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Federal Reserve Balance Sheet Update: Week Of January 13, $1.070 Trillion In UST Holdings

Tyler Durden's picture




 

The steady climb in Fed assets continues, with the left side of Bernanke's balance sheet swelling to just under $2.5 trillion, as US Treasury holdings hit $1.07 trillion, implying that the Fed's DV01 continues to increase on a daily basis with every single POMO. The differential between the US and China is now $163 billion and rising. We expect our now second-largest creditor to realize the game theory balance of leverage (no pun intended) is shifting away from its favor (and to the Fed), and to respond accordingly.

All numbers as of December 16:

  • Securities
    held outright: $2,200 billion, $30 billion more than the week prior.
    • Total

      Treasury holdings increased
      from $1.031 trillion to $1.070 trillion (inclusive of yesterday's POMO).

    • MBS were flat at $992 billion. 

    • Agency holdings declined by $1 billion to $146 billion.
  • Net
    borrowings: flat at
    $45 billion.
  • Float,
    liquidity
    swaps, Maiden Lane and other assets: $205
    billion, $3 billion more than a fortnight ago. FX liquidity swaps were at $70
    million as that one bank continues to borrow the same amount for 4
    months now. The value of Maiden
    Lane I declined slightly to $27 billion. Maiden Lane II was at $15.9 billion, Maiden Lane III at $23.2
    billion, while AIA Aurora was $26.3
    billion. And it is important to note that only the Federal Reserve would have "Other Assets" of $114 billion. That's right: undefuned "assets" of well over one hundred billion.
  • The monetary base was $2.013 trillion.
  • Reserve

    balances with banks: $1096 billion, an increase of $65 billion from last
    week. With assets increasing rapidly, it was about time this lagging liability category caught up.

  • Foreign holdings of USTs and MBS declined by $9 billion to $3.345
    trillion. There has been a decline of $12 billion in foreign custodial holdings since December 22.

There are two things we would like to highlight in the data above:

  • The increase in excess reserves was notable and was long overdue. As we have shown before, since QE2, the cumulative differential between the increase in Fed assets and excess reserves has diverged materially, and last week hit an all time record of $141.1 billion. This week this differential has declined to $106.3 billion which however is still a major discrepancy, and makes one wonder what is the reason for this lack of congruity.
  • The anticipated
    slow-down in MBS buybacks to the Fed due to spiking interest rates is finally starting to materialize: there were no MBS repurchases in the last three weeks, with the total continuing to stay flat at $992 billion, which means the QE Lite part of Fed monetization dry powder is stagnating.

And, as usual we end with our favorite chart, showing total UST holdings by the top 5 world institutions.

 

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Fri, 01/14/2011 - 10:50 | 875837 Sudden Debt
Sudden Debt's picture

Not bad for a private company...

Fri, 01/14/2011 - 11:01 | 875860 financeguru500
financeguru500's picture

Their goal is to keep our economy running at a slow enough pace to where we dont encroach on the world's use of energy, but at the same time to prevent our country from failing.

I strongly believe the growth is limited to energy consumption. If the U.S. was still running at full capacity we be consuming roughly 1/3rd of the worlds oil production. If we were able to do this by printing enough money to keep our economy running 100% then at some point China and the other developed nations would also increase their oil production as they continue to grow. This would result in the world hitting a brick wall in oil consumption vs production which would lead to the immediate collapse of the dollar.

I believe the dollar has not lost value yet because there is no need for it to. The U.S. prints money which keeps the economy afloat which at the same time supports the Chinese economy in its exports. As long as the maximimum energy consumption isn't reached then there is no reason to discontinue the game. You see?

 

Fri, 01/14/2011 - 11:21 | 875900 SheepDog-One
SheepDog-One's picture

Is this post some kind of sarcasm?

Fri, 01/14/2011 - 11:37 | 875948 financeguru500
financeguru500's picture

no sarcasm. Why would you think that I was being sarcastic?

Fri, 01/14/2011 - 14:32 | 876608 Quixotic_Not
Quixotic_Not's picture

In an ethical/moral culture, where the leaders were forthright and executing the Rule of Law without prejudice, you might see some sort of "central" planning such that you hypothesise possible, but we're living in the last days of the 'MeRiKan Empire...

Where it's every man for himself and the banking/political class' MO is rape, pillage and plunder in coordination with other CBs without concern for country -- They could see the collapse that was/is inevitable, and has been for several decades, and They are hoarding as many chairs to themselves as is criminally possible, before the music stops!

Think like Al Capone, but with an Ivy League education and a consortium of corrupt insider networks (aka political parties, corporations, think tanks) where you can somewhat secretly plan your acts against those less prepared, although a lot of the strip mining of the USofA has occurred in broad daylight, all with the consent (i.e. vote) of We the Sheeple, in some sort of twisted nightmare.

They are ALL about survival of the fittest...The Ultimate Ponzi-Debt-Pyramid-Scheme from Hell - The Fraud Bubble.

Fri, 01/14/2011 - 12:10 | 876062 CrazyCooter
CrazyCooter's picture

I think he is new.

financeguru500, follow the content on this site daily for about 3 months. At that point, you should be on board.

CrazyCooter

Fri, 01/14/2011 - 11:34 | 875906 66Sexy
66Sexy's picture

Lets say China dumps treasuries and the FED buys 'em... If the FED is in direct control of the debt, then doesnt that make default easier?

That makes the US taxpayer the CREDITOR. Police power could be used to protect the DEBTOR (the US government) as the CREDITOR can be either killed, imprisoned, stupified, or "reduced".

And as wages remain constant to falling, and price controls on food, gasoline, and rents put into place (the beginning is position limits, fraudclosure clouds on title, iran invasion (oil), CIA heroin distribution, and the fast food corporate dictatorship that insures happy meals are cheaper than buying groceries); the sheep who work 9 to 5 would have no idea what is happening, except from the intellectual class.

The intellectual class can be "bribed" by asset appreciation, through non-risk speculation; as most have front or reverse positions in gold and silver, by simple predictable trends, the middle class can be sustained and the game can continue without disrpution.

Reelect Obama in in 2012 and we'll see astronomical gains in gold and silver after the "moment of doubt" price drops in mid/early 2012 with a substantial challenge from ____. We can speculate for a living, and need not produce or create...anything.

Fri, 01/14/2011 - 11:34 | 875942 financeguru500
financeguru500's picture

Exactly

Fri, 01/14/2011 - 12:06 | 876005 66Sexy
66Sexy's picture

China will bring the solution to oil, 'by necessity'. We skoff at the idea of battery operated vehicles, but.. the initiative will come out of china, and they will modernize and revolutionize the concept of the electric car in everyday life. As the economic pendulum swings and americans face oil prices like europe does, then we will see more alternatives to oil, correlating to the upward price moves of oil.

Again, it will happen 'by necessity'. The price of electric vehicles would become so compettitive (via chinese production), comsumers would gradually move to alternative transportation...

I think oil may itself become obsolete as war becomes a thing of the past, and global unification is acheived via digital infusion into biological organisms for establishing population control; the old threats would become obsolete as well, as simply losing the ability to buy and sell would be motive enough to keep the populace in line... eventually, this control would be re-established as it has been historically, and at a level that would again not be perceived by the population! The NWO concept would be defined by a world without fiat currency, without war, and drastically reduced oil dependence.

Not that i condone such a thing; I would take precautions now.

Fri, 01/14/2011 - 20:52 | 877989 StychoKiller
StychoKiller's picture

The race is on between the Singularity and the Great Implosion -- if the Great Implosion happens first, the Singularity's arrival gets pushed out by decades, maybe even centuries!

Fri, 01/14/2011 - 12:51 | 876252 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

[So] we dont encroach on the world's use of energy

By "we" whome do youe speak for?

Fri, 01/14/2011 - 12:52 | 876254 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

[So] we dont encroach on the world's use of energy

By "we" whome do you speak for?

Fri, 01/14/2011 - 13:10 | 876379 gwar5
gwar5's picture

I agree. It's about resources from West to the East for the 21st century. The real wealth.  

Currencies secondary. We have no money, resources capitulated squid pro quo to the Chinese instead. 

2007 T. Boone Pickens: "The Chinese can't believe we are so dumb that we don't use our own energy resources. Some of them have actually asked me in private if it wasn't really an American plot to sit on our resources only to surprise them later as an economic secret weapon. They just can't believe it. Frankly, neither can I."

 

Fri, 01/14/2011 - 20:55 | 877997 StychoKiller
StychoKiller's picture

Socialist/Progressive thinking is stuck at the grade-school level of "fairness."  An Environmentalist is someone that already owns a cabin in the woods -- combined, we're being led by selfish children!

Fri, 01/14/2011 - 12:07 | 876054 bankonzhongguo
bankonzhongguo's picture

Considering how the Fed orders the Treasury to create money out of thin air (and this is a serious question);

Why can't the Fed simply render the outstanding UST they hold back to the Treasury (the People) and destroy those obligations back to the thin air from once it came?

If you want to talk about the Devil in Debt, it seems like a pretty simple intellectual exercise for the Fed - an tiny agent of the US - to simple nullify some the US debt obligations they have captured under this "economic emergency."

If the US national debt dropped by say $1 trillion overnight, would that not be a pretty good sign that something "good" could happen.  At least the congress would not have to immediately vote on the debt ceiling.  Also, with the whole End the Fed drumbeat, we ought to claw back those illegal POMO profits - good for another $50 billion? - settle AIG and GM exposure.

I am just looking for rainbows with my unicorns.

Fri, 01/14/2011 - 10:55 | 875848 Cash_is_Trash
Cash_is_Trash's picture

It shall be monetized

Fri, 01/14/2011 - 11:02 | 875853 hedgeless_horseman
hedgeless_horseman's picture

The Fed is THE bad bank. 

It worked for GM.

1913-2013

R.I.P.

 

Fri, 01/14/2011 - 11:22 | 875902 living on the edge
living on the edge's picture

1913-2011

Fri, 01/14/2011 - 11:45 | 875976 hedgeless_horseman
hedgeless_horseman's picture

2011...2013...whatever it takes.

Fri, 01/14/2011 - 12:23 | 876119 Boonie
Boonie's picture

First post here.  Been lurking and learning for quite some time now.  Makes the Virginia bill, HJ 557, to study alternative currencies in event of Fed 'breakdown' appear prescient.  VA legislature convened Jan. 12 and we'll see what happens over the next 46 days (length of the legislative session).  I predict nothing, but one must understand what today is in our Old Dominion.

Happy Lee-Jackson Day everyone!

Fri, 01/14/2011 - 20:57 | 878003 StychoKiller
StychoKiller's picture

OTOH, Virginia could pull an Illinois and raise taxes -- not good!

Fri, 01/14/2011 - 10:58 | 875855 Max Hunter
Max Hunter's picture

We expect our now second-largest creditor to realize the game theory balance of leverage (no pun intended) is shifting away from its favor (and to the Fed), and to respond accordingly.

Okay, I give up... What will the response be?

Fri, 01/14/2011 - 12:31 | 876003 OldTrooper
OldTrooper's picture

Poison fish food distributed through their 4300+ clandestine bases scattered throughout the USA (cleverly disguised as Wal-Mart and Sams Club stores).  The shock of losing a pet fish, coming on the heels of losing your job and home, will make the peasants willing to accept their new benevolent Confucian rulers.

Fri, 01/14/2011 - 20:58 | 878008 StychoKiller
StychoKiller's picture

What happen?
Somebody set up us the bomb!
We get signal:
Gentlemen, all your base are belong to us
you are on the way to destruction
what you say!
Give cones change the machine!
You have no chance to survive make your time
take off every sig!
Link a fast ether lord fucking net ascending
for great justice.

Meh.

Fri, 01/14/2011 - 11:03 | 875862 john milton
john milton's picture

He that goes a borrowing goes a sorrowing

 

any chance for another red day??? nooooo...way

Fri, 01/14/2011 - 11:04 | 875866 Whalers
Whalers's picture

So when interest rates inevitably rise (they already are) and those treasury prices fall, who is going to buy those bonds back from the Fed?  And at what loss to tax payers?

Fri, 01/14/2011 - 11:06 | 875868 john milton
john milton's picture

He that goes a borrowing goes a sorrowing

 

any chance for another red day??? nooooo...way

Fri, 01/14/2011 - 11:06 | 875869 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

These criminals are unstoppable. There is no one to challenge them. Politians are bought and paid for. Citizens are fat, apathic and docile. And even people, like Ron Paul, who know what scum the FED are, well, all they do is talk.

If these criminals could be stopped, they would have been by now.

The U.S. is going to implode destroying millions, it didn't take an army to do it, it was all done by a handful of criminal individuals.

Fri, 01/14/2011 - 11:18 | 875894 lead salad
lead salad's picture

Yep.  Most sheeple just keep marching along, unaware.

Fri, 01/14/2011 - 14:30 | 876740 Quixotic_Not
Quixotic_Not's picture

It's actually worse than that.

By continuing to vote for the (D) & (R) Kleptocrats, We the Sheeple have volunteered to be the eggs for the omelet.

Fri, 01/14/2011 - 21:01 | 878011 StychoKiller
StychoKiller's picture

"Do not blame Caesar, blame the people of Rome who have so enthusiastically acclaimed and adored him and rejoiced in their loss of freedom and danced in his path and gave him triumphal processions. ... Blame the people who hail him when he speaks in the Forum of the 'new, wonderful good society' which shall now be Rome's, interpreted to mean 'more money, more ease, more security, more living fatly at the expense of the industrious.'" - Roman statesman Marcus Tullius Cicero (106-43 B.C.)

 

And around and around we go...

Fri, 01/14/2011 - 11:07 | 875872 David99
David99's picture

FED is CRIMINAL

Fri, 01/14/2011 - 11:09 | 875873 Cognitive Dissonance
Cognitive Dissonance's picture

Federal budget deficits and Fed balance sheets don't matter in the quantum physics world of Ponzinomics.

Feel the force Ben, feel the force.

Fri, 01/14/2011 - 11:10 | 875874 EscapeKey
EscapeKey's picture

LOL, so we've got higher than expected inflation, margin pressure, a poor holiday season, and now consumer sentiment is down, and yet the market is green.

What exactly does it take to make the market go down more than (the allowed) 0.2%?

http://www.marketwatch.com/story/jan-umich-consumer-sentiment-surprising...

WASHINGTON (MarketWatch) -- An index of consumer sentiment unexpectedly fell in January, according to the preliminary poll released by Thomson Reuters and the University of Michigan. The index fell to 72.7 from 75.2, compared to expectations of a rise to 76.0

"Unexpected". Right.

 

Fri, 01/14/2011 - 11:10 | 875877 umop episdn
umop episdn's picture

The fed's balance sheet has two sides...

On the right side, there is nothing left.

On the left side, there is nothing right.

Fri, 01/14/2011 - 11:13 | 875884 john milton
john milton's picture

+++++ hah well said..

Fri, 01/14/2011 - 11:22 | 875903 The Third Man
The Third Man's picture

Hahaha! Oh, that is classic!!

Fri, 01/14/2011 - 11:25 | 875912 Cognitive Dissonance
Cognitive Dissonance's picture

Brilliant!

A rousing golf clap from this peanut gallery squatter.

Fri, 01/14/2011 - 11:47 | 875983 hedgeless_horseman
hedgeless_horseman's picture

That is smart, as is your moniker.  You must be an economist with a PhD.

Fri, 01/14/2011 - 11:15 | 875888 breezer1
breezer1's picture

they have no choice but to print. the game was rigged to collapse. the 1st to get the paper wins. when it does someone will step up with a large amount of gold to loan to the collapsed, with terms.

Fri, 01/14/2011 - 11:28 | 875914 DarkAgeAhead
DarkAgeAhead's picture

Hmm, bankers versus China.  I'm actually kind of happy/relieved if the bankers erode China's leverage.

Fri, 01/14/2011 - 21:03 | 878017 StychoKiller
StychoKiller's picture

The Chinese have had civilization for over 3000 years.

Fri, 01/14/2011 - 11:53 | 876014 gloomboomdoom
gloomboomdoom's picture

BUY BUY BUY

This DIP in PMs!!!

I shouldn't have bought at the top... Fu--!!!!

Fri, 01/14/2011 - 12:48 | 876235 gwar5
gwar5's picture

How does the Fed escape if rates rise?

Wipe out

Fri, 01/14/2011 - 13:13 | 876391 davepowers
davepowers's picture

interesting that the bank reserves on the liability side of the FED's balance sheet have started to increase again. Beginning with the end of QE 1 (spring 2010) they actually fell.

Where the FED got the 'money' to continue expanding the asset side of the balance sheet in the face of stagnant reserve growth (which shows up on the liability side of the BS) is interesting.

The FED borrowed it from the US Treasury, who sold treasury paper, lent it to the FED under a 'Supplementary Financing Account.'

According to the FED's balance sheet for the year running from Jan 6, 2010 to Jan 6, 2011, the FED assets increased $194 billion, due overwhelmingly to an $234 billion increase in US Treasury notes/bonds (via QE 1.5 and QE 2). 

This was funded on the liability side by an increase in the US Treasury, Supplemental Financing Account of exactly $194 billion.

The FED describes this SFA as "U.S. Treasury, supplementary financing account: With the dramatic expansion of the Federal Reserve's liquidity facilities, the Treasury agreed to establish the Supplementary Financing Program with the Federal Reserve. Under the Supplementary Financing Program, the Treasury issues debt and places the proceeds in the Supplementary Financing Account."

So, for the past several months, the FED has been buying US treasury paper using money borrowed from the US Treasury, who raised it by selling US treasury paper. 

 

 

 

 

Fri, 01/14/2011 - 13:20 | 876417 davepowers
davepowers's picture

The Fed's balance sheet is at http://www.federalreserve.gov/releases/h41/current/h41.htm

It has now been updated thru Jan 13th.

For that year Fed assets grew by $207 billion, largely from US treasury paper additions. $7 billion came from reserve growth and $194 billion of the other $200 billion came from borrowing from the Treasury.

Since the Supplementary Financing Account 'circle jerk' appears to be capped at $200 billion, it would explain why bank reserve growth is suddenly accelerating ($62 billion in the week from Jan 5, 2011 to Jan 13, 2011 alone.

Bank reserve growth should continue to raise to provide the balance sheet wherewithal for the rest of QE 2.

Unless the FED goes back for more borrowings from the Treasury.

Fri, 01/14/2011 - 14:00 | 876614 JonNadler
JonNadler's picture

so the FED has a trillion, Japan and China have two trillion and who has the rest? The other ten trillion?

The Social Security "trust fund"? ha ha ha

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