The document summarizes the economic impact of the COVID-19 pandemic and the government response. It notes that initial unemployment claims have skyrocketed while the government has spent trillions to stabilize the economy. This massive spending has caused federal debt and deficits to reach unprecedented levels. The Federal Reserve has absorbed almost all new debt issuance through bond purchases, maintaining low interest rates. However, the size and duration of Fed support is uncertain as debt levels rise sharply.

1. CRFB.org

2. CRFB.org
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
We Face a Deep Economic Crisis
Thousands of Weekly Initial Unemployment Claims
Source: U.S. Employment and Training Administration
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3. CRFB.org
And Are Spending Trillions to Stabilize the Economy
Response Allowed Disbursed/Committed Deficit Impact
Legislative Actions $3.6 trillion $1.4 trillion $2.4 trillion
Coronavirus Preparedness & Response Supplemental
Appropriations Act
$8 billion >$1 billion $8 billion
Families First Coronavirus Response Act $192 billion ~$32 billion $192 billion
CARES Act $2.7 trillion $1.2 trillion $1.7 trillion
Paycheck Protection Program and Health Care Enhancement Act $733 billion $186 billion $483 billion
Administrative Actions ~$380 billion ~$300 billion ~$80 billion
Declare national emergency ~$50 billion Unknown ~$50 billion
Delay tax filing deadline to July 15 ~$300 billion ~$300 billion $0
Other executive actions ~$30 billion Unknown ~$30 billion
Federal Reserve Actions >$5.5 trillion $2.0 trillion N/A
Interest rate changes N/A N/A N/A
Asset purchases $1.6 trillion** $1.5 trillion N/A
Liquidity measures >$1.9 trillion $468 billion N/A
Emergency lending programs and facilities >$2.0 trillion $93 billion N/A
Deficit impact is from 2020-2030 / **Represents amount disbursed plus the amount scheduled to be purchased through the following week, currently $51
billion for Treasuries and $37 billion for mortgage-backed securities.
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4. CRFB.orgSource: CRFB Calculations
Bringing Debt to Record Levels
Percent of GDP
101%
81%
60%
70%
80%
90%
100%
110%
120%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Range of Uncertainty
Updated Debt Projections (current law)
Pre-Crisis Debt (current law)
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5. CRFB.org
And Generating Unprecedented Deficits
Billions
Source: CRFB Calculations
$3.7 trillion
$1.1 trillion
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
Range of Uncertainty (current law)
Updated Deficit Projections (current law)
Pre-Crisis Deficit Projections
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The U.S. Is Issuing Trillions in New Debt
Billions of Dollars of Net Debt Increases
Source: Treasury Department
-$12
$9
-$14
$23
$386
$212
$172
$124
$65 $42
$200
$262
$1,379
-$200
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20
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How is Higher Federal Debt Financed?
1. Greater savings (actors spend less and buy bonds)
2. Asset reallocation (actors buy fewer stocks and private
investments and more government bonds)
3. Foreign bond purchases (foreign governments, central
banks, individuals, or companies buy U.S. bonds)
 Foreign purchase of private investment can also spur asset reallocation
4. Central bank purchases (the Fed buys bonds)
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8. CRFB.org
Who Is Buying Our Debt?
Source: Federal Reserve Board of Governors, Treasury Department
8
Japan
China
Other Foreign
State & Local Governments
Mutual Funds
Depository Institutions
Other Domestic Holdings
Federal Reserve
$0
$4
$8
$12
$16
$20
Sept. 2019
Trillions
FOREIGN
40%
DOMESTIC
47%
FED
13%

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Who Is Buying Our Debt?
Japan Japan Japan
China China China
Other Foreign Other Foreign Other Foreign
State & Local Governments
Mutual Funds
Depository Institutions
Other Domestic Holdings
Domestic Holdings Domestic Holdings
Federal Reserve Federal Reserve Federal Reserve
$0
$4
$8
$12
$16
$20
Sept. 2019 Dec. 2019 Feb. 2020
Trillions
Source: Federal Reserve Board of Governors, Treasury Department
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10. CRFB.org
Who Is Buying Our Debt?
Japan Japan Japan
China China China
Other Foreign Other Foreign Other Foreign
State & Local Governments
Mutual Funds
Depository Institutions
Other Domestic
Holdings
Domestic Holdings Domestic Holdings
Foreign & Domestic
Holdings
Federal Reserve Federal Reserve Federal Reserve
Federal Reserve
$0
$4
$8
$12
$16
$20
Sept. 2019 Dec. 2019 Feb. 2020 Apr. 2020
Trillions
Source: Federal Reserve Board of Governors, Treasury Department
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11. CRFB.org
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
3/4 3/11 3/18 3/25 4/1 4/8 4/15 4/22 4/29 5/6
On Net, The Fed has Absorbed ~All New COVID Debt
Trillions
Source: Federal Reserve Board of Governors, Treasury Department
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12. CRFB.org
But They Are Buying Longer Maturities…
Billions
$236
$951
$222
$117
$1,437
$170
$34
-$22
-$200
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Bills
(< 1 Year)
Notes
(1-10 Years)
Bonds
(10-30 Years)
TIPS and FRN
(Various Maturities)
Fed Purchases
New Debt Held by the Public
Note: Chart shows Fed purchases and Treasury auctions since 3/4/2020
Source: Treasury Department, Federal Reserve Board of Governors 12

13. CRFB.org
Did “Money Printer go BRRR”?
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Feb. 26th:
$4.16 trillion
May 6th:
$6.68 trillion
$0
$1
$2
$3
$4
$5
$6
$7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mortgage Backed
Securities
U.S. Treasuries
Other
Quantitative Easing or Debt Monetization?
Trillions
Source: Federal Reserve Board of Governors
$4.02
trillion
$1.61
trillion
$1.06
trillion
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Mortgage Backed
Securities
U.S. Treasuries
Other
Quantitative Easing or Debt Monetization?
Trillions
Source: Federal Reserve Board of Governors
-$7
-$5
-$3
-$1
$1
$3
$5
$7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Other Liabilities
Non-Reserve
Deposits
Reserve Deposits
Currency
Treasuries
Mortgage-Backed
Securities
Other Assets
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Quantitative Easing or Debt Monetization?
Nominal Interest Rates
0%
5%
10%
15%
20%
25%
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020
Past Recessions
Effective Federal Funds Rate
Source: Federal Reserve Bank of New York 16

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The U.S. Central Bank Isn’t Alone
Billions of Monthly Net Purchases
-$200
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Federal Reserve
European Central Bank
Bank of Japan
Bank of England
Bank of Canada
Source: Bloomberg Economics
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Will The Fed Keep Buying?
 The Federal Government will likely issue $2 trillion more in debt
over the next five months (FY2020), alone
 Six weeks ago, the Federal Reserve has said they would buy up to
$75 billion in Treasuries per day.
 But purchases are slowing - The Federal Reserve has been
tapering purchases and will buy just $7 billion in Treasuries per
day this week
 Meanwhile, China has threatened to reduce it’s debt holdings…
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