Running low on ammo

August 18, 2009

On Monday the Fed announced it had purchased another $7 billion worth of Treasuries under its quantitative easing program.  Readers will recall that in last week’s FOMC statement, the Fed said it was extending the Treasury purchase program by a month, to the end of October, while maintaining its total purchase commitment of $300 billion.

After today’s $7 billion purchase, the Fed has just $40 billion left.  Spread out over the next 10 weeks, that doesn’t give it very much ammo.  To date, purchases have averaged over $12 billion per week.  That is set to fall to $4 billion.

Because I’m a glutton for this stuff, I thought I’d put together a quick chart showing the progress of the Fed’s Treasury purchase program.

(Click chart to enlarge in new window)


From the first purchase of Treasuries on March 25th through the end of October, the program will have lasted just over 31 weeks.  We have about 10 weeks to go.

The chart above plots total purchases by week (red line) and the rolling 2-week sum of purchases (blue line).  The variability of the Fed’s purchases is a little less pronounced when measured every two weeks as opposed to every week, which is why I included the blue line.

Anyway, you can see that the Fed will have to put on the brakes over the last 10 weeks of the program.  Assuming, of course, Bernanke doesn’t change his mind about stopping at $300 billion….


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The Fed suddenly started purchasing Agency Debt in January and has bought more than 1/2 trillion dollars of the stuff so far this year. I wonder where that is going.

Posted by John McLeod | Report as abusive

We purchase from ourselves and then pay interest back to ourselves, amazing. No wonder we don’t have any money (USA)

Posted by Bob | Report as abusive

This charade of issuing money to buy government debt seems to have only the objective of confusing the issue. Why the game? Why not just print the money directly and save the processing costs (FED overhead)?!

Posted by Buddy | Report as abusive

[…] Uncategorized on August 18, 2009 at 2:41 pm Rolfe Winkler » Blog Archive » Running low on ammo | Blogs | On Monday the Fed announced it had purchased another $7 billion worth of Treasuries under its […]

Posted by Police State News | Report as abusive

A classic macro Fed policy, which is working. Stop complaining when you don’t understand. Wake up and read an intro ECON text book.


Posted by Neo | Report as abusive

Any way you slice it…the dollar is becoming worthless. Get your wheel barrels ready to fill with cash before going shopping!

Posted by jason | Report as abusive

“We” are not the “Fed”. The Fed is not “we”. Despite its name the Federal Reserve is not now, nor has it ever been a part of the US government. “We” have lost control of our own monetary system long ago.

Posted by James | Report as abusive

I welcome the weak dollar, it’s about time. I’ll take a $1 manufacturing contribution to GDP over $10 service sector any day. No more $5 toasters from China mart that burn your house down!

When people talk about the resiliency of the American economy, what they are really talking about is our ability to compete in a global marketplace. Something that is only enhanced by a weak dollar.

BTW, inflation will NEVER take hold. You have to have wage growth for that to happen. Not to say the speculators won’t try and make it happen….

Posted by Joe Bonasses | Report as abusive

My bet is that QE will have to be resumed at its former rates, whether or not the Fed wishes. The reasoning being that the deficits now exceed the current account deficit by a factor of 6, so the only way the fiscal deficit could be financed is from an increase in the US and world savings rate which finds its way into US treasury securities. A very unlikely proposition IMO.

Get ready for IVQE, InVoluntary QE, necessary to prevent “failed” auctions.

Posted by Davis | Report as abusive

The reason we have a central bank and let the bankers control monetary policy is because if politicians were in control, they would naturally inflate the money to pay for the promises which got them elected. While it is in the interest of bankers to avoid such inflation, it is in their interest to expand credit in order to increase profits. The problem is that when this credit grows beyond what is prudent, the result is the economy expands on a bubble of unsustainable credit, until it pops and then we have deflation.
Until we can understand this simple point and have the bankers and the politicians understand it is in everyone’s best interests to maintain a stable currency and prudent lending practices, the various con artists are going to take advantage of the situation.

Posted by John Merryman | Report as abusive

The fed is merely trying to help stimulate the economy. A side effect is that it does make the dollar more worthless but right now that is what we need to spur spending.

They just better be ready to reverse course when the economy shows any inkling of coming back or inflation will be out of this world as you suggest jason.

Posted by bernie | Report as abusive

Two words. Gold Standard.

Posted by Lillyput | Report as abusive

To all Amuricans: Call your representattives and demand that they support HR 1207 (Independent audit of the fed reserve.)

Posted by Phenfen L. | Report as abusive

to Dan Merryman:

It is more in the interest of the fed and their private banking buddies to have inflation. WHY? because the suckers who borrow money, repay it with cheaper money and are therefore more likely to be able to repay it. Why do you think Helicopter Ben has stated clearly that he doesn’t mind inflation but would fight deflation (which he thinks he is doing now)??? You should review the basics of macroeconomics as light bedtime reading, y’know!!

Posted by Phenfen L. | Report as abusive

“A side effect is that it does make the dollar more worthless but right now that is what we need to spur spending.”

wow, must be a Harvard grad…

Posted by Ken | Report as abusive

What a waste of “FED” dollars!!! The unemployment issue is still growing the lack of jobs is the likely the culprit (just a guess.) However if you live in northeast Virginia, which is IMO, the truist 51st state you would’nt know it. How about we spend some more and just let China hold us up a while (like they would?) How about you post something spectacular in the future like possibly your own opinion (doubtful?) If you truely want to see change, I suggest you change your mind! We are in a depression and inflation will shortly take hold which is the fianl catalyst to (us – U.S.? pick one) being truely screw by our foreign policy. If you really want to see a U.S. come back in world domination then perhaps subscribing to this fine idea may be the way. Lets build 2 new refineries with government funds ( much less then 500 bilion for both of them) and lets put a gas pump at ever U.S. post office (think of the jobs!) and lets only refine U.S. crude in those two new refineries (Oooo someone is getting mad now.) Then lets fuel every U.S., State, and local Government vehicle with the said fuel that would be refined!!! Wow think of the Jobs that would create!! Wow think of the savings at the pump if every government(any U.S. government that is,) vehicle were to not paying for the fuel other then in the form of payroll, for it having been refined. WOW, Obama said we need to rely less on foreign oil and need to inspire more U.S. jobs…. whats he do about that in his first few days (over 150 now?) The answer is absolutly nothing. The idea above is bold and unexpected and all mine. Not to mention something that would employ thousands and lessen our dependence on foreign oil. Heh all the experts say this and that but never offer a true solution… This is only one of the ways that wil put Americans to work and make the world’s oil interests feel the hurt. Step up step out make America Great or get out (.com) oops the (.com) was a inside joke you didnt get it……….but my sister did.

Posted by jon wilkes boothe | Report as abusive

[…] Rolfe Winkler » Blog Archive » Running low on ammo | Blogs | […]

Posted by What is the Process of Running Your Car With Water? « Eco 1st Technology Group | Report as abusive

shhhhh, Obama is going to tax your opinion next, don’t let him know now you have one.

Posted by jon wilkes boothe | Report as abusive

Well oh oh 08/18/recent-data-show-risk-to-u-s-prope rties-stands-at-over-3-trillion/ broke-now-what/25274

Posted by Lori | Report as abusive

[…] highlights the ‘ammo’ the FedRes has left :    On Monday the Fed announced it had purchased another $7 billion worth of Treasuries under its […]

Posted by China Cuts US Treasury Holdings in June. FedRes Running Low on Ammo. « Socio-Economics History Blog | Report as abusive

To Ken 8.04pm

Not only a Harvard grad BUT probably a banker too.

Thats why this Administration is doing such a fine job giving them a helping hand with the bailout and ensuring their multi-million dollar bonuses.

Goes to prove financial incompetence pays better than crime.

Posted by edenz | Report as abusive