The Federal Reserve’s monetary policy of quantitative easing, ostensibly intended to steady the U.S. economy, has more than quadrupled the amount of Treasury securities owned by the Fed since Chairman Ben Bernanke hatched the strategy in 2009.
As of last week, the Fed holds $2,001,093,000,000 (that’s $2 trillion) in U.S. Treasury securities. In late 2008, before the Fed began its four-year run, it held $475.9 billion — less than one-quarter the amount of U.S. debt it now holds.
The Fed’s Aug. 14 report represents the first time its holdings of government debt have surpassed the $2 trillion mark.
The Federal Reserve owns more American debt than any other entity. China is a not-too-distant second, holding more than $1.2 trillion in U.S. Treasury securities. Foreign entities, including China, own $5.6 trillion in U.S. debt.
In all, the United States owes a cumulative $16.9 trillion to creditors worldwide, although one economist has estimated the government’s real obligations are closer to $70 trillion if built-in, consequential costs of current debts and anticipated fiscal stresses are factored in.
According to professor James Hamilton of the University of California-San Diego, the Federal government has intentionally been keeping U.S. debt off the balance sheet by omitting unfunded liabilities such as government loan guarantees and deposit insurance, as well as postsecondary education government loans.
“The biggest off-balance-sheet liabilities come from recognition of the fiscal stress that will come in the form of an aging population and rising medical expenditures,” Hamilton told FOX News last week. “It is worth noting that there are many historical episodes in which off-balance sheet liabilities ended up having quite significant on-balance sheet implications.”
Conservative economists continue to warn that forestalling an economic collapse by the endless printing of fiat currency only will exacerbate the scale of an inevitable economic doomsday, when creditors finally lose faith in the government’s abilities to meet its obligations.