FAQ: What is the difference between a US Treasury and a US Dollar?

A US Treasury is a debt security issued by the United States Department of the Treasury. It is a type of government bond that is backed by the full faith and credit of the US government, meaning it is considered a very safe investment as long as the US government is stable and trustworthy. US Treasuries are issued in a variety of maturities, ranging from a few days to 30 years, and are sold at auction to investors such as banks, insurance companies, and foreign central banks. The interest paid on Treasuries is considered to be a benchmark for other types of debt, such as mortgages and corporate bonds.

A US dollar, on the other hand, is a form of currency. It is the official currency of the United States and is used as a medium of exchange for goods and services. It is also the primary currency used in international trade and finance. US dollars can be held in cash or in various forms of accounts such as checking, savings or money market accounts.

The total amount of US treasuries in circulation is constantly changing as new bonds are issued and existing bonds mature. The US government issues new bonds to finance its spending and to refinance existing debt. At any given time, there are various types of US Treasury securities outstanding, such as Treasury bills, notes, and bonds, with different maturity dates.

The number of dollars in circulation is constantly changing. The Federal Reserve, which is the central bank of the United States, creates new dollars when it conducts monetary policy, and it also destroys old or damaged currency. The M2 money supply measure, which includes cash, checking deposits, and easily convertible near money, was $21.3 trillion as of Nov 2022.

Treasuries as Reserves in Central Banks

China has held as much as $1.3 trillion in US treasuries as reserves, but has been quietly divesting its holdings, which now stand under $1 trillion. Japan holds around $1.2 trillion, which is also down. Other countries that hold significant amounts of US treasuries include Ireland, Brazil, Switzerland, Hong Kong, Taiwan, and Singapore.

Central banks also hold gold as a reserve asset to support their currencies and to provide a source of liquidity during times of economic uncertainty. Gold is considered a safe haven asset, and central banks consider it a diversification strategy. Historically, gold has been used as a store of value and a way to back the value of a currency and signal financial strength to other countries.