As of August 14, the Federal Reserve’s weekly accounting reports place the bank’s ownership of U.S. Treasury securities (i.e., federal government debt) at a worth of over $2 trillion for the first time ever.
The massive increase in the Fed’s debt ownership is a result of the “Quantitative Easing” (QE) strategy, which was launched in 2009 in an effort to stimulate the economy. In 2008, prior to the adoption of QE, the Fed owned only $475.9 billion in Treasury securities. Since, that figure has more than quadrupled.
The Federal Reserve currently holds the largest percentage of U.S. federal government debt, at 16.7 percent. In second place is China, owed $1.2758 trillion by the United States. A recent report by CNS News states that the United States is currently in debt to foreign entities to the tune of $5.6 trillion, China included.
“Since the financial crisis of 2008, the Federal Reserve has filled its balance sheet with private assets and public debt through instruments like quantitative easing, and the totals are adding up,” explained Reason’s Ed Krayewski.
In addition to the report regarding its record debt ownership, the Fed also announced this week the results of a study conducted to identify possible stresses that could lead to another economic crisis.
“A key lesson from the recent financial crisis is that many financial companies simply failed to adequately identify the potential exposures and risks stemming from their firm-wide activities…” stated the Fed’s report. “But more importantly, many companies failed to consider the full scale and scope of exposures, and to analyze how the size and risk characteristics of their exposures and business activities might evolve as economic and market conditions changed.”
In total, the U.S. federal debt is said to equal approximately $16.9 trillion. However, University of California, San Diego economics professor James Hamilton pointed out that the publicized total does not include off-balance-sheet liabilities, and places the total debt closer to $70 trillion.