European Central Bank

The Federal Reserve's Balance Sheet: An Update

By using our balance sheet, the Federal Reserve has been able to overcome, at least partially, the constraints on policy posed by dysfunctional credit markets and by the zero lower bound on the federal funds rate target. By improving credit market functioning and adding liquidity to the system, our programs have provided critical support to the financial system and the economy. Moreover, we have carried out these programs responsibly, with minimal credit risk and with close attention to the exit strategy. Our activities have resulted in substantial changes to the size and composition of our balance sheet. When the economic outlook has improved sufficiently, we will be prepared to tighten the stance of monetary policy and eventually return our balance sheet to a more normal configuration. - Chairman (or is that Printman) Ben Bernanke

smartknowledgeu's picture

I do not profess that the main structural arguments of the following essay are mine. Rather they belong to a rather famous former Chairman of the US Federal Reserve named Alan Greenspan as noted in his rather seminal 1966 essay titled “Gold and Economic Freedom”. However, I have taken the specific arguments of that very prescient essay and modified and reinterpreted them to fit into the contemporary situation of our current global and financial crisis (that it its core, is a monetary crisis).

Medley On The Real Dollar Story

"The Europeans are getting worried. As the euro flirts with the $1.50 level not seen since mid-2008, the Eurozone's economic and monetary authorities are mulling their first unequivocal verbal protest against the currency's appreciation in five years. Why now? Because Eurozone officials have lost trust in the commitment of US President Barack Obama's administration to the "strong dollar" policy. This loss of trust has reached a point where some even suspect the US has reached an accommodation with the Chinese whereby Beijing turns a blind eye to dollar depreciation in return for a moratorium on Washington's public calls for renminbi appreciation." - MGA

George Washington's picture


A round-up of arguments for looking at gold as a reasonable investment, including: 1) China; 2) declining production; 3) inflation; 4) deflation; 5) global short-term interest rates; 6) uncertainty and distrust in government; and 7) flight to safety.

Raymond Shaw's picture

Wednesday UK and Europe highlights. Coverage of the mayhem in the Asian markets today. Since I wrote the post, Indian market indices opened to the downside despite upbeat industrial output data, seems likes the standard theme today across Asia. Article will be updated to keep up with data releases (BOE inflation report, etc). More inside as usual.

Bernanke Prepares For Congressional Grilling

As Bernanke heads to Congress to defend the Fed's Independce, he releases this WSJ Op-Ed:

The depth and breadth of the global recession has required a highly
accommodative monetary policy. Since the onset of the financial crisis
nearly two years ago, the Federal Reserve has reduced the interest-rate
target for overnight lending between banks (the federal-funds rate)
nearly to zero. We have also greatly expanded the size of the Fed’s
balance sheet through purchases of longer-term securities and through
targeted lending programs aimed at restarting the flow of credit.

Relative Central Bank Balance Sheets And Currency Races To The Bottom

Zero Hedge posts a weekly update of the Federal Reserve's bloated balance sheet as we believe it is critical to visualize the spiraling debt burden at our "central bank" especially since any day now the Fed will begin purchasing treasury securities outright in defiance of Geithner's lies to the contrary (China can't sell its planned Bills: at 0.925 Bid-To-Cover does anyone honestly think they will instead prefer to buy dollar denominated toiler paper and not roll out their own QE version momentarily?). As Cornelius pointed out earlier the dollar can't find a floor these days: rerisking is rampant the argument goes and that kills the greenback. However, the circular logic also holds: create dollar pain (by whatever means possible) and thus stimulate the market, Larry Summer's all time wet dream (would anyone like to wager that when hedge fund positional disclosure become mandatory DE Shaw will fight until the bitter end). And in this simplistic trilateral world (have fun gaming the yuan), the strength of any one of the trio in the dollar-yen-euro triangle results in implicit weakness of the other two. And vice versa. Yet aside from major broker-dealers who are axed in a given equity direction and thus have all the incentive to impact underlying currencies, is it possible that specific governments may manipulate currency strength via central bank positioning? Why yes.

Daily Highlights: 6.22.09

  • Asian stocks rose, led by automakers and financial companies,
  • European Central Bank’s Ewald Nowotny said the bank is likely to keep interest rates steady.
  • European stocks fell as the World Bank said the global recession will be deeper than it predicted in March
  • Federal Reserve is considering creating a utility to replace the Wall Street banks that handle US repo market transactions.
  • German business confidence increases in June, signaling an end in recession.
  • Unemployment and consumer debt are reducing home ownership by would-be buyers.
  • US airlines get thumbs down from frequent travelers.
  • World Bank predicted that the global economy will shrink 2.9% this year.
  • Carlsberg A/S is close to selling its brewery in Braunschweig, Germany.