Treasury bills held by commercial banks: my thoughts

One of the interesting things about the data in the previous post (can click here), is how a reduction in US treasuries held by US commercial banks preceded both the most recent economic recessions. I am not, repeat not, suggesting a tight correlation, or even any correlation, let alone cause/effect. What I am saying is, these and similar data suggest a reason US economic recovery could remain anemic into the near future: government need for private capital. Because the US isn’t turning into a socialist state any time soon (good), or even passing a significant stimulus bill (alas), recovery won’t be realized through government initiative. Recovery requires an increase in private spending. The problem: the latter is a difficult proposition for an economy using so much of its private capital to finance the government. Or, as I put it here: “it is difficult to see a proper private re-leveraging as long as so much private capital seems to be necessarily devoted to supporting US bonds instead of private spending.”

I would love to be wrong about this, and even better, to be explained how and why the understanding is wrong.

This entry was posted in advanced capitalism, an actually thriving labor market, economic recovery, macro-economics, money and finance, the great contraction, the great contraction 2007-2012, Uncategorized. Bookmark the permalink.

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