Whatever Happened To The Liquidity Hole?
This podcast from Bridgewater discusses the way in which the US Treasury has been issuing debt.
The main argument is the Treasury is now increasing the quantity of debt issued so it more closely approximates the deficit.
Until now, the difference between spending and revenue raising, via debt, has been met with cash pulled from other areas of the government. That is now reaching its conclusion, so debt issuance has to increase to bridge the gap in funding. That siphons money out of the banking system and further tightens liquidity.
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