Installment loans without credit check: get cash now
By providing a purchasing capacity of around 20% of long-term debt issues, the FED has a way of mitigating the risk of foreign or US investors covering insufficient long-term debt issued by the Treasury. But it can also affect the level of interest rates by intervening punctually during auctions of treasury bills. This direct intervention can be done from now on in the open. The insincerity of Treasury bill issuance is now acquired. This policy of open weighing on the terms of bond issues and their level of remuneration is perfectly in line with the doubts we expressed less than a year ago about the terms of the no credit check installment loans.
We had raised in our posts in August the issue of an inflationary solution out of the crisis. We have issued a double thesis: on the one hand that the US could slip into inflation, on the other hand, that a modest inflation by reducing the amount of the principal of the debt could relieve the federal finances. The present commitments of the FED can be regarded as a step in this direction without it being possible to determine whether it will be followed by more significant subsequent steps. At the current level of purchases of treasury bills, the balance sheet of the FED will not be degraded in 2010-2011. The policy of the FED, therefore, seems to be confined to ensuring the consolidation of the debt at reasonable costs. The future will tell whether the US will be content with prudent monetization policies or whether it will go further.
After having suggested that an inflationary solution could exist in the US, Mr. Bernake found the marks of orthodoxy: “Amid all of the uncertainty about the future and the future outlook. Presidents will be able to make some decisions about the budget back on a sustainable trajectory. “. In less than two months; Mr. Bernanke will have gone from the inflationary temptation to the strictness of the budget. This again signals US uncertainties at the highest level of economic policy.
I leave it to each one to meditate on this phrase: “Finally, it is time to increase the flexibility of policymakers to increase future emergencies, such as recessions, wars, or natural disasters.” If the US economy is in depression, the temptation of inflation inevitably returns, even if it is a desperate remedy as well as the leap forward into the federal deficit.
In September 2010, T Bills’ issues were $ 615bn and issues of T. Notes of $ 167bn, emissions of T. Bonds were only $ 13bn.
At the same time, the depreciation of T. Bills was $ 652 billion, $ 50.1 billion for the T. Notes, they were zero for the T. Bonds. Total issues were $ 795 billion for a total amortization of $ 702 billion.
The Treasury has therefore made massive cuts to the financial market.
These punctures can be calculated using the raw numbers as we just did. It is also possible to calculate the Treasury’s deductions by subtracting the federal debt repayments from gross issues. We then obtain the net issues of treasury bills, the figures of which we give in graph form.
This graph illustrates the growing weight of long-term debt financing (T. Notes & Bonds on short debt (T. Bills).
The operations of the FED
To take stock of the role of the FED, in financing the federal debt, it is first necessary to examine its balance sheet since it decided to buy Treasury bills in lieu of the debt of the agencies and institutions.
We also recall that Residential Mortgage Backed Securities (RMBS) are the securitized debts (Backed Securities) of residential mortgages (Residential Mortgage).
Since August, the Fed has implemented its policy of substituting securities without modifying its balance sheet. Between August and September, the RMBS bridge dropped $ 35bn and agency debt $ 5.3bn. This drop benefited long-dated treasury bills, with net purchases increasing. That is why T. Bills remained at the same level ($ 18.4 billion) while T. Notes and bonds increased by $ 31 billion for ordinary securities and $ 0.7 billion for securities. principal inflation-indexed (TPIS).
The monetization of the federal debt was therefore made with modest amounts of capital (+ $ 31.7 billion). The FED should continue its purchases throughout 2011.
The weight of cases purchases appears relatively marginal when one examines the gross sales of treasury bills: in August the FED bought 5 of the 297 billion of T. Notes and Bonds issued by the Treasury. In September, she bought 26 of the $ 180 billion of T Notes and Bonds issued or 22%. If we remember that the average of the issues is $ 189 billion and the purchases of the FED treasury bills should continue throughout 2011, the FED has a purchasing capacity of 20% of his long debt. It, therefore, has a means to ensure timely consolidation of US debt at reasonable interest rates. This intervention capacity is only compatible with a slight deterioration in debt financing conditions. It is notoriously insufficient in its terms – the substitution of Treasury bills maturing RBMS – and its volumes – $ 400 billion over more than a year – to deal with a serious crisis of sovereign debt.