Wait a minute…The fourth round of quantitative easing has already begun? Yikes – and there wasn’t even an announcement or anything.
Well, for the first time in five years, the Federal Reserve is purchasing US Treasurys again.
Since the middle of August, the United States central bank has purchased $14 billion in U.S. debt.
While it should not come as a surprise because the Fed confirmed that it was ending its unwinding, the fact that it has come so soon is interesting.
More from Schiff Gold:
In July, the Federal Reserve cut interest rates for the first time in more than a decade. At the time Peter Schiff said it was the first cut on the road to zero and another round of QE was in the cards.
It shouldn’t come as a complete surprise that the Fed has pivoted back to buying Treasurys so quickly. There were hints that the central bank was planning to begin monetizing the massive US debt again last spring. In April, the US Treasury Department lowered its borrowing estimate for Q3 2019 in anticipation of the Fed increasing Treasury holdings as the central bank ended its balance sheet reduction program. According to a statement issued by the Treasury Department at the time, the lower estimate was due to changes in “fiscal activity.”
So, what exactly does “fiscal activity” mean?
According to the unnamed Treasury official interviewed by Reuters, “The fiscal change related to the Fed’s plans to stabilize its massive portfolio of bonds relative to the size of the US economy.”
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It’s too early to say the Fed has definitively launched another round of QE. This could be an anomaly. But $14 billion in Treasury purchases over two weeks should certainly raise some eyebrows. As the author of Econimica wrote, “Since March 2019, when the Fed rolled out its plan, the Fed has ended its Treasury runoff sooner than they had communicated, cut rates as they said they would not, and is buying mid and long-duration bonds while aggressively rolling off / selling off notes and bills…again opposite to what they previously communicated (insinuated). I think this is noteworthy!”
The M2 money supply data in the coming months should be a fascinating read.
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