Maris Research

Don't Fight The T-Fed

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Since the GVC, Fed officials repeatedly and frantically have been exhorting the fiscal authorities to do much more to support the economy. They’ve made it very clear that they will continue to help finance the resulting federal deficits by purchasing most, if not all, of the Treasury debt issued to pay for more fiscal stimulus. They’ve certainly been doing so since March 23, when they implemented QE4ever, which has already mostly financed the $2.2 trillion CARES Act signed by President Donald Trump on March 27. Consider the following:

(1) Consolidating the Treasury and the Fed. Over the past 12 months through August, the federal budget deficit totaled a record $2.92 trillion (Fig. 1). Over the same period, the Fed’s holdings of Treasuries is up by a record $2.26 trillion. Now that the Treasury and the Fed have joined forces in the MMT crusade to drown the virus in liquidity, we might as well consolidate the two of them into “T-Fed.” The result is that the federal government needed to borrow just $663 billion from the public over the past 12 months through August (Fig. 2)!

(2) The Fed’s portfolio of Treasuries. The Fed held a record $4.45 trillion in US Treasuries at

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