Federal Reserve

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 $1.13 trillion, implying that the Fed's DV01 continues to increase on a daily basis with every single POMO, as we have been pointing out since last summer, and which the Fed decided to address last week by changing its "accounting" rules and guaranteeing its assets can never decline. The differential between the US and China is now $233 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. Alternatively, maybe someone will finally readjust the UK's holdings to properly reflect what could very likely be simply Chinese debt accumulation.

A must have Wall Chart for Super Dole 2011...

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.

The vast majority of Americans, including many of those who believe that they are "educated" about the Federal Reserve, do not really understand how the Federal Reserve really makes money for the international banking elite. Many of those opposed to the Federal Reserve will point to the record $80.9 billion in profits that the Federal Reserve made last year as evidence that they are robbing the American people blind. But then those defending the Federal Reserve will point out that the Fed returned $78.4 billion to the U.S. Treasury. As a result, the Fed only made a couple billion dollars last year. Pretty harmless, eh? Well, actually no. You see, the money that the Federal Reserve directly makes is not the issue. Rather, the "magic" of the Federal Reserve system is that it took the power of money creation away from the U.S. government and gave it to the bankers. Now, the only way that the U.S. government can inject more money into the economy is by going into more debt. But when new government debt is created, the amount of money to pay the interest on that debt is not also created. In this way, it was intended by the international bankers that U.S. government debt would expand indefinitely and the U.S. money supply would also expand indefinitely. In the process, the international bankers would become insanely wealthy by lending money to the U.S. government.

At this point the weekly updates of the Fed's balance sheet are becoming more or less an autopilot issue: each week the Fed will add between $25 and $30 billion of Treasuries, with the only real question becoming how much mortgages are being prepaid, and what is the incremental liquidity boost due to the weekly change in excess reserves. But before getting into those, here is a broad look at how the Fed's balance sheet looked as of close today (including today's $6.8 billion POMO).

I bet that either you, or someone that you may know, weren't privvy to the TARP 2.0 tax payer funded bailout right under your noses, and the government released the evidence buried in one of over a dozen spreadsheets featuring over 70,000 transactions, with the incriminating one featuring over 340,000 cells and over 10,000 transactions. We at BoomBustBlog suppose they thought no one would be good enough at Excel to ferret it out, or maybe they believed we were all just numb over hearing a trillion here, a trillion there. You know, after a while it starts to add up to real money.

With the Federal Reserve now actively participating in capital markets, it should be noted that just like every other asset manager, the Fed has to be held accountable for its trading efficacy. After all, the Treasury takes every opportunity to remind the US public how courtesy of record amounts of new government debt, it has managed to make "profits" on its assorted investments, which are merely transfers of risk from one entity to another, and the "another" being the US taxpayer, although not directly, but indirectly via the now ludicrous amount of US debt which will never be repaid. Which is why the US taxpayer may want to know that in just the most recent POMO schedule - that from early November to December - the Federal Reserve has lost $2.4 billion in taxpayer capital by its mistimed market operations, primarily due to the recent rise in interest rates. This is $2.4 billion that has not evaporated, but instead has been transferred to Primary Dealers under the "profit on trade" category. This is also money that will be used to determine, and fund, banker bonuses.

The Federal Reserve is America's Fourth Branch of government and Ben Bernanke is, in effect, the economic czar of the country. The Fourth Branch? The Fed and the Fed alone has the power to determine how much money should be in the economy. Such vast power over our lives makes the Fed a de facto fourth branch of government. Yet, its powers are not defined by the Constitution, and neither the chairman nor senior officials are elected by the people.

Now that the Fed is firmly number one in the world in terms of US Treasury holdings (actual marketable paper, not the mythical paper held by various insolvent trusts) with $926 billion in Treasury paper post today's POMO, providing Fed balance sheet updates seems like a moot point. After all, most people by now realize how this will end. And once Trichet starts monetizing debt too (not if but when, which will be followed by Japan, Switzerland, and China), the global Weimer endgame will come quickly. But for now, for the sake of tradition, here is the weekly update of the Fed's most recent balance sheet.

The Federal Reserve's VISA credit card account offers a rare glimpse into the inner workings of the secretive Fed. This leaked transcript of the Federal Reserve's VISA credit card account provides a treasure-trove of insight into the Fed's recent actions. Nothing reveals a person or institution quite so indelicately as a list of credit purchases.

The Federal Reserve is an example not just of run-of-the-mill hubris but of the far more profound Pathology of Power. The rule of law has been supplanted in the U.S. by self-serving propaganda campaigns serving State and financial Elites: this is the Pathology of Power. The Federal Reserve is an instructive example because it is so blatant. Despite the dearth of evidence that goosing the stock market actually generates a "wealth effect" which "trickles down" from the top 10% who own the vast majority of equities to the bottom 90%, the Fed has waged a ceaseless propaganda campaign claiming this policy goal is now essential for the nation's well-being. No mention of its positive effect on Wall Street; cui bono (to whose benefit?) indeed.

Thanks a LOT ...

"Bring it on: let’s watch another wave of monetary policy history crash over us as you pull out the hammer and close your lips around another batch of coffin nails – ready to grasp the first nail to drive into the soon sealed coffin of Keynesian economics and then another in the coffin of fractional reserve banking and perhaps another into the coffin of fiat currencies. Oh, it’s all the same coffin? Fine – it will go quicker that way. Just remember to save a few nails for the millions of coffins of pensions and savings: for all of the responsible people who didn’t join in on the credit bonanza of the last few decades and spent their lives scrimping and saving. Let’s devalue their savings and nuke the US currency rather than go the quicker and more just road of default, shall we? Extend and pretend is the Fed’s motto, after all. Just watch out for those new crazies on the Hill that are starting to bang on the doors of the Eccles building. Will they break in and cart you off before you’ve finished your final magnum opus – the end of the US dollar and the US economy? Bring it on, Ben: take us that much nearer to the denouement of 100 years of US Federal Reserve. There won’t be a second hundred years. The final countdown starts now. " Saxo Bank

As of October 27, the Fed's balance sheet was $2.3 trillion, of which the $837 billion in Treasury debt is of course a fresh all time record, soon to be eclipsed by the tens of billions added weekly as per QE2. There is roughly $13 billion left under the current POMO program ending in the second week of November, which by then will be supplemented by a new and improved almost daily POMO. In the past week, bank excess reserves increased by $16 billion after declining by $34 billion the week prior: total reserves stood at $1,008 billion, up from $993 billion the week before. And once again foreign holdings of agency/MBS debt dropped to a new 3 year low, dumping over $100 billion agencies in the Fed's custodial account over the past two months. Last, we take a look at the one topic that will soon be the most talked about subject by every pundit in the econosphere: the duration distribution of Fed holdings.