Posted by WARREN MOSLER on July 27th, 2009
The stupidity of this comment: “Bond market facing huge supply.”
Week after week after week, you hear these TV commentators or other “know-nothing” economists and analysts talk about the “huge supply” of new Treasuries that is coming and how that is going to cause interest rates to spike up.
One quick glance at the Treasury’s Daily Statement will show you that so far this fiscal year…the Treasury has sold
of securities and interest rates are
We’re talking nine months, here, and nearly $8 trillion worth of sales and rates have done nothing but go down. And by the way…that’s on top of the
$5.6 trillion they sold last year!
And…you guessed it…rates
have come down!!
When will these ninnies wake up???
The money to buy Treasuries comes from government spending itself and the monetary operations of the Fed! The added reserve balances that come about as a result of government spending or the Fed buying securities (to reduce interest rates) are merely swapped for an interest bearing account of the U.S. Government known as a Treasury. And the government pays interest on those Treasuries the same way it pays for everything else…by crediting bank accounts.
Please pass this along!