In the US, the Treasury comes under the public administration and the GSE of a para-public administration of real estate.
In fact, they are only one sector, because the crisis of 2008 showed that the debt of the GSE was supported by the Treasury and the FED.
By this last chart, we would like to show that coverage of the external deficit has for years been one of the instruments of Treasury and real estate policy and that this instrument was not abandoned during the crisis. To make this demonstration, we focus on two types of investment for a simple reason: the US does not buy Treasury Bills from other countries and companies like GSE do not exist outside the US. These purchases therefore always have a positive role in the financial coverage of the balance of payments deficit because they are unrequited.
To show this importance we have deducted from the financial coverage (A = Blue) the value of treasury bills and the debts of agencies and GSEs bought by foreign investors (B = pink). We represented what Net Financial Investment would be minus the reinforcement of treasury bills and GSEs (Green).
The comparison of financial coverage net of treasury bills and GSE is overwhelming: The balance of payments deficit (Red) could no longer be provided by reduced financial coverage (green). And in this case, the dollar collapses.
These remarks allow us to understand the policy of support for the financial sector and economic recovery through the massive issuance of treasury bills.
This aspect of the crisis is very rarely emphasized in France.
1 ° From 2005 to 2006, issues of GSE securities purchased by foreign investors are close (Violet and Marron). GSE securitization purchases are roughly equal to treasury bill sales.
2 ° The year 2008 is a turning year: the bankruptcy of GSE Fannie Mae and Freddie Mac leads to a massive sale of their securitization products, these sales continue in 2009.
It is the issuance of Treasury bills that offset these sales and ensures by their volume a large part of the financial coverage of the USA. The coverage of balance of payments imbalances, supported in 2008 by treasury bills and the trituration of GSE, is no longer based on federal deficits in 2009.
The preservation of the dollar, therefore, involves the financial deficit of the US federal government during a period of disruption of net acquisitions of financial assets. But the role of the GSE in this coverage also leads us to the policy of the FED, which has massively bought the doubtful assets of the GSE to their US and foreign investors. To do this, it benefited from the monetary creation of the reserve institutions which provided it with funds by increasing the excess reserves recorded in the liabilities of the FED. By engaging in this policy, the US government has supported the value of its currency.
To illustrate this countervailing and salivating role of treasury bills for the value of the US dollar, we will quote a single figure: in 2006, treasury bills accounted for 15.2% of total foreign financial investments in the US, or 2126 billion euros. $. In 2009, they accounted for 24.1% of financial investments, or $ 3713 billion. This difference in the amount allowed them to serve as a shield to the dollar (FRB FFA L. 107)