Biden's Treasury accused of trying to juice U.S. economy pre-election

[BumRushDaShow]

Source: Axios

Updated 7 hours ago


The Treasury Department is being accused of trying to juice the economy ahead of the election, by changing how it finances government spending.

Why it matters: This proves that everything — even wonky bond market auctions — can turn into a political fight.

The big picture: The Treasury tries to borrow money at the lowest cost to taxpayers and in the most boring, least attention-grabbing way possible.

Now Republican lawmakers and at least one renowned economist say its strategy of late has been at odds with the Fed's goal of slowing the economy.

How it works: The Treasury conducts regular bond market auctions to sell debt, fund the annual budget deficit, and roll over existing bonds that are maturing.

For the past year, short-term debt — or Treasury bills — have been about 20% of all outstanding debt.

That's at the high end of the old suggested range. Last week the range was updated to say that 20% should be the average, not the cap.

The accusation: Short-term debt is becoming a rising share of all outstanding debt, while the share of long-term debt, like 10-year or 30-year bonds, stays flat. In turn, critics say the lower supply is preventing long-term interest rates from going up. Those rates influence borrowing costs across the economy.

Lower rates mean stronger economic activity — the opposite of what the Fed has been trying to achieve by setting overnight interest rates at a high level.

Of course, if you believe the Fed has been behind the curve and has waited too long to cut rates, then the Treasury has been helping the economic cause rather than hurting it.

Read more: https://www.axios.com/2024/08/05/biden-treasury-economy-spending-election

[unblock]

1. Biden's treasury accused of being geniuses, more like it.

The fed is clearly behind the curve on this one.

The market is now pricing in a whopping *5* quarter-points vita by the end of the year and a total of *9* over the next 12 months.

There's even talk of a double cut prior to the next meeting.

So the treasury shifting gears to boost the economy instead of slowing it seems right on the money.

[mahina]

2. I sure wish I understood what this means

"The market is now pricing in a whopping *5* quarter-points vita by the end of the year and a total of *9* over the next 12 months."


If you have time to restate that for us non-finance literates it would be such a big help! Does that mean the market is already factoring in 1.25 point drop in interest rates this year and 2.25 by August 2025? That would be great news for me if so.

Thanks heaps.

Ask me anything about Hawaii any time, or any randoms you'd like to know from a person who should have studied finance.

Cheeries! Mahalo nunui!

[hueymahl]

4. That is exactly what that means

The adjust the fed funds rate, which, essentially, is the rate banks get charged for borrowing money from the Fed. Cuts to those rates reverberate throughout lending instruments and make the cost of borrowing money cheaper (if they cut) and more expensive (if they increase rates.

There is a lot more to it, especially on longer horizons, but that is the gist of it.

[mahina]

5. Thank you!

[MaryMagdaline]

3. I hope we are!! Powell is killing us with interest rate

N/t

[markodochartaigh]

8. BINGO!!!

nt

[maxsolomon]

6. THIS NEW YORK TIMES HEADLINE IS TREASONOUS!

Oh, wait. It's Axios. Never mind...

[Tweedy]

7. Throwing ketchup at the wall to see if it sticks

Is and has always been Mr. Trump’s tactic to deal with everything.

[niyad]

9. Who, exactly, is doing the accusing?

[BumRushDaShow]

10. Examples from the OP article

What they're saying: "Some people, including myself, believe this is being done to artificially stimulate markets in the run-up to the election," Sen. Bill Hagerty (R-Tenn.) said at a hearing last month.

Two former Treasury advisers — prominent economists Nouriel Roubini and Stephen Miran — write in a new paper that officials are manipulating financial conditions and the economy, "usurping core functions of the Federal Reserve."

"While we have no smoking gun, I would say if it walks and quacks like a duck, it must be a duck," Roubini tells Axios.

The latter had a paper linked (PDF) - https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/635102_Activist_Treasury_Issuance_-_Hudson_Bay_Capital_Research.pdf

[niyad]

11. Since the title read "being accused", perhaps including who did the accusing

as part of the OP would have been appropriate, and helpful. Not everyone has time to read linked articles.

[BumRushDaShow]

12. I don't like breaking up articles in LBN

I try to keep them "neat" and formatted. IMHO, that is something that might be best done in General Discussion.

My style.

[niyad]

17. That sounds like formatting is more important than the information that is

being conveyed?

[BumRushDaShow]

20. The hope is that people would maybe read the actual article

even if they bookmark to read for later. Good writers usually put thesis statement/summary and "the main idea" near the beginning of the article.

[Farmer-Rick]

13. No, Wall Street, the Treasury Isn't Rigging the Economy for Democrats

"What’s wrong with their argument? The Treasury’s critics concede that they have no direct evidence that it’s trying to manipulate rates to get Democrats elected — say, a political directive from Yellen to Josh Frost, the assistant secretary for financial markets, who runs the Treasury’s quarterly refunding auction.

“We have never, ever discussed anything of the sort,” Yellen said last week in an interview with Bloomberg News.

The critics’ evidence is purely circumstantial, namely that the Treasury issued a lot of bills recently......

In fact, though, the Treasury has explained its modus operandi. It says it needed to issue a lot more debt than usual to restock the Treasury General Account, which is the government’s checking account. The government usually has more than $500 billion in the account, but it ran the account down to $23 billion in June of last year because of Congress’s delay in raising the debt ceiling."

https://www.nytimes.com/2024/07/29/opinion/treasury-janet-yellen-roubini.html

[OverBurn]

15. Juice the fuck out of it if it helps us win.

[LymphocyteLover]

16. "at odds with the Fed's goal of slowing the economy"-- WTF? Isn't the goal to slow inflation???

Don't we want a faster growing economy?

[IronLionZion]

18. Treasury is doing what's best for the American taxpayers

not to influence the election. They are doing exactly what they are supposed to do. Doing your job correctly shouldn't be political.

[PedroXimenez]

19. Biden accused of improving lives of Americans

time for impeachment hearings

[ificandream]

21. Typical Republican response