Peter's Blog

Calling the Fed’s Bluff: They are Holding a Losing Hand

The Fed has talked a big game lately. Many people (including me) assumed the Fed would fold a long time ago. There is a very good reason — the Fed will crush the economy and the US Treasury with higher interest rates. In reality, the Fed is holding a losing hand and trying to bluff […]

Is the Fed Worried About the Mortgage Market?

Is the Federal Reserve worried about the tanking mortgage and housing market? If their holdings of mortgage-backed securities (MBS) are any indication, the answer is, yes. The Fed has finally started shrinking its overall balance sheet as promised, but they are not shedding MBS according to plan.

Money Supply Growth Slows Enough to Pop Everything Bubble; Not Enough to Cure Inflation

According to the seasonally adjusted data, M2 increased by $23B in May. Except for the contraction last month (the first contraction in 12 years), it was the smallest monthly increase in M2 since the start of COVID.

Technical Analysis: Gold is Building Solid Support

After a big miss on the Powell/Brainard nominations in November, the price analysis has been fairly accurate. Identifying the initial breakout above $1800, mentioning that $1900 was fragile support, and last month concluding that gold had found a bottom around $1800. For the past month, gold has been consolidating within a tight range around $1850. The data suggests the next […]

Foreign Holders Join the Fed in Reducing Holdings

Despite rising through the month, the Fed balance ended up shrinking slightly by $25 billion in May, even as it slightly increased its Treasury holdings. This was the first monthly decline in the balance sheet since $220B of “Other” rolled off in July 2020. In that case, “Other” were repurchase agreements with foreign entities to […]

Can the Fed Pull Off a Magic Trick?

For the second month in a row, the Fed held true to its word and kept the balance sheet relatively flat. In aggregate, the balance sheet expanded by only $2B, though it did reach an all-time high mid-month. The drop to close out the month came as a result of $15B in mortgage-backed securities rolling […]

Annualized Interest on US Debt Increased $16.4 Billion in Just 6 Months

The US Treasury added $111 billion in debt during March. Meanwhile, rising interest rates are already creating problems for Uncle Sam. Annualized interest on the US debt has increased by over $16 billion in just six months. Following is an analysis of US debt holdings.

Quantitative Easing Has Seemingly Ended (for now)

It appears quantitative easing has pretty much come to an end. At least for now. Although the Fed was still expanding the balance sheet through mid-month, it only added a net $9B to the balance sheet during March. This was accomplished with moderate purchases of short- and long-term debt, while 5–10-year notes had a $20B […]

Biggest Federal Budget Deficit Since July; This Is Bad News for the Fed

If you thought the federal government running a budget surplus in January was a sign that Washington D.C. was getting its fiscal house in order, you’re going to be disappointed. Uncle Sam ran the biggest deficit since last July in February.

Inflation Up 0.8% Month-on-Month and Shows No Sign of Slowing

The latest seasonally adjusted inflation rate for January was 0.8% month over month. The non-seasonally adjusted annual rate came in at 7.87%. Both of these numbers were slightly above expectations. Unlike last year, where one component made up the bulk of the move, the past several months have shown increases more evenly spread across the […]