There was a short report put out by the Council on Foreign Relations (CFR) that really caught my eye. It seems that their results confirm my own: Central banks have been buying more than their fair share of US government debt.
It is safe to say that if it weren’t for the massive interventions of central banks, the US fiscal situation would be entirely different.
How much different? Well, according to the CFR calculations, central banks (called “official buyers”) bought more than 100% of all US government debt offered in 2009, while “economic buyers” (defined as those who actually care about whether they make or lose money) were net sellers.
Government Debt: Financed by Official Sector
This chart shows who financed the massive amounts of debt that the U.S. government issued in the first half of 2009. The total net issuance of treasuries and agencies is shown on the left, and economic sectors are ordered from left to right by the size of their total purchases.
Given the federal backing of the GSEs – government sponsored entities such as Freddie Mac and Fannie Mae – it is best to look at the sum of treasuries and agencies rather than treasury issuance alone. Through the first two quarters of 2009, issuance has been financed primarily by official buyers.
Official buyers often have motivations other than profit. The Federal Reserve is buying debt as a part of its quantitative easing program, while some foreign central banks are accumulating debt as a function of their currency policy.
by cmartenson