The US government's cash account at the Federal Reserve grew 410 billion dollars over the past year. The Fed's entire balance sheet grew 127 billion.
The government's checking account expanded more than three times as fast as the central bank holding it.
That matters because of where the money comes from. When the Treasury collects taxes or sells debt, the cash moves out of the banks and into its account at the Fed. Bank reserves, which are the cash the banking system settles with, fall by the same amount. Over the year they fell 367 billion dollars, down 11 percent. All three figures sit on the Fed's weekly balance sheet, the H.4.1, published every Thursday afternoon.
The Fed spent that year running a program to stop exactly this. Its directive to the New York trading desk is to buy Treasury bills to maintain an ample level of reserves, and it bought 342 billion dollars of them. It also let 186 billion of mortgage bonds and 33 billion of inflation-linked debt run off, which is why the balance sheet grew 127 and not 342.
On Wednesday the Fed published the minutes of its July meeting. Its market manager reported that reserves looked ample and would stay that way for months, and the committee reissued the instruction to keep buying.
The minutes never mention the Treasury General Account, or the cash balance, or the fiscal side at all.
They were released two weeks after the Treasury told the market what it plans to do next. Its quarterly statement on 5th August says the account could peak at 1.05 trillion dollars, give or take 50 billion, in late October. From 936 billion that is roughly another 114 billion out of the banking system. The same statement says Treasury is monitoring the Fed's bill purchases.
The Fed has a fair answer, and it is a good one. Ample is a claim about whether interest rates move when reserves move, not about the level. By that test nothing is wrong. Money market rates barely shifted and stayed close to what the Fed pays on reserves.
$BTC
The government's checking account expanded more than three times as fast as the central bank holding it.
That matters because of where the money comes from. When the Treasury collects taxes or sells debt, the cash moves out of the banks and into its account at the Fed. Bank reserves, which are the cash the banking system settles with, fall by the same amount. Over the year they fell 367 billion dollars, down 11 percent. All three figures sit on the Fed's weekly balance sheet, the H.4.1, published every Thursday afternoon.
The Fed spent that year running a program to stop exactly this. Its directive to the New York trading desk is to buy Treasury bills to maintain an ample level of reserves, and it bought 342 billion dollars of them. It also let 186 billion of mortgage bonds and 33 billion of inflation-linked debt run off, which is why the balance sheet grew 127 and not 342.
On Wednesday the Fed published the minutes of its July meeting. Its market manager reported that reserves looked ample and would stay that way for months, and the committee reissued the instruction to keep buying.
The minutes never mention the Treasury General Account, or the cash balance, or the fiscal side at all.
They were released two weeks after the Treasury told the market what it plans to do next. Its quarterly statement on 5th August says the account could peak at 1.05 trillion dollars, give or take 50 billion, in late October. From 936 billion that is roughly another 114 billion out of the banking system. The same statement says Treasury is monitoring the Fed's bill purchases.
The Fed has a fair answer, and it is a good one. Ample is a claim about whether interest rates move when reserves move, not about the level. By that test nothing is wrong. Money market rates barely shifted and stayed close to what the Fed pays on reserves.
$BTC
