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Re: Can somebody read this for me &....
It means the Federal Reserve is considering un-printing some of the money that they printed earlier.Originally posted by Mega View Post -
Re: Can somebody read this for me &....
Yup. And it is going to do it by selling the only thing on its balance sheet that is marketable - USTs. Imagine what that's going to do for the Fed's balance sheet quality... ;)Originally posted by ASH View Post
Well, it says it's going to do that. I somehow have my doubts they will actually do anything to withdraw monetary stimulus in any material way for a long, long time. The first attempts will probably crash the economy enough that the Fed will throw in the towel and reverse course...hopefully before it precipitates a disaster.Comment
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Re: Can somebody read this for me &....
I think they are misrepresenting this. The article begins:
It's in good part about dealing with a balance sheet crisis at the Fed, in my view.Dec. 31 (Bloomberg) -- Federal Reserve officials are considering a proposal to schedule limited sales of bonds from the central bank’s $2.2 trillion balance sheet as part of a range of tools for withdrawing record monetary stimulus.
- The Fed fattens the balance sheets of large, co-operative banks by trading toxic waste (at mark-to-magic valuations) for Treasuries, which said banks turn right around and deposit with the Fed.
- The Fed pays interest on short term demand deposits by the banks and somewhere I read the Fed will soon be paying more interest on time deposits by those same banks.
- The Fed has Fannie and Freddie paper on its balance sheets (if I recall correctly) which great pains are now being taken to ensure doesn't default.
- The Fed via the Plunge Protection Team is pumping up the stock market so that key big banks can get more capital and earn more money trading, the better for them to increase their reserves with the Fed.
- And now the Fed would like to issue its own bonds.
Yeah, the Fed is trying to soak up excess liquidity. But that's misleading. When you see an alcoholic snitching booze from family and neighbors, it is not because the alcoholic is trying to save his brethren from that demon rum.
The essence of this debt collapse is that (1) some debt has defaulted, (2) much remains in limbo not yet marked to market (which would be roughly zero), and (3) the debt of some chosen few has been moved onto the Fed balance sheet. We continue to burden the Fed's balance sheet not only with Treasuries that no one else wants, but also with the debt to fund economic stimulus money as the government tries to keep the economy from collapsing by increasing expenditures even as tax revenues decline.
The Fed's balance sheet too shall collapse. I doubt that collapse will send us back to an earlier era of gold and barter however. Rather it will be subsume the dollar and Treasuries into a larger world banking scheme in which some other parties, such as China, Russia and India, will have a larger role than now.
Before the Fed's balance sheet collapses, we will first see one or more of the Too Big To Fail (TBTF) banks fail or suffer some near death equivalent, probably as a result of some critical counter parties (nations) defaulting. Presently it is a Texas two step between those banks and the Fed that is perpetuating the shell game known as the Almighty Dollar. When the Fed's dance partners become too ill or too afraid to continue this dance, the Fed will then be living on borrowed time.
The Fed and its TBTF banking partners hope to buy enough time and build a large enough reserve position to withstand some collapse of their remaining debt. They will fail in this effort.
A key difficulty for us who live on this planet and who depend on either saved wealth, profitable cash flows or government payments for our living (that is, most of us) is that we don't know how long it will take for this failure to occur. It could be a few months, it could be many years. It's like predicting an avalanche.Most folks are good; a few aren't.Comment
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