The US Treasury is considering using its TGA account holding 953 billion dollars at the Fed to buy back its own debt on the market, an unprecedented mechanism resembling covert quantitative easing. This maneuver would inject liquidity into the financial system by replacing sovereign debt with cash in the private sector’s hands. The budgetary context is tight with forecasted borrowings of 1.9 trillion dollars this year and next, and net debt set to surge by 75% over ten years to reach 56 trillion dollars. In the short term, this operation is viewed as bullish for risky assets including Bitcoin, thanks to looser financial conditions and a weaker dollar. Over the medium term, the risk remains if investors perceive this financial engineering as an attempt to mask abysmal structural deficits rather than as a solution.
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