US Treasury debt monetization quantified

A recent post ( analyses in details the recent adjudications of 7yr maturity Tbond issuance, which was considered by the press as a success. It appears that the FED hid itself behind primary dealers, by immediately repurchasing half of the TBonds issued. So it is now quite clear that the ‘easy’ scenario for the US government to refinance its debt by monetization, which we discussed in an earlier post, is unfolding, despite the public statements that the Fed is getting ready to reduce its balance sheet as soon as the recovery firms up.

This does seem to be the only workable scenario for the US, it just makes me very uneasy to see that this is happening through manipulation… while ensuring healthy (?) margins to the primary dealers in the process. A formal US dollar devaluation would be so much cleaner. I don’t think I am paranoid, but I find it harder and harder to trust the various economic indicators published by official sources.