US National Debt Hits $32 Trillion, up $572 billion since Debt Ceiling Suspended. TGA Starts Refilling, Drains Liquidity from Markets

Debt doesn’t matter. Until it does. And now it does.

By Wolf Richter for WOLF STREET.

The U.S. national debt spiked by $572 billion since the debt ceiling was suspended two weeks ago after the sarcastically named “Fiscal Responsibility Act of 2023” was signed into law, the Treasury Department reported Friday evening. The total government debt now exceeds $32.0 trillion – hallelujah, we made it!

Debt doesn’t matter. Until it does. And now it does — in several ways, including interest on the debt, and fuel for inflation. Interest rates have come up because inflation started to rage in early 2021, and all this fiscal stimulus from deficit-spending is throwing fuel on the inflation fire, and so “core” inflation – inflation minus food, whose prices have ticked down, and energy whose prices have plunged – has been stubbornly stuck in the 5% range annualized for seven months, driven by inflation in services:

The US national debt comes in two types of Treasury securities, “nonmarketable” (cannot be traded in the bond market) and marketable (can be traded in the bond market).

“Nonmarketable” Treasury securities include the “I bonds” that Americans can buy – they pay a base rate plus a rate based on CPI. The Treasuries securities held by government pension funds, the Social Security Trust Fund, etc. are nonmarketable. These nonmarketable Treasury securities jumped by $96 billion since the debt ceiling was suspended, to $6.86 trillion.

“Marketable” Treasury securities spiked by $476 billion since the debt ceiling was suspended, to $25.2 trillion. These are the securities that the government sells via auctions to the public.

The Treasury Department is now selling a flood of Treasury securities to replenish its checking account that had been drawn down to near-nothing during the debt-ceiling standoff. These securities include a large amount of Treasury bills (with a maturity date in one year or less), short-term Cash Management bills (at the last CMB auction on June 13, it sold $45 billion in 42-day CMBs), and longer-term notes and bonds, including TIPS.

The Treasury General Account at the New York Fed, which is the government’s checking account, had fallen to a closing balance of $23 billion just before the debt ceiling was suspended – a hair-thin cushion, given the huge amounts that flow daily through this account. The default-day would have been sometime in early June. In this respect, this 2023 debt ceiling farce mirrored prior debt ceiling farces.

What flows into the TGA are tax receipts and the proceeds from selling Treasury securities. June 15 was also the deadline for quarter estimated taxes that corporations and self-employed have to pay. So there was a surge in the balance of the TGA.

Since the debt ceiling was suspended, the TGA has jumped by $227 billion – including the June 15 tax receipts – to a balance of $250 billion. But the tax receipts are going to get spent promptly, as they do every quarter.

Last year, the June 15 tax payments caused the TGA balance to jump by $140 billion. And a month later, the balance was down by $200 billion. Deficit spending will see to it that tax receipts are outspent at a very fast clip.

Massive bond issuance will be required in the near future, along with tax receipts, to:

  • Replenish the TGA
  • Pay off maturing securities
  • Fund the ongoing blistering budget deficit.

The huge bond issuance in the spring and summer of 2020 to fund the stimulus packages and other giveaways wasn’t all spent in 2020. The TGA peaked at $1.8 trillion in July and ended the year 2020 with $1.6 trillion. It was then drawn down to near-nothing during the two debt-ceiling farces in late 2021.

The $1.5 trillion drawdown of the TGA in 2021 moved $1.5 trillion in cash from the TGA (a liability on the Fed’s balance sheet) to the markets because the government was spending money it didn’t have to extract from the markets via bond issuance. This huge amount of liquidity to seep into the markets over a 12-month period explains in part the hot performance of the stock market in 2021.

From late 2021 through April May 2022, the TGA was being replenished and absorbed nearly $1 trillion, and markets tanked. There are always some lags. In June 2022, the S&P 500 began to bounce off in its up-and-down manner.

This $1 trillion in TGA drawdown from May 2022 through May 2023 in part counteracted the Fed’s QT that was phased in the summer of 2022.

Now the Fed’s QT is running for the first time simultaneously with the TGA being refilled, and both are draining liquidity from the markets simultaneously, and this is happening with some lag effects, amid the usual ups and downs.

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  269 comments for “US National Debt Hits $32 Trillion, up $572 billion since Debt Ceiling Suspended. TGA Starts Refilling, Drains Liquidity from Markets

  1. Bobber says:

    The government is now using “extraordinary measures” to increase the national debt. It seems like yesterday when we were awestruck by the $20 billion milestone.

    A reckoning is in our future.

    • andy says:

      I think you meant to say $Trillion. But who’s counting.

    • Leo says:

      Lol “Fiscal Responsibility Act of 2023”

      Milton Friedman: “One of the great mistakes is to judge policies and programs by their intentions rather than their results”

      In reality “Fiscal Irresponsibility and no accountability Act”

      God Bless America.

      • Sebastian says:

        I will never understand why officials and the general public seem to simply ignore Friedman’s findings, as if they were completely invalid, but with no evidence to support their dismissal.

        Want to reduce inflation? Don’t print money and take it out of circulation. Is inflation such a bad thing? Not as long as everyone has the same information. Can monetary policy reduce inflation without destroying more value than it’s preserving? Most definitely not, you can only postpone inflation, not really reduce it, without destroying value measured as economic output and purchasing power.

        • Leo says:

          Is inflation such a bad thing? Not as long as everyone has the same information.

          Problems with Inflation:
          1. Government measures inflation => Big Conflict of interest. Visible in how house and car price increases are not accounted in inflation. Many other examples.
          2. Debt and Deficit are very high => High inflation may be a result of decreasing productivity. If yes, society must be getting poorer. E.g. I pay 50% more at restaurants and cafes now, but both quality and quantity of meals is decreasing. Many other examples.

        • Denis says:

          It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

        • CRV says:

          The problem with taking money out of circulation is that the loan that created the money(debt) still exists and still has to be paid off. With now less money in circulation then there is debt, somebody has to be a bag holder. If money was ‘created’ without any debt ‘backing’ it, it would be different. That could be taken away without having to also take the backing off the books.

        • old school says:

          Yes. I enjoy listening to professor Steve Hanke, a follower of Friedman.. He has been an accurate forecaster of inflation which the Fed has not been able to do.

          I think in reality the economics profession is mostly captured by government and only solutions that facilitate a massive government are considered legitimate.

    • Nacho Bigly Libre says:

      USG inserts itself into everything and runs huge complexes.

      Military Industrial complex, Health care Pharma complex, Big Green complex, Higher Education complex.

      None of these make lives better.

      They drive up deficits and leaves everyone with less.

      We have had wars in Iraq, Afghanistan, Syria, Libya, Yemen etc and now Ukraine and Sudan.

      Has any single one of these wars left us or the people in those countries safer or better off? Who has massively benefited from them?

      Are students getting better education for less money? Or are they graduating with less skills and a massive student debt? Who has benefited here?

      Is the general population getting healthier? Or spending more every year and getting sicker?

      All those trillions don’t benefit general population, here or in any country.

      • JimL says:

        None of these make lives better?

        That statement flies in the face of reality. Living in the U.S., right now, is literally among the best times for a human to live anywhere at anytime in the history of mankind.

        • Nacho Bigly Libre says:

          What nonsense. Prosperity is not because of those borrowed trillions.

          That money line the pockets of those who run those rackets. Those who “spread liberty” and “rebuild nations”.

          Which of the 21st century wars have benefitted people? How much have they cost us?

          Free markets create wealth and prosperity. Government complexes create dependency and regression.

      • Chris says:

        Very well said! It seems JimL is buying the propaganda narratives that have poisoned the American people for decades.

        Now that reality is here, they will have no idea how they got here, because they have been living in an illusion and propagandist fog for most of their existence on this planet.

        The U.S. Government, Corporations, banks, Big Pharma, Big Medical, Wall Street and the MIC (All Davos stooges) have absolutely horrific records and is diametrically opposed to making life better for humanity! We are just the black sludge feeding the Matrix, JimL… Stop making it so easy for the known and highly paid liars to deceive you! All the evidence is around you, so why don’t you see it??

    • 91B20 1stCav (AUS) says:

      …radioactivity lasts longer than you can remain solvent…

      may we all find a better day.

  2. Herpderp says:

    Is “liquidity” something that can be show as a line graph?

    • Gomp says:

      Is there a place where we can view the line items of the TGA monthly statement?

  3. Jackson Y says:

    One party wants to massively expand welfare & social spending but is scared to raise taxes. The other party wants to cut taxes but is scared to reform entitlements and reduce fraud & waste.

    Meanwhile, both parties want to spend extravagantly on the military & foreign interventions.

    The only semblance of fiscal restraint is during divided government, when one party can check the other’s worst excesses. But even then, it just rises at a slower rate.

    There’s no solution to this ballooning debt problem. Austerity is broadly unpopular so politicians don’t campaign on it, outside of divided government.

    • Roger Pedactor says:


      The two party system has FAILED.

      • Doolittle says:

        Failed because they are both completely corrupt and not making the best decisions for the society just for their puppeteers. It’s a disgustingly greedy sewer.

        • Cas127 says:

          If Trump had included DC in his infamous “sh*tholes” speech, he would have had a much better chance at re-election – such is the long-standing contempt for the ” DC way”.

          In fact, Trump is the stumbling, gibbering manifestation of that contempt.

          It isn’t that 50+ million US citizens think Trump is wonderful (or even competent) – it is just that they hate the long-failing Establishment (and their MSM familiars) *more* (which explains the white-hot hatred among the MSM types…Trump is the culmination of their castration).

      • Dave says:


        That is why I vote for 3rd party candidates all the time. The wife says I am throwing my vote away. I say that vote is a sacred right and I honor it by voting outside of the corrupt duopoly structure we now have.

        • Escierto says:

          I have voted in the US since 1980. I have voted for Gus Hall, Ron Paul, Ed Clark, Ralph Nader, and Ross Perot. The current system is an abomination.

        • Implicit says:

          No one will debate RFK he doesn’t like War neither did his father or his uncle and they both were assassinated.
          When everybody calls him crazy and the world is acting and saying and crazy, perhaps the system that is insane andu crazy needs to be changed.

      • Winston says:

        “The two party system has FAILED.”

        It failed a long time ago because it isn’t actually two parties on the vast majority of topics. They bring people to the polls with hot button topics while they vote the same on big ticket items.

        A 2014 Princeton study proved Fred Reed’s point with data analysis:

        Plumbing the Depths
        How the Gears Turn
        FRED REED • MARCH 9, 2008


        Common delusions notwithstanding, the United States, I submit, is not a democracy—by which is meant a system in which the will of the people prevails. Rather it is a curious mechanism artfully designed to circumvent the will of the people while appearing to be democratic. Several mechanisms accomplish this. [he details nine of them – W]

        First, we have two identical parties which, when elected, do very much the same things. Thus the election determines not policy but only the division of spoils. Nothing really changes. The Democrats will never seriously reduce military spending, nor the Republicans, entitlements.

        • JimL says:

          The U.S. is most definitely a democracy. The problem is that a democracy requires a well informed populace. Unfortunately our populace is not well informed. More people know about the Kardashians than know how an election is run and the safeguards involved.

          Too many people think “the parties are the same” rather than educate themselves about the differences between them and what it would mean for our future.

        • Swamp Creature says:

          Art Laffer was on the financial shows tonight and gave a grade of ‘F’ to the Republicans proposed tax bill that repeals most of the 2017 Trump tax cuts and makes the taxes much more complicated. It’s a tax accountants dream. Get ready for higher taxes a more progressive tax code, and 87.000 new IRS agents. The Dems will be salivating as the Republicans destroy themselves with this bill.

      • Neel Kash & Kari says:

        You mean our democracy has failed or has been subverted as well as our so called “free” marked capitalist system

        • Gomp says:

          The word “Democracy” doesn’t exist in the Declaration of Independence or the Constitution.

    • Wolf Richter says:

      Congress has chosen inflation as the answer. That’s always the ultimate answer to out-of-control government debt.

      So higher interest rates for much longer.

      My hope is that eventually, interest expense WILL get the attention of Congress. But not yet. Still way too low:

      • Jackson Y says:

        Yes, inflating the debt away is a “solution” but it’s slow. Real debt to gross national product has decreased from about 130% to 120% in the last 3 years, while we permanently lost 20-25% of the dollar’s purchasing power. It requires sustaining high inflation (and sour consumer sentiment) for a long time.

        • Anon1970 says:

          Inflating the debt away did not work very well for Weimar Germany. Many Germans effectively lost their life savings as runaway inflation during the early 1920’s made their Reichmarks virtually worthless. When the Great Depression hit central Europe like a ton of bricks in 1931 after the failure of a major Austrian Bank (Kreditanstalt), many German voters had little savings to fall back on and decided to vote for the Nazi Party in 1932 national elections. I wonder if senior officials in the US Treasury Department and the Federal Reserve have trouble sleeping at night.

        • JimL says:

          Comparing 4-5% inflation in the US to Weimar Germany?

          Say what?

          Not every little problem results in the end of the world.

        • Nicholas Cogdill says:

          True: but which one of us could go to a bank and get a loan when the bank sees we’re spending 120-130% of our income?? NO ONE. Congress will soon have to face the fact they can’t borrow continually: sooner or later other governments will stop lending them money, and so will Americans: nobody wants to be repaid in worthless money. Conversely, if they ARE able to borrow more, then they will have to do so at unfavorable rates!

        • Kurtismayfield says:

          I agree with JimL, the comparison isn’t apt.

          The problem is that labor is going to get slowly squeezed. They average laborer of the US is going to approach third world standards of living after a decade of this.

        • Djreef says:

          Plus it doesn’t work very well when debt keeps being piled on at a geometric rate.

        • Stevie says:

          Its slow alright, and doesn’t require anything like high inflation, which ticks off the public and disrupts the economy. The US government slowly whittled away WWII debt via financial repression by keeping inflation adjusted savings rates almost zero for decades, the final blowout occurring during the 1970’s. I’m betting they may try the same again if govt spending can ever be stabilized.

      • Gabriel says:

        Wolf, I am trying to understand the direction of T-bills.

        The govt. raises the national debt and the stock market goes up. Does that mean people are pulling money from fixed income assets (T-bills) to invest in equities? If so, how does that affect the T-bills in the near future?

        Are treasury rates set by the government or by auction? In the article you referenced you said the government would be offering t-bills above 5% which they did for a short while.

        I understand inflation is eroding my finances, but at least short term T-bills softens it. By the way, why would anyone by a 10-year T-bill if it pays less than 4%?

        I appreciate your articles. I understand most of your unpacking of the data. But I don’t always understand the “why.”

        I struggle to see the forest from the trees.


        • Wolf Richter says:

          1. “The govt. raises the national debt and the stock market goes up.”

          The two events as you describe them are not related. The stock market had been going up for months. Then the government suspended the debt ceiling, and the stock market continued to go up a little further. If you draw it out on a timeline, you see that there is no relationship. The relationship is between liquidity and stocks.

          The liquidity issues are discussed in the article. They’re related to the stock market. The TGA refilling just started, and there are lags, as I said, and we can see the lags in prior periods.

          2. “Are treasury rates set by the government or by auction?”

          2.a. Treasury securities are traded actively in the bond market, which is where minute by minute, yields are established. In this case, yield is a function of market price — or buyers and sellers coming to a meeting of the minds.

          2.b. When the Treasury Dept sells securities at auction, a bidding process establishes the yield for that particular issuance, and all investors that buy securities of that issuance get the same yield.

          2.c. Yields of “nonmarketable” securities, including i-bonds, are set by the government based on a formula. For i-bonds, the formula includes CPI. For other nonmarketable securities, the formula includes recent yield data.

          3. “why would anyone by a 10-year T-bill if it pays less than 4%?”

          Investors have their reasons. Like paying $426 for a share of NVDA. Neither makes sense to me, and both happened.

          4. “But I don’t always understand the “why.””

          Here, the most important concept is that on a day-to-day basis, markets do what they do because they do it. It’s a fool’s errand to try to attach a “why” to every little move in the market.

          However, over the longer term, there are “whys”. And we discuss some of them here.

      • longstreet says:

        “eventually, interest expense WILL get the attention of Congress.”

        That seemed to be missing in all the debt ceiling games. Never did I hear we must keep the debt down to keep the cost of servicing the debt down.

        • sunny129 says:


          Deficit spending is the ‘mother’s milk’ (milked from Taxpayers)
          to which lawmakers of BOTH parties are addicted.

          Without deficit spending NO (elected) politician of any stripe can promise ‘goodies’ to his constituents private or otherwise. Then why become a politician? No work for lobbyists or the campaign contributors to PACs. They may go initially for Japanaification!?

          A politician is one who hypocrite, intellectually dishonest and his integrity for sale.

          B/w being (successful )politician is very lucrative career. Without deficit spending it will not materialize.

      • BENW says:

        Though May 2023, total interest expense for FY2023 was $530B. It was $718B (again total) last year, so $850B+ is extremely likely this year. If core CPI inflation keeps running hot to the tune above 4%, the Fed has three choices:

        1) Redefine the rate up from 2% that’s neither inflationary nor deflationary.
        2) Leave rates mostly unchanged for much longer than anyone expects.
        3) Keep raising rates until they induce a recession, thereby creating the necessary deflationary pressures that would give them cover to lower rates, thereby lowering interest expense.

        And I for one don’t care for comparing inflation to GDP. Rather, comparing it to actual revenues makes more sense because everyone knows Congress isn’t going to tax its way out of this problem. Nor are they going to cut spending meaningfully.

        One can only hope that once total interest expense breaches the $1T annual mark in the next 12-18 months that Congress will actually wake up to some extent.

        So just wondering, are you willing to define what level of interest expense that you think will grab Congresses attention?

        • Wolf Richter says:

          “1. Redefine the rate up from 2% that’s neither inflationary nor deflationary.”

          The Fed pegs policy interest rates to inflation. If inflation is at the target of 2%, and the economy is growing, policy rates are going to be “neutral,” meaning at about 2%. But if core inflation = 5%, and the Fed raises its inflation target to 5%, the Fed’s policy interest rates are going be at around 5% as long as the economy is growing. People need to understand that raising the inflation target means higher interest rates for the long term.

    • Redneck_Millionaire says:

      To Jackson Y. Don t be fooled that we have a two party system. The 536+1 have been working together for quite some time.

      • JimL says:

        That is just crazy talk.

        Seriously, you are completely unable to tell the differences between the parties and what their priorities are?

        • Natron says:

          JimL, check out this study “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens” by Cambridge a while ago. It tells you who is is charge.

          The point R.M. is making is that this “our” government a good cop bad cop routine with the sides flipping around depending on the topic at hand, but neither on the little guy’s side.

        • Redneck_Millionaire says:

          Example # 1
          536+1 votes to raise the debt ceiling again and again.
          No difference in the two parties, just a side show and game.
          How many examples does a person need? Depends on the person. I am fooled no longer. The Federal Government has become more powerful in my lifetime and will protect its Golden Goose at all costs. Party Ideology, politics, preferences, pro this, con that, is just show and tell nonsense to gain control and power over people…..

        • JimL says:

          You say neither side is on the side of the little guys, but the measure of inequality (Gini coefficient) has gone down under one administration in the last couple of decades. That was the Obama administration and it was mostly because of Obamacare which brought healthcare coverage to millions of poor people who didn’t have healthcare coverage.

          The thing is, only one party wanted to go further than Obamacare in bringing healthcare to the little guy, but they could only do what was politically possible.

          Saying the parties are the same is just plain crazy and ignorant. Ignorant of reality.

        • Natron says:

          Fair enough JimL, Obama managed to pass along another large long term deficit program to future generations that makes the insurance company fat cats fatter, with publically held debt increasing from around 50% of GDP to 70% during his administration. Did some public good, which is nice. Did manage to drop a record number of bombs on people to keep the MIC happy. He was a mixed bag, trying to play good and bad cop at the same time.

      • Harry Houndstooth says:

        Great comment…

        Concise, true and humorous.

    • max says:

      Democracy’s Road to Tyranny by Erik von Kuehnelt-Leddihn
      Slouching Toward Servitude
      Tocqueville did not tell us just how the gradual change toward totalitarian servitude can come about. But 150 years ago he could not exactly foresee that the parliamentary scene would produce two main types of parties: the Santa Claus parties, predominantly on the Left, and the Tighten-Your-Belt parties, more or less on the Right. The Santa Claus parties, with presents for the many, normally take from some people to give to others: they operate with largesses, to use the term of John Adams. Socialism, whether national or international, will act in the name of “distributive justice,” as well as “social justice” and “progress,” and thus gain popularity. You don’t, after all, shoot Santa Claus. As a result, these parties normally win elections, and politicians who use their slogans are effective vote-getters.
      The Tighten-Your-Belt parties, if they unexpectedly gain power, generally act more wisely, but they rarely have the courage to undo the policies of the Santa parties. The voting masses, who frequently favor the Santa parties, would retract their support if the Tighten-Your-Belt parties were to act radically and consistently. Profligates are usually more popular than misers. In fact, the Santa Claus parties are rarely utterly defeated, but they sometimes defeat themselves by featuring hopeless candidates or causing political turmoil or economic disaster.
      A politicized Saint Nicholas is a grim taskmaster. Gifts cannot be distributed without bureaucratic regulation, registration, and regimentation of the entire country. Countless strings are attached to the gifts received from “above.” The State interferes in all domains of human existence—education, health, transportation, communication, entertainment, food, commerce, industry, farming, building, employment, inheritance, social life, birth, and death.
      Democratic tyranny, evolving on the sly as a slow and subtle corruption leading to total State control, is thus the third and by no means rarest road to the most modern form of slavery.

      • VintageVNvet says:

        GOOD ONE Max, thanks.
        As one whose mom was an centerist Ike republican poll watcher in the democratic majority and heavily conservative FL of that era, I have been trying to get folks to understand the dems make hay by total support of the folks administering the socialist agenda for the poor, while the repubs make hay by kowtowing to those who think they make their own way, then more quietly supporting the socialist agenda for the rich.
        Neither side is supportive of the middle, as can SO clearly be seen these days as the middle classes shrink once again.
        AAHHH, the swings and roundabouts of politics, eh?

        • 91B20 1stCav (AUS) says:

          …to reprise the Firesign Theatre: “…we’re all bozos on this bus…”.

          may we all find a better day.

      • Lisa_Hooker says:

        A most excellent and accurate description.
        Thank you.

    • Greg Kubina says:

      Well said!

    • Einhal says:

      People like to blame the parties, but I blame the people. Ultimately, politicians run on promising more and more goodies with borrowed money because the people demand it.

      • Wellstone's Ghost says:

        Someone once said, “You get the government you deserve.” I believe they were referring to the American experience.

      • John Smith says:

        …political elections in the United States are funded by corporations, especially from Wall Street, the military industrial complex, arms manufacturers, are major funders of political campaigns.

        In the United States, the head of any congressional committee is the congressman who receives the most campaign contributions.

        We’ll make sure we fund our MPs so that we elect MPs who represent our interests. The donors to the campaign, not the voters, are these donors. This is how American politics works. in most countries it’s illegal, but that’s the financialization of the American political system. Wall Street, the oil industry, the pharmaceutical industry, and the mining industry are major contributors to US election campaigns. This is why the U.S. government ignores the interests of voters and serves Wall Street, the pharmaceutical industry, and the military industry.

        • Lisa_Hooker says:

          You simply don’t understand that corporations are people.
          The SCOTUS said so.

      • Greg says:

        Exactly. I blame the people too. Politicians just reflect the will of the majority of voters.

  4. Bobber says:

    $32T national debt divided by 150 million household is a debt burden of $213,000 per household, which is growing at a rate of 5-8% per year.

    We should be investing in future generations. Instead, we are putting shackles on them, like greedy slave ship captains.

    Such generational wealth transfers are unconscionable and threaten the stability of the system. Who wants a system that screws you when you are too young to vote or do anything about it. Would you have any allegiance to that system? Would you respect that system?

    • Herpderp says:

      I graduated college in 2013. Paid 21k a year for a generic regional tech school. At the time the fancier tech school (WPI) was 42k a year. But you become a well paid engineer!
      My college now costs 42k a year, and WPI ~60k. Four years of delayed compounding interest payments on on 200k in debt, starter homes at 500k. We will have to import all the worker units to replace these debt slaves, because theres no way theyre siring more production units for the job creators while paying that debt off.
      “No one wants to work anymore”, as they say

      • Escierto says:

        No one wants to work anymore? Then is the labor force bigger than it’s ever been? Why are millions and millions of people working at not just one but two or three jobs. Complete nonsense.

        • Natron says:

          It’s more like no one wants to be exploited anymore, but plenty of them (and increasing) don’t have a choice d/t various circumstances.

      • Ethan in NoVA says:

        The imported workers near me are buying $750k townhouses that were $400k a few years ago.

      • Flea says:

        And u can go to a union trade school ,get paid while working in 4-5 years you become a journeyman.And live a quality life,with no debt

    • djrichard says:

      You know what the treasury holders do with the interest on treasuries? They buy more treasuries with it. If they had something better to do with their currency they wouldn’t be buying treasuries in the first place.

      • VintageVNvet says:

        Not everyone djr:
        Some folks want to maintain liquidity of savings/reserves, while still having income for, for instance, paying taxes and utilities and other GUV MINT mandates.
        Best to keep in mind, ”different strokes for different folks,” no matter how individual preferences are described.
        And to be sure, while ”freedom (S)” in USA are clearly NOT what they used to be back when I was a fairly wild kid in the 1950s able to shoot pretty much any tin can or bottle or squirrel that I happened across on or near our farm, IMHO after visiting a bit of Asia thanks to good ol’ Uncle Sam, and walking through parts of Britain and Europe, we are still more free to choose many aspects of our life than those places were 50 years ago.

        • djrichard says:

          Sure, not everyone. But you’re not talking about institutional players. I’m talking about institutions that would hoard currency instead if it wasn’t for treasuries. Except that hoarding currency would actually gum up the works – hoarding treasuries instead allows the currency to be recycled back into the US economy via the magic of Fed Gov spending.

          In the early days of Japan’s trade surplus, US actually had to send a delegation to Japan to advise them on buying US treasuries so they weren’t hoarding US currency instead. Same with Kingdom of Saudi Arabia, though my understanding is that KSA cottoned on quickly to using their surplus US currency as a euro dollar and loaned it back to US banks – hence our inflation of the 1970s.

          Withstanding countries with trade surplus, there’s always the case of currency reaching its terminal velocity. After being hoovered up by the winners, it’s basically recycled into the economy in the search for yield, purchasing all kinds of debt instruments that provide a higher yield than US treasuries. Until there’s no more debt worth funding – at which point the choice is to let the currency sit in bank reserves inert or to swap it for treasuries.

        • JimL says:

          If course that misses the obvious that in the 1950’s kids were free to go to school where they didn’t have to worry about a nutcase hosing down a class room with one pull of the trigger because the little .22 you used to shoot squirrels or glass bottles couldn’t do that.

    • Anon1970 says:

      We have chosen to be the policeman of the world instead of investing in future generations. The party of “Family Values” (R) does not seem to care much for average American families. Their arch rivals (D) have been infected by the neo-con disease, which calls for an aggressive American foreign policy.

      • Mojer says:

        World police is quite an understatement, I would say it’s called perpetual war and it doesn’t matter if lose it like all recent and no recent wars because the military complex demands it like a bottomless pit with shutters always ready to come to the rescue.
        Military complex is the true US inflation.

    • gametv says:

      One of the problems is that younger generations are completely ignorant. They are too busy posing for selfies to care about anything economic or political. You would think that the youth would wake up and realize they are getting screwed, but it is far too easy to distract them with the latest post by a celebrity.

      • LIFO says:

        After people have lived long enough to hear politicians recycle the same old lies, they begin to awaken. Unfortunately, that usually requires decades.

      • Pea Sea says:

        Well then, it’s a good thing that the older generations, having no Instagram or avocado toast to distract them, were such responsible and wise stewards of the nation’s (and their own) finances. Otherwise we’d really be in trouble.

        • Flaming Anarchist says:

          I previously had a neighbour who bought a travel trailer for 29k financed for 20 years at 7%. Never did the math. Came out to over 70k over the loan term. He was a boomer.

        • Peacefuldaizy says:

          “No avocado toast to distract them.” That really hit my funny bone! Thank you.

      • JimL says:

        That is a bizarre statement to make given that so much of DJT support comes from the older generation, and his supporters genuinely think he won the 2020 election despite all literal facts to the contrary. Who is ignorant?

    • Doolittle says:

      No. You screw them back in whatever way possible. Corruption is a cancer.

    • SOL says:

      We can all see what’s happening behind the curtain, and most people don’t even care.

    • eg says:

      Ugh — Bobber, you do realize that a balance sheet has two sides, right? So future generations don’t just inherit all of the debt; they also inherit all of the assets.

      • Einhal says:

        What assets? A dwindling productive base and mineral/energy deposits?

        • JimL says:

          Do you think having ultimate taxing authority on one of the world’s biggest and most dynamic economies is worth anything?

      • Bobber says:


        You are the worst kind of wrong – confidently wrong.

        Please identify these assets, worth $32T, that new generations will inherit.

      • MarkinSF says:

        Ever here of negative equity?

    • Flea says:

      Why are we in this situation,because being worlds policeman is damn expensive ,I hear 900 bases worldwide,unsustainable situation.But it does create millionaires,billionaires.

      • gametv says:

        There is more to it than that. We have also shipped our productive base off to China and rewarded the financial sector for stripping the country of wealth.

  5. Jackson Y says:

    Many analysts predicted the flood of new treasury issuance would effectively act as additional QT, draining liquidity & dragging down stocks.

    Instead the stock market rocketed higher, confirming a new bull market. The Dow is only about 6% off its 2021 top.

    • Wolf Richter says:

      No, no, no, no… TGA refill JUST STARTED, and as we have seen, there are substantial lags, on the way up and on the way down.

      • Blam 35 says:


        Yes the TGA but the fed hasn’t appreciably tightened, they need to offload mbs in the worst way, short of that, it’s all deck chairs and encouraging risk taking and fomenting moral risk and malinvestment in the economy. Powell is not going to attack inflation at the cost of asset holders, his true dual mandate cannot be reconciled.

        • longstreet says:

          “they need to offload mbs in the worst way,”

          It will never happen. They forced rates with bad trades that they justify by holding to maturity.
          The Fed used to stay out of the long end, then Bernanke and Yellen and Powell diverted from this wisdom and went all in….nw with about one Trillion in paper losses to the benefit of whom, exactly? I have a few guesses….

      • Natron says:

        It’s the top 7 “Gorilla” stocks that are booming anyway, not the whole market so far. It’s mostly on AI hype, which will likely moderate in due course too.

      • AuHound says:


        Thanks for this article. TGA is something I never saw before so nice to have something new to think of. That is why I read your postings. Stuff one does not see elsewhere

        Unfortunately, too many commentators got sidetraked from the real value of your piece (into politics instead of investing) which is that TGA ups and downs help explain stock market ups and downs better than most explanations I have seen over the decades.

        i.e. investor funds flow out of T bills into stock market when TGA declines so stocks go up,
        and from stock market to T bills when TGA increases so stocks go down.

        Very simple.

        Of course always with a lag as you said. This lag…

        Could you repost that graph along with the S&P 500 superimposed on it so that lag could be a bit more visualized? And perhaps over a longer period?

        Also can you post both again in say 6 to 9 months?

        That would be much appreciated as this is an investment blog.

        Comment to other posters… Usually the comment section is very educational, but when it goes so off track it becomes a bit boring/uninformative. Come on, we learned something new here, what appears to be a very good predictor of the general stock market trends, something I doubt we have seen before.

    • HR01 says:

      Jackson Y,

      Yes as Wolf stated, this liquidity drainage is just getting underway.

      TGA was slow to refill. Banks and money funds also reduced nightly usage of the Overnight Reverse Repo facility. From $2.25 T down to $1.99 T. Provided an additional $260 B of excess liquidity.

      Global liquidity also about to be crimped. ECB potentially draining hundreds of millions of euros at the end of this month and then in July the ECB removes the monthly cap on balance sheet runoff.

      • butters says:

        I was reading somewhere that if the TGA is filled with RRP, may be no impacts to stonks at all. I suppose time will tell.

  6. AV8R says:

    No problem refinancing the TPG at or near 5%. Plus in the wholly inadequate QT which can’t achieve $1T and financial conditions are still stimulative. Any sign of contraction forestalls a July rate hike and the markets will catch more fire.

    S&P 4700 by Labor Day.

    • Wolf Richter says:

      Opposite direction.

      • Harry Houndstooth says:

        Pure wisdom dispensed daily.

      • Occam says:

        “Opposite direction” is as close to a firm and near-term prediction on the direction of the stock market as I recall seeing on this site from the Proprietor, and I have been lurking here since “Testosterone Pit” days. We’ll soon see whether AV8R or the Proprietor is correct (or the market could meander and it’ll be a push). Of course, the market could tank and then the Fed will signal “pivot” and the market will go wild, and so both could be right in the near term. The Fed’s response will always be quick and asymmetrical in favor of easy money until inflation is out of control; 5% PCE and 118% debt to GDP are chicken feed for a budding banana republic that issues the world’s reserve currency. The near-vertical trend line on the “interest on the debt” chart is the alarm, and both parties will hit the “snooze button” because that is what a majority of the electorate wants them to do. The Narrative will be, “Look at how inflation is reducing our debt to GDP ratio; inflation is good”!

        • Pea Sea says:

          I have to give Wolf sincere credit for making such an unambiguous prediction. That’s very rare among people who purport to explain macroeconomics and/or finance; I’m used to (and tired of) seeing cryptic forward-looking statements that seem designed to be easily walked back. “No, that’s not what I REALLY meant.”

        • Harry Houndstooth says:

          First take a look at the graphs. S&P 500, Nasdaq 100, Dow 30, Russell 2000.

          We are at the peak of the first large dead cat bounce in this infant bear market. Now with a blow off top…Record call buying…Extreme bullish sentiment. Consensus amongst intelligent well-meaning advisors is virtually unanimous: you can be a bear or bull, but the one thing you do NOT want to do is short the market. Markets take the escalator up, but the elevator down. This is the chance of a lifetime to profit from an epic top.

          Just my humble opinion.

      • AuHound says:


        I totally agree with you. Why? As I posted (above):

        ” investor funds flow out of T bills into stock market when TGA declines so stocks go up,
        and from stock market to T bills when TGA increases so stocks go down.”

        So no S&P 4700? 3700 perhaps? (It is now at 4,381 with headlines “Dow drops nearly 300 points to start the week as market rally stalls” – perhaps the lag is not that long after all?).

        RE Inflation. Hard to quell inflation when TGA effectively dumps one T into the economy. but now with TGA and QT both working in tandom for the first time in months there may be a real slowing. Possibly in both the economy and inflation?

        Any thoughts on this?

    • gametv says:

      I have come to believe that markets are very much like a meal. It takes a while to get full. For a while the supply-demand balance is not impacted and the chart pattern remains range-bound; then it hits a critical point and suddenly the direction shifts overnight.

      Everyone poured money into equities as the chart patterns were straight up. It will take real selling pressure to turn things down, but once the trends are broken and the algorithms turn down, it can move down rapidly.

      Keep in mind that many people have been talking about liquidity problems in the markets so downside moves could be highly amplified.

      I believe that Powell held off on a rate hike because they are concerned about what impact the debt issuance might have on the markets.

      • Brain says:

        Once again, it’s the banks, stupid! The FRB doesn’t care about businesses or markets for as long as the financial system is stable. More banks will fail, but let’s hope no more bailouts and phony ‘facilities’ to liquefy those too far gone.

      • AuHound says:

        Holding off on a rate hike…

        I am sure Mr. P also sees the TGA graph. Now that the TGA is working WITH QT instead of against it inflation (and the stock market) will start a real decline, so why hike now?

        Until Wolf posted the TGA graph I never took this into consideration as I never saw it before. Thanks, Wolf.

    • Einhal says:

      I’d be floored if the balance sheet ever reaches below $8 trillion before something breaks and they quit QT.

      • Wolf Richter says:

        Something HUGE already broke, the hugest thing that the Fed is in charge of, and it’s called Price Stability — inflation has broken out all over the place. Nothing else compares in severity.

        • Einhal says:

          *I* agree with you, and thing this needs to be the Fed’s biggest concern. But I’m not convinced that if, for example, JP Morgan starts teetering on the edge of bankruptcy the way Lehman did in 2008, they won’t decide that price stability remaining broken is the lesser or two evils.

        • Blam35 says:

          Well the fed isn’t acting like the most important thing broke. It’s acting like it’s protecting asset values for the moneyed classes.

        • Motorcycle John says:

          What, no one likes the NEW TAX SYSTEM? The federal government used to have to go to the people for a general approval ( elections } of higher taxes in order to fund new or expanding programs. At some point the media got so controlled by the Washington Grifters that it was possible to just print money for these new programs without it being reported in a negative way. First just a small amount to test the waters then more and more taking us to today. The old tax system would have to rise exponentially to cover the drunk sailors and their debt. This would be obvious to the voters and they would rebel. The NEW TAX system allows the grifters to blame everything but their irresponsible spending.

    • Flea says:

      Does TPG stand for TOILET PAPER Group

  7. D says:

    As I read this all I could hear was your podcast voice in my head doing the reading.

    Thanks for another great article!

  8. SoCalBeachDude says:

    Excellent article!

  9. Peter says:

    I am retired now but was in the institutional investment profession as a portfolio manager for 36 years, macro was my focus.
    Still interested , still active in my own account, just want to say that I get good insight from this site.
    Thanks Wolf , your analysis is always sound and practical, IMO this was one of your better reads.

  10. spencer says:

    As the Treasury issues bonds, since January 3, 2012, the funds in these accounts must be transferred to the Treasury’s General Fund account by the close of business on the day they are received, so the end-of-day balance in TT&L accounts is always zero”. This immediately drains the money stock.

  11. spencer says:

    The budget needs cut. The only thing untouchable is interest.

  12. Angel says:

    Let the whole system crash. It going to anyway. New world order is slowly taking shape

    • SpencerG says:

      I always love listening to people advocating to let the system crash. They imagine that somehow or another they will be immune to the affects and just skate away.

      • Flea says:

        That is because they have no idea,what the aftermath or consequences of a crash would be.Unlike 1930 s when people were civil, now it would be total chaos.People feel entitled,but food,water would disappear overnight no money,no gas GOOD LUCK SURVIVING

        • VintageVNvet says:

          NAH small bug:
          Been personally through several catastrophes, hurricanes, tornadoes, riots, and earthquakes,,,
          In each instance, PEOPLE PULLED TOGETHER to help others who needed help, etc., etc…
          Best preparation policy IMHO and after extensive experience volunteering in all of those situations is do the best ya can to establish and maintain community….
          And ignore the doomers focused on the negatives.

        • Swamp Creature says:


          Hurricane Andrew in 1992 was an example of the South Florida community pulling together.

          1. 50 people killed by people with guns defending their property from looters

          2. Massive insurance fraud.

          3. Home builders walking away from lawsuits over faulty construction.

          4. Zero help from the government.

      • Einhal says:

        No, I don’t think that at all. I’d just rather it collapse now while I’m still young enough to help rebuild.

        “If there must be trouble, let it be in my day, that my child may have peace” – Thomas Paine

        • SpencerG says:

          That is sort of my point… you IMAGINE that you would be able to rebuild.

        • Einhal says:

          And if I wouldn’t be able to, it’s better for me to live nicely knowing we’re heading off a cliff and figuring the problems are for the next generation (including my children) to solve?

          That’s the type of attitude that got us into this mess in the first place.

        • william says:

          So when you incur a trillion dollar debt building tanks that are destroyed in minutes, explain to me how the balance sheet works out. Or if you encourage a housing bubble where houses are priced on the margin under extreme circumstances (neg real rates) the only way that balance sheet can turn is negative.

  13. MattF says:

    Looking at your graphs, national debt and marketable securities have been more or less stable for all of 2023. This means that all treasury auctions have been rolling over old debt, and thus the only “new money” coming in was to cover the $60B/month that the Fed is not rolling over. To get $60B of new money into treasury debt costs the government about 4-5%.

    Now that the debt ceiling is lifted, the treasury needs to get about $150B/month ($60B for QT and $90B for a $1T deficit). Where does this money come from? I found one article that says retail investors invest $45B/month in the stock market, so if every retail dollar invested in the stock market went to treasuries it would only cover half of the new demand for treasury debt. What price would the government have to pay to get every retail investor to stop investing in the stock market and start investing in treasury debt? And then they are still $45B/month short.

    If we had not had QE over the past 15 years, new government debt issuance would probably be in $750B range annually based on rough pre-QE trends, and that debt would have cost the government 4-5%. With QE, debt issuance expectation was raised to the $1-1.5T range at a cost of 1-3%. Now we have that $1-1.5T debt issuance + the $720B of QT, and all this with out the crutch of QE. I just don’t see how there is enough money out there to fund $150B/month of new inflows to government debt.

    Quantitatively what investments or purchases exist that have this much which can be diverted into government debt? And at what price?

  14. Hubberts Curve says:

    The government now faces tow choices, which are both unpopular to the voters. High inflation or extreme austerity. We are in the. middling days of the inflation choice. We may ping pong back and forth between them for a while. But eventually with each swing of the pendulum the situation will become so extreme one way or another that the federal government ( and those in the financial oligarchy) will become so unpopular that their time in power will be very short. The next set of want-to-be leaders will pop up with ” easy answers” and get elected but face the same hard choices and lose power ( at the least) very quickly. Not sure what the endgame is by know what things will look like along the way.

    • phleep says:

      Interesting model: oscillation. Seems very credible. Makes me think of late Roman emperors with shortening tenures. They also got into this thing of charismatic rich celebrity candidates for power, parading around with ragtag mobs of rowdy followers. “What, me worry?”

      • Cicero says:

        Julius Caesar didn’t have a long tenure, and was a charismatic rich celebrity candidate that paraded around with a mob of plebs. The peak of the Roman Empire was two centuries later, and the end of the empire 1,500 years later.

      • gametv says:

        Didnt the Roman empire also have demented emperors? That also fits our current scenario.

    • Kent says:

      I vote for extreme austerity for everyone but me.

  15. William Leake says:

    How does refilling the TGA impact short-term interest rates, i.e., interest on Treasury Bills, say 3 to 6 month Treasury Bills? Up, down, no impact, too complicated to say?

  16. polistra says:

    The Core CPI graph is a classic picture of a variable that was uncontrolled at first, then controlled by live negative feedback. Oscillating in smaller wiggles, reaching an asymptote. It shows that SOMEBODY is in control, probably Powell.

    • William Leake says:

      Looks to me like Core CPI is trying to recover from the big pandemic shock, looking for a new mean, with smaller oscillations around the new mean. The old mean was around .2%, the new one looks like .4% to .5%. If true, ceteris paribus, the Fed will have a very difficult time getting back to an annual Core CPI of 2%. If the Fed is going to do 25 basis points every other meeting, with eight meetings a year, that is an increase in the Fed Funds Rate of only 100 basis points a year. Good luck getting back to a Core CPI of 2% with that.

      The Fed now seems deathly afraid of a hard landing type recession, which means its 2% target is now bullshit. Unlike many others, I think Powell’s last press conference comments were a watershed event.

      • The Struggler says:

        The monthly CPI chart looks like an “inside pattern” in trading.

        Typically it’s followed by a breakout.

        Will it be up or down?

        Fundamentally it seems to be up (FFR less than annualized CPI? Real or official numbers?)

        “Monetarily” it’s indicating a drop (M2 is shrinking, credit/ liquidity is slowing).

        Actually: nobody knows!

        My thought from the beginning is that the American Public is tough, resilient and downright stubborn.

        Breaking the back of the consumer is difficult. Especially when it’s a Boomer consumer with income beating inflation (between risk assets, real estate and now fixed income reviving).

        These folks will complain about it, but pay elevated services prices. Corporations are protecting margins by stifling worker pay (for 40-50 years, and acceleration today).

        2020s = tough decade.

      • dang says:

        The reported change in the mom measurement is statistically insignificant between plus and minus 0.4 pct.

  17. Cody2 says:

    I don’t understand. Why does debt matter now? How will this time be different from all the times the debt hasn’t mattered before?

    • Wolf Richter says:

      Interest expense and inflation.

      • rusell1200 says:

        And aging workforce reducing overall production.

        And (probably) higher costs of basic inputs like oil in long run.

      • sunny129 says:


        The interest will be paid as long as the revenue is higher than the interest amount.
        Inflation will make US $ relatively cheaper to pay for the debt!

        What am I missing?

        • Wolf Richter says:

          Yes, interest will be paid. But it will assume an ever-larger portion of the budget. Interest grows with the amount of debt, and it grows as more bonds are issued with the new higher rates. That’s why you’re now seeing the spike of interest payments as a percent of tax revenues. See chart below

          Higher rates (due to higher inflation and more debt) make the interest burden heavier. But inflation makes the debt-to-GDP burden lighter unless the debt grows faster than inflation.

        • gametv says:

          As Wolf shows in this graph interest expense as a percent of GDP is rising rapidly, but the problem is that as debt is refinanced at a higher interest rate, there is no way to stop the growth of the total interest paid. It is a runaway train set to go off the tracks.

          Here we come 1.5 trillion per year. And since we are just adding it to the deficit, it turns into runaway spending. At some point, the markets decide that maybe Treasuries are not going to get paid back and then we end up with interest rates spiking even higher and a real huge problem.

          Look for China to start dumping Treasuries at a much faster pace as well. Japan and ECB will also be sellers soon.

      • JimL says:

        Do those not offset each other though?

        So if the overall blended rate on the national debt is 6-7% (estimated number), but inflation is 5%, how is this different than 3-4% on the national debt, but with 2% inflation?

        Just asking because I am confused.

        Normally the people to benefit most in a high inflation environment is debtors. They end up paying off debts with inflated money.

  18. Micheal Engel says:

    1) 70 million boomer own $75T assets. Within 4Y their front end will reach 80Y. When they expire they will leave behind houses, fill the TGA account and close the budget deficit.
    2) Held to maturity might expire without rollovers to reduce gov debt.
    3) The $150T/$200T unfunded liabilities is a monster.
    4) If US gov shut their valve to states, counties and cities – like during president Coolidge – states might rollover unfunded liabilities, send new IOU, subjected to inflation.
    5) The upper echelons might lose benefits in the name of equality.

    • phleep says:

      That comment is fascinating. A book (rather, multiple modern books) in itself: several big scenarios.
      I submitted “Micheal Engel” to an anagram solver and got the predictable random scatter. Only a VERY souped-up Turing test might yield information.

    • sunny129 says:


      ’70 million boomer own $75T assets. Within 4Y their front end will reach 80Y. When they expire they will leave behind houses’

      Sounds great but NOT all of them DIE at the same time, NOR the inheriting generation will sell all, at the same time. The inevitable BEARS in between will reduce the asset values,

  19. harry hv says:

    Oh dear there’s a budget deficit, what to do? The same as in every banana republic in history.

    Same procedure as every year, these new bonds will take their place on the Fed’s “Balance Sheet” – a peculiar concept with a printing-press on one side and a bunch of worthless IOUs on the other.

    This part is easy, the hard bit is how the Fed needs to obscure and confuse the public about what they’re doing. SPVs, off-balance-sheet secret expense, whatever it takes.

    • Wolf Richter says:

      You forgot the other part, inflation. QE is off the table due to inflation. That trick isn’t working anymore.

      • DownFed says:

        Well, that is the $64K question. Is QE truly off the table? Is the Fed’s concern inflation and employment, or does monetizing debt supersede inflation and employment concerns, which is called fiscal dominance.

        We’ll see. Not enough time has passed yet to come to a conclusion. I’m at most 50-50 on that.

        • Old Ghost says:

          I wonder if the FED (or Powell) even know what to do ?

          If they don’t raise interest rates, inflation rolls on, and the public pressure to do something about it intensifies.

          If the FED does raise interest rates, it hurts the financial solvency of the cartel of big banks that own the FED.

          Dithering, or doing nothing, probably looks good to the FED at this time.

        • John Smith says:

          Fed knows there are going to be more bank failures. Officials seem to be counting on it. Why you don’t hear about BTFP going up to record highs increasing the balance sheet

        • Wolf Richter says:

          The BTFP is minuscule, by Fed balance sheet standards. It inched up by $1.8 billion last week, which isn’t even a rounding error on the Fed’s $8 trillion balance sheet. It now totals $102 billion, while the other bank-bailout accounts have either collapsed to zero or near-zero or have come down a whole lot. These are tiny banks that are borrowing tiny amounts from the Fed via the BTFP.

      • MattF says:

        If QE is off the table, what investment loses money so that the government can sell debt? So far in 2023, the treasury has brought in $60B/month at a price of 4-5%. Now they need $150-200B/month. The economy must redirect $90-140B/month from somewhere else into treasuries.

        I don’t think the government has ever sold that much without having the Fed as a buyer. Where does that money come from? The only numbers I could find for corporate bond issuance is about $100-200B/month. Retail investment in the stock market is about $40-50B/month. Are there other sources of available dollars?

        The treasury has to attract almost every dollar that the American citizens save away from normal investments into treasuries. How does that happen? It looks to me like we are moving to the portion of the supply/demand curve where the slope is vertical.

        • elbowwilham says:

          This is a great question. I are they relying on foreign investment?

        • jm says:

          China needs to run a huge trade surplus to keep its people employed, because they aren’t paid enough to buy the stuff they make. Exports are 20% of the economy the only way to run a trade surplus is to loan your customers the money to buy your goods. So they need to buy U.S. debt, directly or indirectly. Read Michael Pettis.

          Now their youth unemployment is rising rapidly, and real estate which has been 30% of the economy is starting to crater. They’ll be pushing exports even harder. Big market for U.S. debt.

  20. Redneck_Millionaire says:

    Big money, no wammies, stop???….. Not for a long long time this time… Yep, this will be interesting…..Watching this through Mr Wolfs lense has been a big help and education about the FED for me. Thanks

  21. Thunder says:

    I don’t follow politics much as they all appear to be the same, but am I correct that, the agreement “Fiscal Responsibility Act of 2023” allows the current Government to ask treasury for ANY Amount it desires / requires without Limit until sometime in 2025.
    Will there be now No restraint in the “Fiscal Responsibility Act of 2023” or is there an emergency brake pedal somewhere in this “Act”

    • Wolf Richter says:

      It’s Congress that decides how much gets spent on what; and it tells the Treasury depart to follow those spending bills and spend this money. So that’s where the spending decisions are made: ¡ In Congress!

      The Treasury department’s job is to FUND those detailed spending bills it gets from Congress by collecting taxes and issuing bonds.

      During the debt ceiling, Congress told the Treasury to spend this money but didn’t allow the Treasury to fund this spending by bond issuance. The debt ceiling is completely stupid. Suspending the debt ceiling suspends something completely stupid for a couple of years.

      • ru82 says:

        Good explanation! Plus…why do we have a debt ceiling. LOL.

        • JimL says:

          It is a great explanation.

          The debt ceiling is dumb.

          It is like you and your wife agreeing to go on an expensive vacation on your credit card. Then you both agree to buy new wardrobes on your credit card, then pay for her hospital bills foe a broken arm on your credit card.

          Then the credit card comes due, and even though you both agreed to all of these expenses and you both can afford to pay the credit card, one of you decides just not to pay the the CC bill. It doesn’t matter that you can afford it, it doesn’t matter that both of you agreed to the expenditures, one decides to ruin your great credit rating for absolutely no reason.


        • Tom S. says:

          As I understand it, Congress used to have to write a bill for each debt issuance. With the debt ceiling, they are effectively issuing the new debt all in one go, so it’s really just a procedural time saver. There are ways it could be eliminated, but I’m sure there are questions as to the constitutionality, and it’s great political fodder, so it will probably remain. The debt ceiling is a non-issue that both sides can use to rile up their base about govt spending without actually needing to take much of a side or change anything, perfect waste of time in a divided congress.

  22. SocalJimObjects says:

    It’s time to call in the Plunge Protection Team. Buy tons of calls so that market makers are forced to hedge them, that should keep the stock market high.

    • butters says:

      PPT? you must be kidding, right?

      We need an anti-PPT, whatever that is. Stonks & housing need to be beat down to earth by any means necessary to lower the inflation back to 2.

      • dang says:

        Inflation has been soaring for the past 15 years disguised as asset price inflation,

        That was the purpose of ZIRP, to hide the cost of risk.

        • dang says:

          I sometimes , often, suspect that the PPT is the source of the continuous bid under the market these past 15 years. Mindlessly, inflating the greatest asset bubble in history,

  23. dang says:

    The bloated Fed balance sheet will easily handle this minor squamish in the complex world of macroeconomics that is currently suspended on a ledge, an unstable disequilibrium.

    Macroeconomics, often equilibrates without the aid of an economic plan. Often in spite of the operational economic plan.

    • butters says:


      And be assured, there will be non-qe qe to fill the any gap. Inflation is over cuz the Fed is NOT serious and stonks to the moon or mars.

      • Wolf Richter says:

        “the Fed is NOT serious…”

        This stuff is just hilarious.

        • Jon says:

          If fed is serious then they would have hiked rate last week .

          The market knows what is fed upto hence this reaction.

        • Einhal says:

          I know you disagree, but if you’re judging the Fed by actions, not words, his is not an unreasonable conclusion. Yes, I know they’ve raised interest rates to 5.25%. But their QT is painfully slow, and current rates are still “stimulative.” I don’t doubt that they would like to reduce inflation back down to 2%, but not if it causes any real pain.

          I believe the only way to do it IS to have real pain.

        • Wolf Richter says:

          The Fed raised from 0.25% to 5.25% in about 14 months, fastest in 40 years, after 14 years near 0%, and it blew up a few banks in the process so far, and threatens to blow up a bunch more, and it’s blowing up CRE, and it’s blowing up a bunch of other stuff, including government finances, and all kinds of other rough stuff is going to happen because of the 5%+ rates, and you people think the Fed is not “serious?” You gotta be kidding me.

        • gametv says:

          Wolf – I would assert that the Fed is not serious about reducing the size of the balance sheet fast enough. But compared to the ECB and Japan the Fed is actually looking very prudent.

          The Fed made a HUGE mistake by raising interest rates as the primary monetary tool. If they had used balance sheet reduction, they could have deflated asset bubbles and avoided some of the losses they are taking. And the balance sheet could have gotten somewhat closer to normalization. Instead of having an inverted yield curve, where short term rates are struggling to stop inflation, we would have had a market driven increase in interest rates (long term rates) that would have quashed inflation much more effectively. This would have really brought down all forms of asset bubbles.

          But the Fed is a puppet of the rich, so they dont execute smart monetary policy – ever.

        • Swamp Creature says:


          I had the same concerns as gametv below and would like your opinion. Why didn’t the Fed just reduce the balance sheet much faster instead of focusing on interest rates, which hasn’t worked so well so far. What would things look like today if they had done that? Reverse of all that excess bond monitization over the last 4 years and let interest rates seek their market level. Usually, when I make a mistake, the first thing I do is reverse what I did and try to undo the mistake. Not create another blunder.

        • Wolf Richter says:

          The Fed could accelerate a LITTLE, such as by selling its MBS to hit the cap, or by letting Treasuries roll off without cap.

          But removing liquidity out of the overleveraged financial system is already blowing up all kinds of stuff. There are several trillions of dollars of floating rate loans, notes, and commercial mortgages that are now all in the process of blowing up. Some of them already have, and we’ve covered this here.

          Liquidity withdrawal MUST BE a reasonably slow process if you don’t want the entire financial system to collapse.

          Why the heck do you want to cause a collapse of the financial system? Just to trigger more QE and get NIRP? Is that it?

          What’s wrong with having many years of slow methodical liquidity withdrawal and higher interest rates and no financial-system collapse?

        • MM says:

          I too wish the Fed would sell *a little* MBS. Just a smidge. After all, housing market is frozen and anyone with a low rate is likely making the minimum payment.

        • jon says:

          You are missing the big picture.
          Per your multiple posts, inflation is still high.
          We should also acknowledge the FED’s policy is still too stimulative to the economy.

          If you think inflation is still too high, then I think FED made a mistake by not hiking and doing a pause.

    • dang says:

      An obvious example is WW2 where the onerous macroeconomic oppression of Germany specified in the treaty of Versailles is the likely root cause that the mayhem that ensued,

      • dang says:

        The Federal budget deficit has to expand by at least the 7+ pct to counter the trade deficit and thereforebto keep the GDP positive, ie keep the US from recognizing the recession it has been in since at least 1998.

        The Kyenesian equation that specifies that the trade deficit is a negative value in the four part calculation of GDP.

        • dang says:

          There is always two choices:

          What should be done and

          the alternative which historically, we seem to consider the best choice.

          Perhaps, the best choice seems to favor those that are protecting their good fortune and the other choice is rebellious,

          an attractive affectation for any young person.

  24. chickenlight says:

    How about a chart with the annualized yoy increase of the national debt relative to cost interest financing and a forecast -5/+5 (including forecasted interest expenses) compared to the same analysis of gdp. then show the crack spread forecasted for 10 years at assumed acceleration.

  25. Bobber says:

    The federal debt reaching $32T is a direct consequence of the Federal Reserve’s deranged policy to repress interest rates and print money for a decade. Had the Federal Reserve not done this, higher interest rates would have caused the federal government to cut back deficits a long time ago. The debt would never have reached $10T, government would be smaller and more efficient, and the real economy would be running strong on real investment, not wagers on Bitcoin and other fancies.

    Our current system of monetary governance needs to be completely revamped. Poor decision-making has consequences.

    • Occam says:

      Once politicians and the US public realized that the dollar was a pure fiat creation, unmoored to any objective standard, unlimited in amount, and independent of the proceeds of taxation, our current situation was inevitable and the concept of the dollar as a “hard currency” died. The GFC (and the Fed’s prolonged reaction to it) were the watershed events similar to Dorothy looking behind the curtain at the Wizard of Oz. What’s left for the dollar is its reserve currency status, and the fact that unmoored fiat currency is the mother’s milk of all modern governments. The gold (or bimetallic) standard is never coming back; an internationally based hard currency backed by something and used solely for settling international trade and accounts is likely to be the long term end game, with each country free to abuse its domestic currency and its own citizens to a greater or lesser degree.

      • Kent says:

        The mooring in fiat currencies is a higher level of abstraction: the relative value of the currency to those of major trade partners, along with the value relative to important commodities.

        • eg says:

          Also the relative strength of institutions, including tax collection, police, prisons and ultimately the military, Kent.

          It’s least dirty shirts all the way down until you hit the guns — lots and lots of guns …

        • 91B20 1stCav (AUS) says:

          LH – realpolitik at its best…

          may we all find a better day.

      • MOFO says:

        I agree.

        What is that “something” that will be used for settling accounts? Since gold and silver are no longer in vogue perhaps something like lithium would work. Oil could also fill the void but seems unlikely given the growth in EVs. Crypto is just more fiat. Food? Who knows?

        I contend that our status as a reserve currency is based on the values that have made us great, i.e, freedoms of the press, speech, association, religion etc. and our willingness to defend these values. Given the current social and political atmosphere it is apparent that not everyone agrees.

        Withdrawing from our 75-year commitment to NATO or retreating from Ronald Reagan’s guarantee of Taiwanese independence would signal a rejection of these values and create a void in confidence that would be filled by others. The dollar’s current status would be destroyed. The dollar weakness and inflation of the 70s was caused, at least in part, by our craven policies in Vietnam (yes, oil was also a factor).

        Unfortunately, the world faces a cornucopia of existential threats. Who will provide the leadership to address them? China? Russia? Whoever assumes the leadership will enjoy reserve currency status.

        • Mike R. says:

          Oil pricing will be tied to gold (or vice-versa). Everyone needs oil. Everyone better own some gold.

        • Whatsthepoint says:

          The dollar was strong because of perceived trust and belief in ‘rule of law’ to protect $ based assets/investments….seizing (stealing) other people’s (countries’) stuff tends to undermine such confidence long term….gradually then suddenly…the writing is on the wall…

        • Gabby Cat says:

          There are many with lots of $$ pulling the strings of politicians that make these choices to disable the USD. They will become very wealthy in their own right when the USD collapses. Corruption no longer has the consequences it once held because those who own the politicians own the free press. I am thankful Wolf exists. At least I have one financial website that still deserves confidence in the written word.

        • Sams says:

          You make an assumtions that might not be valid.
          -The demise of the US dollar as the worlds reserve currency do not imply that a different currency replace it as a reserve currency.

        • Lisa_Hooker says:

          Whomever has more than ten (count ’em 10) carrier battle groups will enjoy reserve currency status. If they want it.

      • JimL says:

        The dollar is most certainly NOT unmoored. It is directly connected to the power of the U.S. economy.

        Sure, that is in comparison to the currencies of other countries in relation to their economy, but given the U.S. economy is in great shape versus most other economies, the dollar is in fine.

    • longstreet says:

      The Fed was/is the great enabler for deficit spending.
      In 2009 national debt $9 Trillion. Now $32. Fake prosperity
      Its like a poker game where everyone breaks their chips in half to make the game bigger…..but it doesnt.
      The intent of the Constitutional provision that Congress controls the “minting” of money is violated by the existence of the Fed, a Fed whose initial purpose was to halt bank runs by providing temporary liquidity. Now central planning, yield curve control and digital minting is their game.
      Though one can argue that the Fed doesnt “mint”‘, the Constitutional “intent” is clear.

    • SoCalBeachDude says:

      Absolutely not. That $32 trillion federal debt is 100% due to vast and absurd overspending by Congress beyond its means and its only means are tax revenues. Obviously. That has nothing whatsoever to do with the Federal Reserve.

      • longstreet says:

        ” its only means are tax revenues”

        you forgot deficit spending which was absorbed and hidden to the balance sheet (under $1 Trillion in 2008 to near $9 Trillion) by the Fed’s QE and other moves.

  26. simonyoosen says:

    It would be interesting to see how the de-dollarization effort would impact these trillion dollars of deficit on a yearly basics. Perhaps Washington can learnt from BOJ on this.

  27. Kenny Logouts says:

    Shirley this all means long end of the treasury yield curve should be shooting up to near where long term inflation expectations are?

  28. Micheal Engel says:

    The 70 million boomers own $75T assets. Their front end will reach
    80Y in 4Y.
    When the boomers expire they will leave behind houses and fill the gaps for states, counties, cities…

  29. Citizen AllenM says:

    Higher interest rates will lead to higher deficit spending without tax increases. So, everyone just read the biggest sections the economy post, right? Now you see the fattest pigs ready to be rendered in this long recession of high rates.

    Because tax increases will have to happen, and a 10% Fed is going to nuke this economy.

  30. spencer says:

    The FOMC operates a “smoke screen”, an administered rate policy, not a money policy (or a balance sheet policy).

    The money policy is contractionary, i.e., uptake in the Treasury’s General Fund Account, and the $95b monthly contraction in assets (split between $60 billion of Treasuries and $35 billion of MBS).

    Interest is the price of credit (bank credit, plus nonbank savings). The price of money is the reciprocal of the price level (based on specialized price indices).

    Waller, Williams, and Logan seem to agree. They “believe the Fed can keep unloading bonds even when officials cut interest rates at some future date.”

    The FED should cut interest rates now, and continue with QT. The 1966 Interest Rate Adjustment Act is prima facie evidence.

    The FED’s Ph.Ds. have learned their catechisms, that there is no difference between money and liquid assets.

  31. JG says:

    I use to to think US debt mattered. I have concluded apparently it just does not matter. Print, delay, forbear, forgive, loan, inflate. It keeps working without consequence. Incredible!

    • Z33 says:

      Without consequence? You heard of something called inflation? Housing, healthcare, and education are substantially more expensive now than before given the subsidies/debt/printing the government did to those…

    • longstreet says:

      “. It keeps working without consequence. Incredible!”

      You forget the /s

  32. spencer says:

    Secular stagnation is as Martin Wolf says: “chronically deficient AD”, producing an excess of savings over real investment outlets.

    And as DR. Ravi Batra pointed out in his book: “Greenspan’s Fraud”:

    “If demand and supply are to be balanced over time, then either wages rise in sync with productivity, or productivity growth must be matched by the growth of wages plus debt…so debt growth was the only way to maintain demand-supply equilibrium from the 1970s till today.”

    The tax revenue needed to cover expenses is deficient because N-gDp is deficient (constrained by bank-held savings).

  33. SoCalBeachDude says:

    DM: ‘New shiny bull market’ could be a mirage and Wall Street should brace for a ‘big collapse’ after recent rally, warns Bank of America analyst

    Bank of America Chief Investment Strategist Michael Hartnett doesn’t believe it’s the start of a ‘brand, new shiny bull market’ but that stocks are headed for ‘big rally before big collapse.’

    • Doolittle says:

      BofA strategist? Ba hahahaha! Bunch of hacks.

    • VintageVNvet says:

      Seems like there always is a rally in RE too, just before the real crash slides us once more down the slope…
      I got caught in the first one I went through with my own assets at stake, about 40 years ago, in spite of the warnings I received from friends and family folks who were also in RE for many many decades before me…
      Is it different this time??? Surely it is always different is some aspects,,, equally surely, it is always the same in some ways.

  34. Bobber says:

    The stock market rally might reverse fast if the Fed announces it will be selling MBS up to the cap, which was already pre-announced. That is a”tool” the Fed should be using now.

    Homebuilders and tech stocks are making record highs, again, on bets the Fed doesn’t have the spine to follow through with QT. It will be vary hard to keep inflation below 5%, let alone 2%, with stock markets making new highs.

    If you believe in the wealth effect creates inflation, you must also recognize a reverse wealth effect destroys inflation.

  35. Mainly on the Plain says:

    Wolf, if Congress has chosen inflation as a hidden tax (boosting future tax receipts in nominal dollars), and the Fed is serious about reducing inflation (as you said), how does this get resolved? If Congress gets its way then inflation will need to be more than 2%. If Fed gets its way, inflation will be pushed back to 2%, and then Congress doesn’t get its way. Will the two opposing forces compromise at 3%, or will Congress cry uncle and be forced to balance the budget better?

    • Bobber says:

      When has the spineless Fed ever defied the goals of the short-sighted Congress for any length of time?

      You have to go back to the days of Volker.

      Let’s see if the Fed allows stocks and RE to drop 20%. That will be the real test. Taking inflation down from 8% to 4% was the easy part. Wall Street and politicians have been in agreement with Fed policy, so far.

      • Bobber says:

        We should all remember 2018, when the stock market said “Boo” and Powell took a fetal position. I don’t think he get anything done. He’ll try and ride the wave until it hits shore.

        • Wolf Richter says:

          Trump was keelhauling Powell daily in public. Powell caved to the President!

          But back then, inflation was at or BELOW the Fed’s target. Huge difference.

      • Jackson Y says:

        The Federal Reserve Put has regularly been a thing since the 1980s, but last October the stock market was down 25% and the Federal Reserve didn’t pivot. Markets are surprisingly resilient over the long term, regardless.

  36. Steppenwolf says:

    The one true chart to the moon 🚀

  37. Micheal Engel says:

    1) Exogenous events cause inflation.
    2) MSFT welcome Modi. The raven fly to US to feed his chicks. Within few weeks the chicks fly above the cliff.
    3) After a wheel alignment between : India, China, the ME and Russia the East might rule the trades coming from the East.
    4) After 500Y a flip ==> East 1 : 0 West.

  38. Micheal Engel says:

    5) A supply shock #2 might bend our will. Steam will come out of our heads. The Fed is helpless.

  39. Bobber says:

    “A man who procrastinates in his choosing will inevitably have his choice made for him by circumstances”. ~Hunter S. Thompson

    This one sentence holds more value than all Federal Reserve research papers, publications, and statements, combined.

    • VintageVNvet says:

      not so fast fishing tool:
      Knew a very successful guy whose motto was, “Never do anything today that you can put off until tomorrow.”
      Starting from scratch, after heroic service in WW2, he was a multi millionaire when a million was more than chump change, and lived VERY well, with hot and cold running ”stuff” in every room (if you understand that allusion.)
      OTOH, surely, sometimes ”He who hesitates is lost.”
      Pick your poison, eh???

  40. Jose says:

    Wolf Richter: The $1.5 trillion drawdown of the TGA in 2021 moved $1.5 trillion in cash from the TGA (a liability on the Fed’s balance sheet) to the markets because the government was spending money it didn’t have to extract from the markets via bond issuance. This huge amount of liquidity to seep into the markets over a 12-month period explains in part the hot performance of the stock market in 2021.

    Question: How was it move to the “markets” and how did it seep into the markets over a12 month period ? Was it the QE and zero interest rates the during that time ?

    Wolf Richter: From late 2021 through April May 2022, the TGA was being replenished and absorbed nearly $1 trillion, and markets tanked. There are always some lags. In June 2022, the S&P 500 began to bounce off in its up-and-down manner.

    Question: So, just by selling more securities the market began to tank ? Or was there some other mechanism behind the situation ? To be fair, interest rate increases just started in March 2022 and QE was still going on and so the reduced liquidity shouldn’t have been much of a problem.

    Wolf Richter: This $1 trillion in TGA drawdown from May 2022 through May 2023 in part counteracted the Fed’s QT that was phased in the summer of 2022.

    Question: So, the Federal Reserve QT was apparently irrelevant in the fight against inflation due to the TGA being drawdown for a year? It’s a bit strange, I guess the tools of the Fed for price stability are only one part of a larger whole. Other factors must be aligned in order to achieve reduce liquidity and therefore reduce inflation.

    But your last statement regarding replenishing the TGA while running QT, is it possible there could be some real effects in the fight against inflation during this time ? Possibly asset price inflation reduction ?

    • AuHound says:

      With both TGA and QT withdrawing $ from the market and consumer spending (5% T bills are much more attractive to Joe Average than .5%) both the market and inflation should cool or tank. Perhaps the economy as well? Perhaps that very long predicted recession?

      That TGA reduction was very stimulating to everything…

  41. We says:

    Doesn’t matter, new bull market has been born. Up only and massive gains for next decade.

  42. Joe C. says:

    I wonder if the Fed pays the Treasury the IORB rate on their TGA balance, not that it matters. My guess would be no.

  43. andy says:

    The Fed is only paying lip service to inflation while the real return on USTs/US bonds is negative.

    The Fed/Govt love inflation (or more accurately negative real interest rates). That’s where they get to spend more money and the cost gets paid by us peons via the hidden inflation of negative real rates.

    We will know when the Fed gets serious about interest rates, when the market forces the Fed/Govt to pay positive real rates.

    That time is coming with certainty, at some as yet uncertain time. But soon.

    • DownFed says:

      There has been nothing that the Fed has been more serious about than interest rates (and not in a good way). The entire purpose of QE is to engage in Large Scale Asset Purchases in order to alter the supply vs. debt in debt markets, so that interest rates resolve lower.

      At some point, if the deficits keep rising and rising, the interest on the debt will be unserviceable absent Fed QE to reduce interest rates. And once the Fed is required to print, this country will be in a world of trouble.

      Japan is like that now. They have 3% inflation, yet the central bank wants 0.50% interest on government debt. According to Deloitte, the BoJ is the only purchaser of sovereign debt.

      Per the late Sam Zell, once no other countries are buying our debt, that’ll be the end of reserve currency status. And per Sam, once that happens, expect our standard of living to decline 20%.

  44. jon says:

    Few points I’d like to make:

    1. There is no threat to USD as reserve currency at least for next few decades. There is no alternatives to USD.

    2. This means demand for long dated treasury would remain good, meaning the long end may not see much higher rates else 10Y yield would have jumped like crazy.

    3. Shorter duration rates are directly controlled by FED.

    3. Longer duration rates can be and are controlled by FED via QE.

    4. Manipulated inflation metrics would show inflation going down.

    5. We all know that in last 3 decades or so, USD has lot its purchasing power by 70% or so.

    6. All the essentials of live are becoming very expensive and so called American Dream is no more there.

    7. FED is simply paying lip service to tame inflation. If FED were really serious, they’d have raised rates last week instead of pause.

    8. The market very well knows for whom the FED works and thus are roaring high.

    9. US Gov would run and can run big deficits and debt does not really matter. US can print its own currency and thus can never default. The side effect of this is inflation but these inflation metrics can be manipulated. Point in case: My point #5, USD has lost its purchasing power.

    10. This basically means rich people getting richer and if you don’t believe me then look at the increasing wealth in equality in USA for last few decades.

    11. Debt may matter but not now. This can go on for decades or centuries.

    12. The general population is too comatose to realize all this. They are being divided by politicians on the basis of race, color, and other issues.

    13. Both parties are to be blamed. People in power are extremely corrupt and they are simply looking after their own interests.

    • Augustus Frost says:

      Most of your points are determined by psychology, not what you claim. Another example of linear thinking in a mechanical world.

    • MrMagoo says:

      I agree with Jon, the US Dollar is safe for now.

      $32T debt and markets are in a new Bull Market.
      When will the debt and interest payments, cause BIG trouble ?
      $50T, $100T ??? Or do I worry about the next Black Swan event ?

      Yes, the standard of living falls as inflation eats away at Purchasing Power.

      • Einhal says:

        For now, but I just read an article (search for “We cannot allow China’s assault on America’s farmland to continue” if you’re interested) decrying that China is buying up U.S. farmland.

        The fact is, our strategy has been for the past few decades that we can just print money, export our inflation, and the rest of the world will be magnanimous enough to support our lifestyle by just holding on to that cash, irrespective of whether or not it’s a good store of value.

        The problem with this strategy is that every dollar is ultimately a claim on U.S. assets. At some point, people won’t take our printed dollars for their stuff, they will want hard assets. Taking those dollars and buying hard assets is an intermediary step.

        It was very foreseeable that this would eventually happen.

        • Flea says:

          And we will just nationalize,said purchases like Mexico did to mines,only reason silver is going up Mexico shut down mines

        • longstreet says:

          To your point, the Saudis essentially just bought the PGA (IMO)
          As the “trade deficits. dont matter” crowd says “the dollars must return”.
          What they miss is that with the return comes a change in ownership and control

        • JimL says:

          You are missing the lessons of the 1980’s, when everyone was up in arms about the Japanese buying up assets in the U.S. with their dollar surplus due to the trade deficit. People were foaming at the mouth about them buying real estate and movie studios.

          Turns out they bought them at overinflated prices and most of the assets were later bought back by U.S. entities for far lower valuations.

        • longstreet says:


          Foreign ownership in the United States is at an all time high.
          From pork processing and farmland to stocks.

          Sure, the Japanese bought Pebble Beach at too high a price. But the NET is that more has moved to foreign ownership.
          The dollars return, and ownership and control changes.
          Don’t miss that lesson.

    • Sams says:

      #1, there is no alternative to the US dollar as the worlds reserve currency. Maybe not, but it is still possible that there will be no world reserve currency. It may even happen in less than a decade.

    • AuHound says:

      RE your item #7:

      The FED could pause as TGA changed from fighting QT to helping QT.

  45. ru82 says:

    All aboard the Crazy Train.

    Feb, 2023. The Congressional Budget Office estimates the national debt will increase by $19 trillion over the next decade. 3 Trillion more than they predicted in May, 2022.

    I wonder what the price of a house or car or milk will be in 10 years?

  46. MrMagoo says:

    How can people protect their purchasing power ?
    Massive debt leads to inflation and loss of Purchasing Power.

    Hold stocks ?
    Buy Gold ?
    Buy more Real-Estate ?

    Im guessing the stock market is in a Blow-Off phase.
    But the markets are not as over priced as 1999 or 2007.
    What is crazy stupidly over-priced, can exceed my expectations.

    • Jon says:

      this market is very narrow and per any valuation metric.. it is much overvalued in comparison with 1999 or 2007.

      This insanity can go one for years and keeping in mind the dovish fed actions .. I can see it going higher for years.

      • Flea says:

        There’s a 18.6 year cycle for housing stocks ,SHTF in middle of 2025 or early 2026 Look it up

        • Jon says:

          It all depends upon government policy.

          Fed has already paused and they may start cutting rates based on manipulated inflation data.

          If this happens this can go on for quite long.

        • Wolf Richter says:

          If you think that Fed will cut in the near future, you’re delusional. You’re drinking the pivot-mongers’ Kool-Aide. They’ve been handing out the Kool-Aide for over a year. The Fed will hike in July, and it will hike again later this year. Get used to the idea.

        • sunny129 says:


          “The Fed will hike in July, and it will hike again later this year. Get used to the idea”

          You mean Mr. Powell will follow Mr. Volker!?

          I hope you are right. But I am less certain.

        • Wolf Richter says:

          LOL, no. Long way to go. 5.75% or even 6% ≠ 20%

          But inflation isn’t nearly as bad either.

  47. Gary Fredrickson says:

    Credit rating agencies should be downgrading national debt bases upon the debt to GDP ratio. Such a ratio is analogous to maxing out one’s credit.

  48. Polar Fleeced says:

    Kinda puts the whole “Let’s make a $1 Trillion platinum coin and save the economy” thing into perspective, don’t it?

  49. Beardawg says:

    Hey Wolf – you have recently been quoted on Bonner Private Research (Bill Bonner) – twice in the span of a week. Once RE the National debt and once RE “Business Bankruptcy resetting activity.” The Wolf Den expands?

  50. Rd says:

    Jun 18, 2023 at 8:49 pm

    1. There is no threat to USD as reserve currency at least for next few decades. There is no alternatives to USD.”

    I do not see any indication of any entity wishing to take over as the new emperor. However, there is clear indication of a shirinking use of $ in global trade. Down just under 59% in recent months for the first time.

    So what happens when that volume drops to 55 or even 50%? What financial metrics would be impacted here? This would be a more realistic point to consider that the ‘general’ perceptions of no worries, the $ is supreme!!!!

  51. Implicit says:

    Currencies will have to be backed by something eventually because Fiat currencies are doomed for failure. Once Quantum Computing becomes more widely available, it will become infinitely more feasible to give value rating to items on the periodic table and their molecular derivatives like H2O, oil, gold, food etc…
    The value of things will be determined by their availability, amount of use, and extraction costs according to settlement costs that are collected from countries every day, week and month.
    The base elements will always be of great value because that’s how civilizations are built and why we will harvest these resources from the Moon, asteroids, and other planets eventually if we last that long.
    Entrepreneurism and intellectual property, although not physical assets, will be highly valued and rewarded.
    However, we’re not near there yet, but we are showing the problems associated with printing Fiat currencies willy-nilly without backing.
    There does not seem like any easy way out without realizing that resources are the closest thing to real money that exists.
    For now, this is why I like gold: it is indestructible does, not tarnish, it is malleable, and it is pure element that has always been valued highly as a substitute currency.

    • JimL says:

      Currencies have been back by something for a long time.

      The power of the economy issuing them.

      • Lisa_Hooker says:

        The “economy” is pretty imprecise.
        More accurate is “the power” of the taxable slaves within the country.

  52. Harry Houndstooth says:

    Kahuna Central Monitoring – Wolf Richter

    Wolf Richter
    Jun 19, 2023 at 12:35 pm
    “If you think that Fed will cut in the near future, you’re delusional. You’re drinking the pivot-mongers’ Kool-Aide. They’ve been handing out the Kool-Aide for over a year. The Fed will hike in July, and it will hike again later this year. Get used to the idea.”

    Wolf has extra large coconut Kahunas.

    Pure wisdom dispensed daily.

  53. Desert Dweller says:

    Now that QE has ended and the supply of govies coming into the market is exploding, it seems like just a matter of time until interest rates climb higher based upon supply and demand if nothing else. Not only that, but the major credit agencies may not have lowered the US credit rating due to the debt ceiling fiasco, but huge institutional buyers have. And then there is China, what if they start selling their US govie portfolio like they mean it? Lastly, we have the never ending deficit increase. Where this all leads is not known, but the backdrop is very troubling.

  54. gametv says:

    I think something is brewing in China. Recently, many of the CEOs of the biggest countries doing business in China have made trips to bow at the feet of Xi. Blinken went to China and stated that the US does not seek Taiwanese independence.

    My guess is that Xi is demanding fealty from US corporations, or he will bring down his wrath on them.

    I have become of the opinion that US corporations are the enemy of US citizens. They sold out to the Chinese long ago and now will be used as puppets of Xi to try to appease Americans as he tries to force the take-over of Taiwan.

    • Swamp Creature says:

      Previously, JB was on tape multiple times saying he would defend Tiawan if it were invaded. I saw these tapes myself. He’s reversed himself 180 degrees in just a few months. Was he lying then or someone’s got to him recently to change his mind. This is big news, and no one in the MSM is even covering it. Tiawan is a key trading partner and the source for most of our semiconductors, and our best ally in the region. An invasion of Tiawan would be a catastrophic for the markets, (20% crash or more) and would be a major regional conflict, as the Tiawanese would not surrender without a fight.

    • jon says:

      US Corps exist to make money for their shareholders at any cost.
      Hope we all understand this.

  55. MrMagoo says:

    I agree the Fed will hike July, only 1/4 point.
    The Fed may do another 1/4 point this fall.

    If the markets take a strong downturn, the Fed will ease again.
    Zero rates or Negative rates will be seen again.
    The PIVIOT might come next year, Spring 2024 before the election.
    Liberal Dems want to be reelected.

    Normal Financial Policy is gone. Manipulation is New Norm.
    Corruption and Manipulation has replaced Capitalism.
    Crony Capitalism and it stinks.

    Is this the Blow Off phase ? Shorts being squeezed ?
    Maybe not, would be very unusual with elections next year.

  56. Cassandro says:

    Great article by Wolf, followed by a variety of good comments and confused nonsense. Keep an eye on Japan and the JCB. It will provide insight to the impact of deficit spending and inflation, before the reality reaches the US shores. My second comment is that cycles continue UNTIL they don’t. The US as a reserve currency will continue to decline. Finally like people who say “buy real estate, it never goes down, since they aren’t making more.”

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