Has QE4 already started?
For the first time since October 2014, the Federal Reserve has bought a significant number of US Treasurys. Over the past two weeks, the Fed purchased $14 billion in US bonds.
The yield on the 10-year Treasury fell below the yield on the 2-year for the first time in 12 years, stoking recession fears and tanking stock markets.
Yield curve inversions have preceded all nine recessions since 1955. This was the first time the 10-year Treasury yield has dropped below the 2-year yield since June 2007 – the cusp of the Great Recession.
Month after month, the Trump administration runs multi-billion dollar deficits. The national debt has ballooned to over $22 trillion. According to the most recent Treasury Report, the US has a net worth of negative $21.5 trillion. And this understates the problem.
As Wolf Richter of WolfStreet puts it, the US government has “debt out the wazoo.”
Is this sustainable?
Over the past 12 months, the US federal government has added $1.5 trillion to the national debt.
As of Jan 30, the debt stood just under the $22 trillion mark at $21.97 trillion, according to the latest Treasury Department data. As WolfStreet put it, we’re seeing these rapidly increasing levels of debt during “good times when the economy is hopping. At the next recession, this is going to get cute.”
But even as the US added to its debt load, foreign holders of US Treasurys are gradually selling them off. So, who’s buying up all of this debt? And is it sustainable?