholders of a closely held FR Board of Governors, Inc.? But all profit of the Fed legally belongs to the govt. How is this not embezzlement ?
Are these potential recipients of $34 Trillion in New Cash over the past 100 years the same bankers who conspired on Jekyll Island for a week to create the Fed ?