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Federal Reserve Balance Sheet Update: Week Of August 19
Total Federal Reserve balance sheet assets for the week of August 12 of $2,047 billion (an run up of $57 billion from the prior week) consisting of:
- Securities held outright: $1,449 billion
(an increase of $123 billion MoM, resulting from $44.6 billion in new
Treasury purchases, $69.7 billion increase in MBS and $8.6 billion in Agency Debt), or $18.6 billion increase sequentially - Net borrowings: $340.5 billion (the number was stale as of the update due to a lag in Fed H.3 borrowing update)
- Float, liquidity swaps, Maiden Lane and other assets: $258 billion
(another major decrease of $78.8 billion month over month due to a continued reduction in Central Bank
Liquidity Swaps ($21
billion) and ($54) billion in CPFF outstandings). The rate of decline
sequentially has, however, slowed yet again. It appears the Fed is at the threshold for removing Swap and CPFF liquidity.
Last week's $300 million decline in Foreign Holdings was promptly reversed and this week saw an increase of $7.2 billion. Yet, like last week, the comparison between domestic and foreign weekly securities purchases is trivial: $7 billion versus $86 billion: the US is promptly becoming its own largest debtor... by a factor more than 10x.
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Kick the tires and light the fires!
It would appear as though all the talk of the Fed losing its independence is just a smoke screen for the Treasury & FDIC losing their independence from the Fed and its member institutions.
Showtime...today's feature is Three Card Monty, featuring Fed, FDIC and Tax cheat..
Seriously, I'm terrified of these ppl...;-(
Be aware. Terrified keeps you from doing what you must in a hot fire zone.
Im in the hot zone..unfortunately my taco burned last year...lol
is the main vector difference between above prices and real business (convexity vs concavity
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Actually I can smell the balance sheet rot from here. Take out the trash !
Is it because of people afraid that US can not pay back the debt and afraid of USD crash, so they are also using equity (stock market) as a safe haven? I mean WTF is that TNX is going down while equity going up too?
Doesnt this leave out all the US infrarstructure that the FED owns as collateral?
Hah dollar back down at 78.01. Interesante! Who believes Walayat that we are going to 93 and beyond? Gentlement, place your bets. The time for whale noise is near.
http://financialsense.com/fsu/editorials/walayat/2009/0814.html
Interesting how copper isn't confirming the dollar move. Oil was the main driver for this "dollar weakness" as the boys probably bought a couple more tankers to store the black gold out of sight and out of mind, at the same time creating demand.
I'm in, my gut says just shy of 94.
This slide shows that Fed debt has gone up to 2.2 Trillion. Where does this come from? Last year the Fed got permission to pay interest on excess reserves. As soon as you pay interest on money it is translated into a liability or a debt. If that technical change had not been made the Fed did not have any true borrowing capacity. So this is a monster ramp up in assets. My question is, "Is the depositor base that provides the liquidity for this stable?" I would think not.
This is a monetary flow of funds question. Can someone tell me what the conditions would be that would result in a significant reduction in Excess Reserves? These reserves are earning bubkiss. The holder of these reserves (the banks) could put this money to more productive use no?
The Fed does not have a captive deposit base. They have no altervative source of liquidity (save to print). Is this a problem to be?
Excellent points sir.
Interest on excess reserves is rather pointless if the system is structurally insolvent (from high level of nonperforming debt!) The banks are parking the stolen loot in USTbond complex. Borrow at 0% loan at 30% to the sucker-dupes with revolving debt. Nice work if you can get it. No , the depositor base is not stable -- but there have been no bank runs yet. People are still drinking the Kool Aid. If anyone has some please send it my way! I'm still kind of hung over. Anyway . . . the system is still highly leveraged -- Denninger wrote on Tuesday about how a level of ~5% of nonperforming debt is enough to cause structural insolvency.
http://market-ticker.denninger.net/archives/1344-Will-It-All-Come-Tumbli...
So flow of funds. What could cause Reduction to excess reserves? Hmm good question. Only four things come to mind really that could reduce excess reserves: 1) mark-to-market losses on nonperforming debt, 2) bank runs, 3) bank failures, and/or 4) currency problems. Granted I am biased because these four things are on my mind lately. Perhaps someone else has some other thoughts on the topic? On excess reserves and flow of funds?
Here's your Kool-Aid
http://www.youtube.com/watch?v=oLcilJGPo68
HAHAHAHAHA
This is definately a problem to be. Printing money to prevent banks from loaning out their reserves at the Fed. You're right that it's not a captive depositor and they're not really preventing banks from doing anything. I would suppose that there's enough of a liquidity squeeze amount the depositories not to want to loan much out right now. Therefore, the Fed may be paying close to nothing on the reserves. (A side question: is paying money not to loan out your reserves a form of "negative" interest rate?)
But Project Mayham is right below, but I would argue your 4 scenarios are really all just the same event, namely a bank run or a localized squeeze on a handful of banks. I'm not sure the M2M rules mean much unless there's a run anyway. (To the banks: Who cares if you're lying? You're just lying to yourself.)
But where should the money in reserves at the Fed show up on the balance sheet? They should show up on the asset side. Why? Just as all deposits at any bank show up on the asset side. What's incredible with the Fed is that US Dollars are Fed Reserve Liabilities, so liabilities of the Fed show up as assets on the Fed's own books. Correct me if I'm wrong, I'm only one Diet Coke into the day with a T-account in front of me.
The banks aren't lending so they are just parking the money at the Fed. That is why this whole "recovery" idea is so stupid. If there was real recovery banks would be lending so they could earn more than the Fed pays.
JPM's economist said GDP could get back to prior peak in a couple years. Really? Why aren't they lending to all of the "recovering" companies?
As long as the banks have their $ with the Fed instead of lending there won't be inflation. When they start lending get very afraid of inflation.
said the quality of life has declined dramatically the past several years as the violence has escalated.
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The move by the CFTC in wheat and corn...first stirke in attemot to stamp out dollar hedges?
“I believe that position limits should be consistently applied and vigorously enforced,” CFTC Chairman Gary Gensler said. “Position limits promote market integrity by guarding against concentrated positions.”
Ted Butler has something he'd like to say to you, Gary.
Commodity ETFs are for dummies. Stop complaining and trade the futures.
I think you will like this article Tyler
http://capitalobserver.blogspot.com/2009/08/lunatics-firmly-in-control-o...
How long does it take for a huge monetary expansion to impact aggregate demand? About 6 months. So 8 months ago the base expoded. 6 months later we have demand again.
But this graph has stopped rising. The stimulus from 8 months ago did its job. But there is no monetary follow through. The economy will not grow unless this graph resumes its sharp uptrend. That will not happen. Bernanke has said so.
Those looking for L recovery are nuts. We will be lucky to get 1% growth in 2010. That is not enough.
Most experts agree that anything under 3% GDP growth is a "growing recession".
I suppose that number depends a lot on the average rate on debt, immigration, and employement rate.
Somehow people assume "greater than 0" is the benchmark for success.
If the bookie running this scam has a benchmark of "0" then the real world GDP would probably equate to -3.
Are the $1 Billion in MBS marked at a true value or were they purchased at inflated values? What happens when the Fed tries to sell them?
I don't rightly know... but I'm sure as hell am not going to be a buyer.
Glad to keep see the comments are still free.
Don't ever change.
Math got tougher too, damn.
let google do it.
Meanwhile, bond yields continue to plummet.
Self-reinforcing feedback loop.
The more the fed buys, the lower interest rates go.
The lower interest rates go, the bigger the deficits which can be financed.
The bigger the deficits, the bigger the "concern" about economic stability.
Ergo, investors "flee to the safety of Treasuries".
Pretty much a "slam dunk" scenario for the Treasury Dept.
I agree. I'm not so sure shorting Treasuries is a good idea! Fed could end up continuing this QE madness and end up owning all the new debt. This game cannot go on forever! When it ends there will be carnage. Only Zerohedge readers, relying on their presence of mind and wits, will survive!
When does the short squeeze on treasury debt end?
As soon as interest rates go up, the deficit goes to the moon. This is like holding a beachball under water. As soon as they let go and defend the dollar with higher interest rates, the dollar becomes indefensible.
What we all want to know is when?
I'm thinking this comes unglued over the next few months into the end of 2009. I also think Fed will do whatever it takes to defend US Tbond complex and will sacrifice king dollar to Moloch.
Eventually though, the Fed has to raise rates.
That is when things get silly.
What you describe is the wild instability of keeping Ts yields low in the US. Eventually the only buyers of Ts will be the Fed. That leads to an inconvertible dollar. As soon as they try to defend the dollar, it will become indefensible because the government borrowing costs will shoot through the moon.
Conundrum, to quote Greenspan.
protecting the tbond complex means protectecting the dollar! isn't that the irony? If they trash the dollar they will be left comsuming all the Tbond debt internally - how is another question. Perhaps they are looking to those "deposits/money on sidelines" to buy up the residual debt but aren't those deposits already invested in the treasuries, agencies etc via the asset side of bank balance sheets? Where does the internal demand come from - q up the mandatory treasury purchase program. King dollar is taking its q from nepal
Here is the dunk to use RT. After all it all about running over the inwestors and stuffing it.
http://www.youtube.com/watch?v=ieXETZVLJa4
RT,
This chart says otherwise:
http://jsmineset.com/wp-content/uploads/2009/08/TIC.jpg
Now, that doesn't mean shorting T's is a short-term good idea.
ha ha thats true
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http://research.stlouisfed.org/fred2/series/ADJRESNS banks reserve
http://research.stlouisfed.org/fred2/series/AMBSL monetary base
Banks reserves are ample and so does the monetary base, it seems to have the ability to last forever?
Whereas: Congress, the Federal Reserve, and the U.S. Treasury have put the American taxpayer on the hook for over $12 trillion in bailouts and loans; and
Whereas: Federal Reserve Chairman Ben Bernanke recently refused to tell Congress who has received trillions in these funds from the Federal Reserve; and
Whereas: Allowing the Fed to operate our nation's monetary system in almost complete secrecy leads to abuse, inflation, and a lower quality of life for every American; and
Whereas: HR 1207, the Federal Reserve Transparency Act, and S 604, the Federal Reserve Sunshine Act, would require a full audit of the Fed for the first time in its history and would provide answers to the American people about how our money is being spent;
Therefore: It's time to hold the Federal Reserve accountable to Congress and the American People. I urge you to do everything in your power to pass the Audit the Fed bill!
http://www.auditthefed.com/
September is Mass Action month for the Audit the Fed movement. Keep checking AuditTheFed.com for updates on how to get invovled. Thank you all for your continued support.
-Crook
Hi, I've been a long time lurker here, at Denninger's, Nate's, Mish's, etc. and have learned oceans of info - THANKS! I've come to the general belief that we're in for a deflationary ride for the near to mid-term future, regardless of the Fed's issuance and monetization of debt, which seems to be a general concensus.
However, looking at the above (and rising debt level), and combining it with what KD posted this morning - http://market-ticker.denninger.net/archives/1358-Here-Comes-Trouble-Thre... - noting that the Social Security fund is rapidly (VERY near term) about to be forced into the 'red' due to lack of inflows a decade ahead of schedule:
My question is now, could these combinations overcome the lack of money flowing through the system (via credit) to instigate a falling through the floor dollar and then hyper-inflation?
Best Regards.
-SnBiTX
You raise valid points but how do you get that this would end up in a deflationary cycle?
Only chance the US system has of ever repaying debt and honoring outstanding liabilities would be with hyperinflation where your dollar buys only half or less of what it buys today. People get paid their soc.sec. but it only buys them half of what they would expect. Hardship will be on the millions of boomers who are about to retire. That entire system was never sustainable and will pay what it can afford to pay. Doesn't mean the currency will go away. Its pretty common to dilute the value of your currency to pay your bills. Several nations had to do it.
I dare you to go over to KD's and ask him that on the Ticker. heehee
The SSTF is still running an annual surplus. Therefore they are not selling these special IOUs they have. They are buying them. But they are buying less. My estimate is for $60b in 09 vs 183b in 08. My concern is that this all ends in 2010. When they stop buying and start selling it will mean a cash consequence to the Treasury of very big bucks.
I have been pounding the table on this for a year and I do not think any one cares. Reform of SS has taken aback seat to healthcare. That is a mistake. By the time SS come on the table for a 'fix' there will not be enough resources left to fix it. It is a very big systemic problem. My guess that by the end of 2010 it will be in 'in the market' and it will not have a good result.
Folks, we are broke. We do not have what we need to fix what is broken.
It's time we crown Bernanke King of the world. He's claiming full credit for saving the world from disaster.
All hail The King!
You'll likely see yet another stimulus package by them when the resulting downside drop in asset prices from the tightening becomes "unacceptabl
good articles; good articles 4 slow news day ..http://www..
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We have to keep spending to get out of this recession - J Biden
**By a factor of 10**??
Please explain your rationale.
If Tyler is right and the Fed is at its threshold as far as removing SWAPS and CPFF liquidity, the balance sheet is set to expand again rapidly via further settlement of MBS purchases. The NY Fed has net purchased $760B MBS to date but only $610B has settled on the H.4.1, upon settlement that $150B difference is going to add to the balance sheet (if like Tyler suggests the Fed cannot take other items down concurrently) and IMO fuel futher rally in Treasuries short term.