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Who Will Buy U.S. Treasury Debt Flood in 2024? The U.S. Treasury Will Try

As of the end of November, the U.S. Treasury’s six-month flood of new debt had reached levels even John Maynard Keynes never dreamed of; but the federal government plans at least four more months of $300 billion or so per month in new debt, through March 2024. Because U.S. debt auctions are becoming more and more volatile as foreign buyers and major banks withdraw and hedge fund speculators take over, a new buyer is announced for January: The Treasury will start to borrow in order to buy its own debt!

As of Nov. 30, the new debt issuance had reached $2.6 trillion since President Joe Biden signed the latest debt ceiling increase legislation on June 3. Leaving aside issuances which roll over maturing debt, the net debt increase is $1.7 trillion in six months. That brought the total U.S. federal debt to $33.8 trillion, or $26.8 trillion held by “the public” and $7 trillion by federal trust funds for Social Security, Medicare, etc.

The best measure of the incredible debt mushroom, is that just the interest on it, paid out by the Treasury, even with average interest rates on it historically low, hit an annual rate of more than $1 trillion in October and November—16% of the total federal budget if that keeps up.

And it will keep up, until and unless the strain causes the interbank lending market to freeze up, a problem much discussed by bankers beyond the corner of the public’s eye. Back on Oct. 30 the Treasury announced: “During the January-March 2024 quarter, Treasury expects to borrow $816 billion in privately-held net marketable debt.”

How can it keep up, without a new “repo crisis”? On Sept. 21, the Treasury had announced that it would be buying back its own debt during 2024.