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Auditing America's Finances: Treasury & Federal Reserve 2024-2025


Part 1: The U.S. Treasury – 2024 Financial Report Breakdown


Federal Fiscal Snapshot (2024)


The United States' fiscal health continues to raise serious concerns after the release of the 2024 Financial Report of the U.S. Government:

  • Total Revenue: $4.919 trillion (17.1% of GDP)

  • Total Spending: $6.752 trillion (23.4% of GDP)

  • Budget Deficit: $1.833 trillion (6.4% of GDP)

  • Total Federal Debt: $36.56 trillion (as of March 2025)


Despite record-high revenues, the government continues to spend at an unsustainable pace. Structural deficits persist, and projections suggest debt levels could climb to 172% of GDP by 2054 if left unaddressed.


Key Issues to Watch


  • Rising Interest Costs: For the first time in history, interest payments on the national debt have exceeded $1 trillion annually — now larger than individual spending on Medicare or defense.

  • Persistent Structural Deficits: Even with high tax receipts, spending growth outpaces revenue. Entitlement programs and debt service dominate the budget, leaving little flexibility for future needs.

  • Unfunded Liabilities Looming: Social Security and Medicare face enormous funding shortfalls, estimated at $50 trillion combined over the next 75 years.


Part 2: The Federal Reserve – Balance Sheet and Quantitative Tightening (2025)


Fed Balance Sheet (March 26, 2025)

Assets

Liabilities & Capital

Treasury Securities: $4.2T

Currency in Circulation: $2.3T

Mortgage-Backed Securities (MBS): $2.2T

Bank Reserves: $3.5T

Loans and Emergency Facilities: < $0.1T

Treasury General Account (TGA): $0.3T

Other Assets: $0.3T

Reverse Repos and Other: $0.6T+

Total Balance Sheet: $6.7 trillion.


Key Developments


  • Negative Net Income: The Fed has been operating at a loss since late 2022. High interest paid to banks on reserves now exceeds the returns on the Fed’s asset holdings, leading to zero remittances to the Treasury — a first since 1934.

  • Quantitative Tightening (QT) Slowed:Initially aggressive, the Fed has now tapered QT:

    • Treasury securities are rolling off at a slower $5 billion/month.

    • MBS roll-offs are capped at $35 billion/month.

    • There’s no clear target date or size for when QT will end.

  • Liquidity Support Institutionalized:Tools like the Standing Repo Facility and Overnight Reverse Repo Facility have normalized emergency-style liquidity programs, making them permanent fixtures of the financial system.

Long-Term Trends (2008–2025)

Event

Change in Size

Ending Size

2008 Crisis

+$1.3T

$2.2T

QE1, QE2, QE3

+$2.7T

$4.5T

COVID-19 Response

+$4.8T

$8.9T

QT Roll-off and Tapering

-$2T+

$6.7T

Over the past 15 years, every crisis has expanded the Fed’s footprint — and even "tightening" has barely dented it.


Part 3: Money Printing – The Hidden Engine Behind Markets


How Much Money Was Printed?

Since 2008, the size of the U.S. money supply (measured by M2) has exploded:

  • 2008 M2 Money Supply: ~$7.5 trillion

  • 2020 M2 Money Supply (Pre-Pandemic): ~$15.5 trillion

  • 2022 Peak (Post-Pandemic Stimulus): ~$22 trillion

  • Today (2025): ~$20 trillion (after modest tightening)


In short:

➔ The money supply nearly tripled in just over a decade.

➔ Over 40% of all dollars in circulation were created since 2020 alone.

The Federal Reserve’s Quantitative Easing (QE) programs — especially during the COVID-19 pandemic — injected trillions into the banking system. Combined with aggressive fiscal stimulus from Congress, this fueled a monetary expansion unlike anything seen in modern history.


How Did It Impact Stocks and the Economy?


Stock Market Surge: Cheap liquidity found its way into asset markets. Stocks, real estate, and crypto all surged in value between 2020 and 2022.

  • The S&P 500 more than doubled from its pandemic lows.

  • Housing prices saw their fastest rise in U.S. history.

  • Crypto assets exploded in 2020–2021, partly fueled by speculative excess from abundant liquidity.


Inflation: The flip side was rising consumer prices — inflation hit 40-year highs in 2022, leading the Fed to reverse course and hike interest rates aggressively.

Economic Fragility: Instead of creating sustainable growth, the surge in money supply created an economy heavily dependent on low rates and easy money. Once liquidity was withdrawn, volatility returned — with banking crises (e.g., 2023's regional bank collapses) and deep market corrections.

What Does This Mean for Future Recessions?


Recession Risk Remains Elevated: Higher rates, tighter credit conditions, and shrinking liquidity create a drag on economic activity. Leading indicators suggest that underlying growth is fragile despite a resilient labor market.


The Liquidity Trap Dilemma: The Fed now faces a "no easy choice" environment:

  • If they cut rates too soon, inflation could reaccelerate.

  • If they stay tight for too long, recession risks deepen.

Either path suggests heightened market volatility ahead.

Market Opportunities in a Post-Liquidity Boom


Periods following major tightening cycles historically create big market dislocations — but also major buying opportunities for disciplined investors:


  • Stocks: Valuations in certain sectors may become attractive again if earnings drop and sentiment overcorrects.

  • Hard Assets: Gold, silver, and real estate could perform well if inflation persists alongside slower growth.

  • Technology and Innovation: After periods of liquidity withdrawal, capital tends to shift toward sectors that can drive future productivity (e.g., AI, energy, biotechnology).


Final Thoughts


The 2024-2025 audits of America's financial position reveal a sobering reality:

  • At the Treasury, soaring deficits, unfunded liabilities, and unsustainable debt growth threaten long-term stability.

  • At the Federal Reserve, operating losses and an entrenched interventionist stance raise questions about the future of monetary policy independence.

Without decisive leadership and bold reforms, the combined weight of fiscal and monetary distortions could severely constrain America’s future economic resilience.


Written by Roy Dunia

Date: 4/26/2025

Disclaimer

The information provided in this article is for informational and educational purposes only. It should not be construed as financial, investment, legal, or tax advice.The views expressed are those of the author based on publicly available data and government reports.Readers should conduct their own research or consult with a qualified professional before making any financial decisions.The author assumes no responsibility for errors, omissions, or outcomes resulting from the use of this information.

Sources

  1. U.S. Department of the TreasuryFinancial Report of the United States Government, Fiscal Year 2024Link to full report (PDF)

  2. Congressional Research Service (CRS)The Fed’s Balance Sheet and Quantitative Tightening (April 3, 2025)Link to CRS Report (PDF)

  3. Federal Reserve BoardH.4.1 Factors Affecting Reserve Balances Release (Weekly Updates)FederalReserve.gov H.4.1 Data

  4. U.S. Federal ReserveMonetary Policy Overview and Policy Normalization PrinciplesFederalReserve.gov Monetary Policy

  5. U.S. Bureau of Economic Analysis (BEA)GDP and Inflation Databea.gov

  6. Federal Reserve Economic Data (FRED)Money Supply (M2) Historical DataFRED – St. Louis Fed

  7. Congressional Budget Office (CBO)Long-Term Budget Outlook Reportscbo.gov

 
 
 

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