Secret US Treasury Stimulus Thwarts Fed’s Plans – Is Your Business Safe?

In the complex dance between the US Federal Reserve and the US Treasury, a subtle yet impactful phenomenon has emerged. The Treasury’s debt-issuance strategy has inadvertently been working against the Fed’s efforts to control inflation, resulting in economic stimulus equivalent to a rate cut. This backdoor quantitative easing strategy, known as ATI or activist Treasury issuance, has significant economic consequences that must be addressed.

Here are some key points to consider in the current economic landscape:

1. Shift in Issuance Profile: The US Treasury has skewed its issuance profile towards short-term bills, lowering long-term interest rates and providing economic stimulus akin to a rate cut.
2. Excessive Reliance on Short-Term Debt: Up to 70% of new debt raised over the past year has come from short-term bills, far exceeding the 15-20% benchmark customary in less turbulent times.
3. Economic Implications: This issuance strategy deviates from the norm, influencing interest rates and asset prices, ultimately spurring inflation and growth.
4. Activist Issuance vs. Standard Rules: The ATI mirrors activist monetary policy, impacting interest rates and asset markets through unorthodox means.
5. Need for Change: The Treasury’s current strategy, if left unchecked, could become a permanent fixture in economic policy, veering into a realm of politicized business cycles.

In order to rectify the situation, the Treasury must revert to a more conventional and predictable issuance pattern, retiring excess bills and restoring balance to the economic landscape. Failure to address this issue may lead to prolonged economic distortions, with inflation and interest rates running higher than desired.

As we navigate the intricate web of policies and decisions shaping our economy, it is imperative to uphold the integrity and independence of key institutions. Let us heed the warnings and insights shared by experts like Nouriel Roubini and Stephen Miran, advocating for a return to stability and predictability in economic policy. Only then can we safeguard our future from the looming threat of unchecked stimulus and politicized cycles.

In conclusion, the time for action is now. Let us work towards restoring balance and coherence in our economic strategies, setting a course for sustainable growth and stability in the years to come.