Central Banks buying Equities

[vinoveri]

http://www.bloomberg.com/news/2011-1...-equities.html


Can someone please help me understand the following:

What exactly is meant by "reserves" or "foreign reserves" of a Central Bank? Where fo they come from? What is the unit of account? Who keeps track and audits?

If CB's can create fiat money, is not this akin (in some way) to printing money and buying the stock market?

[gwynedd1]

Re: Central Banks buying Equities

http://www.bloomberg.com/news/2011-1...-equities.html


Can someone please help me understand the following:

What exactly is meant by "reserves" or "foreign reserves" of a Central Bank? Where fo they come from? What is the unit of account? Who keeps track and audits?

If CB's can create fiat money, is not this akin (in some way) to printing money and buying the stock market?

I think it is just foreign currencies and possibly sovereign debt. Looks like they want to get out of fiat in this currency war.

[vinoveri]

Re: Central Banks buying Equities

I think it is just foreign currencies and possibly sovereign debt. Looks like they want to get out of fiat in this currency war.

Thanks.
So if reserves are either foreign currencies or sovereign debt, both of which are liabilities of the other country AND both which can be purchased with fiat money (example: CB #1 prints its own currency and uses it to buy currrency of country #2, and then uses that currency to buy the debt of country #2) .... is this not in fact an example of using fiat money to buy the stocks?

[gwynedd1]

Re: Central Banks buying Equities

Thanks.
So if reserves are either foreign currencies or sovereign debt, both of which are liabilities of the other country AND both which can be purchased with fiat money (example: CB #1 prints its own currency and uses it to buy currrency of country #2, and then uses that currency to buy the debt of country #2) .... is this not in fact an example of using fiat money to buy the stocks?

Public funds to funnel more money into the financial empire? Its basically money printing into financialized assets. Didn't mortgage backed securities already create this precedent? Norway's sovereign fund is of this sort o thinking. Instead of direct investment, they financialized it. This is why its dangerous to not have equity positions of some kind if you ask me. Unfortunately its also dangerous to have them. Its also just plain dangerous since this will move vast amounts of wealth into the shark pool. Think of the buckets of chum sitting in the central banks?