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"Other Assets" Of $210 Billion Is Now The Fed's Third Largest Asset

Tyler Durden's picture





 

Below is a list of the 4 largest Federal Reserve asset category by notional as of today:

  • Treasurys:  $1,655,889 million
  • Mortgages: $883,627 million
  • Other assets: $209,863 million
  • Agency debt: $79,283 million

Quietly, the Fed's Other Assets have overtaken Agencies, and are now the Fed's third largest asset category and about four times the total Fed capital of $55 billion. We have written about these "other assets" in the past; we will likely write about them in the future again, for the simple reason that the chart showing the Fed's notional holdings in this category correlates quite clearly with the parabolic Greek unemployment rate.

Finally, here is the semi-circular definition of Other Assets provided by the H.4.1:

Includes other assets denominated in foreign currencies, which are revalued daily at market exchange rates, and the fair value adjustment to credit extended by the FRBNY to eligible borrowers through the Term Asset-Backed Securities Loan Facility.                                                    

Who knew that in addition to being a master of borderline Congressional perjury, the Fed was so adept at tautology: other assets are, well, other assets.

But at least we know something about the subset of the set that contains the set as a subset of itself (Bertrand Russell's head just exploded): it contains "other assets denominated in foreign currencies."

Foreign currencies: this means foreign assets. Which perhaps answers a long-running question. Recall that in March we revealed that, based on the Fed's own admission, it was monetizing not only US debt, but foreign debt as well (much like what the BOJ is hoping to do as well in its imminent "forceful" easing).

  • *DUDLEY: FED HOLDS OVERSEAS SOVEREIGN DEBT TO MANAGE RESERVES

Wait, wait, it's in the Fed's charter to buy foreign bonds?

Yup. In the Chairman's own words:

Central banks typically hold a variety of assets, and the composition of assets on the cen- tral bank's balance sheet offers another potential lever for monetary policy. For example, the Federal Reserve participates in all segments of the Treasury market, with most of its current asset holdings of about $650 billion distributed among Treasury securities with ma- turities ranging from four weeks to 30 years. As an important participant in the Treasury market, the Federal Reserve might be able to influence term premiums, and thus overall yields, by shifting the composition of its holdings, say, from shorter- to longer-dated securities. In simple terms, if the liquidity or risk characteristics of securities differ, so that investors do not treat all securities as perfect substitutes, then changes in relative demands by a large purchaser have the potential to alter relative security prices. The same logic might lead the central bank to consider purchasing assets other than government securities, such as corporate bonds or stocks or foreign government bonds. (The Federal Reserve is currently authorized to purchase some foreign government bonds but not most private-sector assets, such as corporate bonds or stocks.)

One thing, however, that was unclear is where on its balance sheet the Fed was lumping these "overseas sovereign debt" purchases.

Now we know. And more importantly we know the maximum possible size (until such time as the Fed provides an actual break down of precisely what is in "other assets") of said foreign bond holdings: $209 billion and rising parabolically.

Perhaps, with Europe supposedly "stable" due to the recent stability of its sovereign bond markets, it is time to ask the Chairman just how responsible the Fed has been in the past several months for said stability, courtesy of expanding its own balance sheet, since the ECB continues to play coy with the Spanish PM, but where the completely unused OMT is supposed to provide some mystical backstop to everything.

Or, to cut to the chase, how many tens of billions of Spanish, Italian, French, Japanese and other sovereign bonds does the Fed currently hold?

 


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Thu, 12/06/2012 - 21:30 | Link to Comment nmewn
nmewn's picture

Black Holes.

Thu, 12/06/2012 - 21:34 | Link to Comment I think I need ...
I think I need to buy a gun's picture

DO OTHER ASSETS INCLUDE THE GLD?

Thu, 12/06/2012 - 21:36 | Link to Comment kliguy38
kliguy38's picture

Try SnP contracts

Thu, 12/06/2012 - 21:43 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

Millions?

  • Treasurys: $1,655,889 million
  • Mortgages: $883,627 million
  • Other assets: $209,863 million
  • Agency debt: $79,283 million
  • I think we are off a half dozen zeros....

    Thu, 12/06/2012 - 21:57 | Link to Comment LetThemEatRand
    LetThemEatRand's picture

    Not sure what you mean that we are off six zeros.  The first number is 1.6 million million.  One million million = 1 trillion.  To accumulate one trillion dollars, you have to take one million millionaires, hire a few of them at Treasury, buy the President and Congress, and then steal the rest from the hundred million or so middle class.  Voila.  

    Thu, 12/06/2012 - 22:04 | Link to Comment Big Slick
    Big Slick's picture

    "$209 billion and rising parabolically"

    That plot does not look parabolic.  I'd call it linear.  Mischaracterizations like that throw water on otherwise great analysis.


    Thu, 12/06/2012 - 22:09 | Link to Comment LetThemEatRand
    LetThemEatRand's picture

    Take it back a few decades and it's parabolic.

    Thu, 12/06/2012 - 22:38 | Link to Comment jomama
    jomama's picture

    haha, yeah, i wonder what that r^2 looks like.  sure as shit ain't anything close to 1.000

    Fri, 12/07/2012 - 01:10 | Link to Comment Dingleberry
    Dingleberry's picture

    ok....instead of parabolic say the assets held went up 500% in a few years....notice the trend line?

    Fri, 12/07/2012 - 02:36 | Link to Comment fourchan
    fourchan's picture

     

     

    •Treasurys: $1,655,889,000,000

    •Mortgages: $883,627,000,000

    •Other assets: $209,863,000,000

    •Agency debt: $79,283,000,000

     

    buy your ounces people. this creature is the bubble of all bubbles.

    Fri, 12/07/2012 - 08:52 | Link to Comment DavidC
    DavidC's picture

    Bubble? I see no bubble...

    [\SARC]

    DavidC

    Thu, 12/06/2012 - 21:50 | Link to Comment kliguy38
    kliguy38's picture

    scratch that ......try hookers and blow instead

    Thu, 12/06/2012 - 21:55 | Link to Comment knukles
    knukles's picture

    swap lines, NO gold, S&P contracts, gold futures, puts, PIIGGY debt, miscellaneous unrated bad ass nte vaule zero horseshit

    what have I missed?

    Fri, 12/07/2012 - 02:28 | Link to Comment fourchan
    fourchan's picture

    The fed is a bubble.

    Fri, 12/07/2012 - 02:48 | Link to Comment prains
    prains's picture

    I think that is called a Fubble

    Thu, 12/06/2012 - 21:44 | Link to Comment Glass Seagull
    Glass Seagull's picture

    Nah, Fed and BOE allowing us to do the heavy-lifting/GLD buying for them.  They get the benefit of swapping the gold out of the physical custodian stores though. 

    This is how the Fed and BOE are getting the physical gold back. 

    Fri, 12/07/2012 - 01:50 | Link to Comment Daily Bail
    Daily Bail's picture

    For anyone who hasn't seen this.

    This is actually an excellent song, no joke.

    Fuck The Fed - A Central Bank Love Song
    Thu, 12/06/2012 - 21:30 | Link to Comment ACP
    ACP's picture

    Charter, Constitution, whatever.

    Thu, 12/06/2012 - 21:32 | Link to Comment AUD
    AUD's picture

    What constitutes Fed capital?

    Thu, 12/06/2012 - 21:56 | Link to Comment stocktivity
    stocktivity's picture

    How did this fuck Bernanke get this kind of power?

    Thu, 12/06/2012 - 22:38 | Link to Comment Real Estate Geek
    Real Estate Geek's picture

    Power is seized, not grannted.

    Sun Tzu, I believe

    Fri, 12/07/2012 - 08:53 | Link to Comment DavidC
    DavidC's picture

    Obama returned it to him after Bush...

    DavidC

    Thu, 12/06/2012 - 22:00 | Link to Comment knukles
    knukles's picture

    Lots and lots of imaginary electronic zeros, an old cigar box of razor stubble, 5 of Alexander Hamilton's toenail clippings, a small sack of Hitler's ashes, an autographed Linotype picture of Izaak Elchanan Rothschild and a cardboard box of tags illegally removed form pillows and seat cushions.

    Booyah motherfuckers

    Thu, 12/06/2012 - 22:03 | Link to Comment HurricaneSeason
    HurricaneSeason's picture

    Bridges, swampland and baseball and pokemon cards. Hundreds each of Micky Mantle and Babe Ruth that are worth 10s of billions of dollars each to the right buyer.

    Thu, 12/06/2012 - 22:05 | Link to Comment Whoa Dammit
    Whoa Dammit's picture

    "What constitutes Fed capital?"

    A nod or a wink to a blind horse.

    Thu, 12/06/2012 - 22:31 | Link to Comment AUD
    AUD's picture

    If this is the case, then the Fed would have to be the most leveraged bank on earth. Total liabilities a couple of trillion, total assets a nod or a wink.

    So why accept its credit as if it were the ultimate extinguisher of debt? As if it were money?

    Thu, 12/06/2012 - 22:45 | Link to Comment HurricaneSeason
    HurricaneSeason's picture

    "My fellow Americans, I'm pleased to tell you today that I've signed legislation that will outlaw Russia forever. We begin bombing in five minutes." Ronald Reagan-August 11 1984 

    The Bernank can do it too. Ask Saddam and Mommar that wanted to try something different.

    Fri, 12/07/2012 - 01:07 | Link to Comment TheProphet
    TheProphet's picture

    Go back and read the Guggenhiem report Tyler posted herein a few months ago. The Fed IS far and away the most leveraged financial organization on the planet.

    Interest rates are not going to rise for at least 8 years, likely much longer.

    If the Fed accomplishes their goal of $4 trillion in monetization, the Fed balance sheet will be levered close to 100:1, and the average duration of securities on that balance sheet will be more than 10 years. At that point, quite literally a shift of a few basis points in interest rates would render the Fed insolvent from one moment to the next.

    Have a nice day!

    Fri, 12/07/2012 - 08:54 | Link to Comment DavidC
    DavidC's picture

    And I'm guessing the Fed has its exit plan worked out.

    [\SARC]

    DavidC

    Thu, 12/06/2012 - 21:35 | Link to Comment Water Is Wet
    Water Is Wet's picture
    Cop: And was there anything of value in the car?
    DUDE: Huh? Oh. Yeah. Tape deck. Couple of Creedence tapes. And there was a, uh. . . my briefcase.
    Cop: In the briefcase?
    DUDE: Papers. Just papers. You know, my papers. Business papers.

    I don't know why. That just seemed relevant.
    Thu, 12/06/2012 - 21:35 | Link to Comment Debtless
    Debtless's picture

    Other assets like, um politicians?

    Fri, 12/07/2012 - 04:12 | Link to Comment spdrdr
    spdrdr's picture

    When I was young and illiterate, I thought that "assets" were young, female donkeys....

     

    Thu, 12/06/2012 - 21:36 | Link to Comment IndicaTive
    IndicaTive's picture

    There's gold in there somewhere.

    Thu, 12/06/2012 - 21:51 | Link to Comment CH1
    CH1's picture

    Honestly, I think they'll eventually declare bankruptcy.

    Then they'll start over with a new fiat game. Different front companies/names, a worse structure, but a return to shearing the same stupid sheep.

    Thu, 12/06/2012 - 22:33 | Link to Comment jomama
    jomama's picture

    the classic new american sham

    Fri, 12/07/2012 - 14:04 | Link to Comment Kobe Beef
    Kobe Beef's picture

    Of course, there were two before the Fed. Where's Andrew Jackson when you need him?

    Thu, 12/06/2012 - 21:36 | Link to Comment Its_the_economy...
    Its_the_economy_stupid's picture

    $209863 million?

     

    Thu, 12/06/2012 - 21:36 | Link to Comment max2205
    max2205's picture

    A fucking lot!

    ECU china and USA each pointing guns at each others head while masterbaiting each other

    Thu, 12/06/2012 - 21:37 | Link to Comment Darkness
    Darkness's picture

    Is parabolic your favorite word? There are some great synonyms for it out there, just a thought. 

    Thu, 12/06/2012 - 21:48 | Link to Comment IndicaTive
    IndicaTive's picture

    Such as?

    Thu, 12/06/2012 - 22:01 | Link to Comment knukles
    knukles's picture

    WOW!
    Holy Shit!
    Oh My God!
    You gotta be kidding me!

    Fri, 12/07/2012 - 00:14 | Link to Comment Schmuck Raker
    Schmuck Raker's picture

    Indicative is right:

    Thesaurus Adj. 1. parabolic - resembling or expressed by parables
    parabolical   2. parabolic - having the form of a parabola
    parabolical rounded - curving and somewhat round in shape rather than jagged; "low rounded hills"; "rounded shoulders"
    But thanks for your negative contribution anyway. [Kudos, Knuckles. Don't forget "Holy Bejeebus", and "Fookin' 'Ell.]
    Thu, 12/06/2012 - 21:38 | Link to Comment e-man
    e-man's picture

    Other Assets = whatever other crap C, GS, JPM, MS and BAC used as collateral to stay above water.

    Thu, 12/06/2012 - 21:40 | Link to Comment Crtrvlt
    Crtrvlt's picture

    No doubt taken off the hands of foreign subsidiaries of us banks, some well connected hedgies and of course duetche bank all at par. Bank bailouts forever. But of course many of the people that work at these institutions consider themselves hard working free market pure capitalists who deserve every dollar they "earn"

    Thu, 12/06/2012 - 21:40 | Link to Comment Vagabond
    Vagabond's picture

    They are collecting all sorts of worthless bonds for the great vaporization.

    Thu, 12/06/2012 - 22:07 | Link to Comment HurricaneSeason
    HurricaneSeason's picture

    They started with about half a trillion before the great farce. I'm thinking they're goint to push away from the table before it hits ten trillion, maybe before 5 trillion. Someone might accuse them of cheating if the pot gets too high.

    Thu, 12/06/2012 - 21:39 | Link to Comment Nid
    Nid's picture

    Which category records the Short VIX Futures?

    Thu, 12/06/2012 - 21:42 | Link to Comment Its_the_economy...
    Its_the_economy_stupid's picture

    Economy or no economy, people still gotta hang a rat. Gotta get some t.p. somewhere.

    Thu, 12/06/2012 - 21:42 | Link to Comment fonzannoon
    fonzannoon's picture

    Does it matter? They don't ever have to mark them to market right?

    A small part of me could see those other assets being Maple leafs, kruggerands and credit suisse bars. Then, when on the border of hyperinflation Bernak comes out with a pile of bullion and grabs his balls and yells "How you like me now!!!"  That would be something.

    Thu, 12/06/2012 - 22:40 | Link to Comment BidnessMan
    BidnessMan's picture

    I really am Laughing Out Loud! You made my evening

    Thu, 12/06/2012 - 21:48 | Link to Comment SmittyinLA
    SmittyinLA's picture

    they're buying FRE FNM FHA paper at face value-in a round about way (it was collateral) , a housing crater is coming, America is going to eat that bad paper and pay Mexicans to breed in them foreclosures.

     

    O wait we already did that, O this is that low life EU subprime paper too, for all the people that coudn't get an Ameriquest loan.

    Thu, 12/06/2012 - 21:48 | Link to Comment LongSoupLine
    LongSoupLine's picture

    It's a simple 3 step process at this point:

     

    1) Audit the Fed

    2) Arrest all involved for crimes against the United States

    3) Convict and carry out the punishment for High Treason.

    Thu, 12/06/2012 - 22:02 | Link to Comment knukles
    knukles's picture

    Hah ha ha ha
    So simple a cave man could do it.

    Good luck

    Thu, 12/06/2012 - 22:22 | Link to Comment Tsar Pointless
    Tsar Pointless's picture

    So that means a cave man would be more advanced than our modern-day Average Amerikkkan.

    Sounds about right to me.

    Let's get ready for some football, bitchez!

    http://www.post-gazette.com/stories/sports/steelers/tomlin-names-roethli...

    And, well, not for hockey.

    http://www.post-gazette.com/stories/sports/penguins/nhl-lockout-negotiat...

    Happy Fucking Holidays!

    Thu, 12/06/2012 - 22:08 | Link to Comment HurricaneSeason
    HurricaneSeason's picture

    Ron Paul is changing in the phone booth at this moment.

    Thu, 12/06/2012 - 21:54 | Link to Comment chump666
    chump666's picture

    It is revolting that the NY Fed has an infinity FX swap line with the ECB.  Y'know Obama you f*cking ignorant fool, on your watch you have an unelected rogue governing body i,e the Fed -  funding every crony capo on the planet.  Nice work, guillotine worthy, for real.

     

    Thu, 12/06/2012 - 22:08 | Link to Comment fonzannoon
    fonzannoon's picture

    you are being a bit harsh chump it is clearly all explained right here.

    http://www.youtube.com/watch?v=n0NYBTkE1yQ

    Thu, 12/06/2012 - 22:28 | Link to Comment chump666
    chump666's picture

     Bernanke not listing the CB banks!!!  FX wires once a month the NY Fed lists its dealings with the ECB, usually about 200-500million a month.  Infinity. As if the ECB (and Euro banks) with the crappiest collateral you could have want can then pay the Fed back! 

    Could be one of the reasons that the FX markets have had volatility almost completely wipe-out.  In that sense, yes, FX now is completely a central planned fixed price market, bought and sold via CB's.  Whether they could pull this off 100% in the stock market...

    Fri, 12/07/2012 - 02:27 | Link to Comment Dr. Engali
    Dr. Engali's picture

    Fucking Bawney Fwank's ass was puckering with that line if questioning. He couldn't cut him off quick enough.

    Thu, 12/06/2012 - 23:54 | Link to Comment alfred b.
    alfred b.'s picture

     

        I've said it before:  the evil trio of Gaithner,  Barnank and diamon are running the show!   The prez and most other politicians are simply accessory to fraud and corruption for funding and  political gains!

        Time to take 'm down.

    Buy physical gold and silver!

     

    Thu, 12/06/2012 - 21:55 | Link to Comment Cursive
    Cursive's picture

    Just like with HFT/algos, this story will appear on BBG in another year or two.

    Thu, 12/06/2012 - 22:02 | Link to Comment NotApplicable
    NotApplicable's picture

    2010 shall be remembered as The Year of the Great Restraint.

    Thu, 12/06/2012 - 22:07 | Link to Comment smart girl
    smart girl's picture

    Propping up the Stock.

    Thu, 12/06/2012 - 22:07 | Link to Comment Tsar Pointless
    Tsar Pointless's picture

    One word: Stocks.

    Duh. Winning! (Or, are we past that phrase now?)

    Thu, 12/06/2012 - 22:16 | Link to Comment jomama
    Thu, 12/06/2012 - 22:10 | Link to Comment HurricaneSeason
    HurricaneSeason's picture

    Thank God December 21st is almost here. I can't believe the Mayans saw this coming. No wonder they sacrificed their bankers. Their God was happy, but not now.

    Thu, 12/06/2012 - 22:22 | Link to Comment Everybodys All ...
    Everybodys All American's picture

    Is it their mandate to save sovereigns in Europe and at the same time pass on the responsibility to the American tax payer? Nope. End the Fed and jail these criminals.

    Thu, 12/06/2012 - 22:25 | Link to Comment nmewn
    nmewn's picture

    So we got at least two Fed assholes hangin on my every word.

    Good.

    Let me splain myself. You are a merely a conveyance of lawfully produced property to others in the political/oligarch classes who did not earn it.

    Nothing more, nothing less...a tool.

    Thu, 12/06/2012 - 22:25 | Link to Comment conspicio
    conspicio's picture

    Keep an eye on Maiden Lane, bitchez. Perhaps more than MBS there.

    Thu, 12/06/2012 - 23:19 | Link to Comment Seasmoke
    Seasmoke's picture

    doesnt their 99-year rule of theft lease , come to a close in 2013......BYE BYE !

    Fri, 12/07/2012 - 02:28 | Link to Comment Dr. Engali
    Dr. Engali's picture

    No. There is no end date in the fed charter. They are around to plunder and steal as long as congress wants them around , since it takes an act of congress to dissolve the fed.

    Thu, 12/06/2012 - 22:39 | Link to Comment tbd108
    tbd108's picture

    The nice thing is that when the times comes, they will all go to hell together.

    Thu, 12/06/2012 - 22:41 | Link to Comment 1eyedman
    1eyedman's picture

    it truly is amazing what you can do when you print your own money.   fed buys foreign bonds, keeping rates in italy spain france acceptable....fx fluctuation? no worries, just do some fx swaps and drive that euro back up...and it goes in circles and circles....

    but at some point as the numbers become not just surprisingly large, but fantastic and cease to be real or have an impact on markets.  but of course the fed is allowed to buy anything it wants.  it could litereally monetize every asset under the sun...which may be the plan..it owns everything, and we have fiat....but more realistically-- what bizarro 'efforts' will a cornered fed do to keep the illusion alive?   

    it was eur/usd....now jpn/usd....central bank swap/repo maneuvres to keep things balanced.....but it used to be that  supply and demand decided the price of assets/currency/bonds not a committee, but now we know better, yes comrade?

    Thu, 12/06/2012 - 23:11 | Link to Comment devo
    devo's picture

    Pretty sure the "other" category has a few million shares of Apple after this morning.

    Thu, 12/06/2012 - 23:47 | Link to Comment Stuck on Zero
    Stuck on Zero's picture

    Do "other assets" include California and Illinois State bonds and Detroit Municipal bonds?

     

    Thu, 12/06/2012 - 23:53 | Link to Comment Almost Solvent
    Almost Solvent's picture

    If only. They're a shitload of scratch-off tickets from multiple state lotteries.

    The ultimate hedge since you can hold on to them for book value until someone actually scratches them off to see if you're a winner.

    Thu, 12/06/2012 - 23:59 | Link to Comment Schmuck Raker
    Schmuck Raker's picture

    "... correlates quite clearly with the parabolic Greek unemployment rate."

    HOLY SHIT! Bernanke is hoarding unemployed Greeks*!?!

    "Hey, hey. The [Bernanke] is trying to corner the market."

    - "[He] knows something."

    - "Let's get in on it."

    *FCOJ

    Fri, 12/07/2012 - 00:26 | Link to Comment hairball48
    hairball48's picture

    Fed capital = shit paper

    Fri, 12/07/2012 - 01:08 | Link to Comment sbenard
    sbenard's picture

    We're toast!

    Fri, 12/07/2012 - 01:09 | Link to Comment ghostfaceinvestah
    ghostfaceinvestah's picture

    spoos

    Fri, 12/07/2012 - 01:12 | Link to Comment The Duke of New...
    The Duke of New York A No.1's picture

    That's ALOT of TUNGSTEN!.

    Fri, 12/07/2012 - 02:23 | Link to Comment resurger
    resurger's picture

    Wait untill the "Other Assets" will be an entire foreign stock exchanges and soverign bonds ...

    Fri, 12/07/2012 - 02:55 | Link to Comment chancee
    chancee's picture

    Don't forget about 50 billion in ES futures contracts

    Fri, 12/07/2012 - 03:28 | Link to Comment q99x2
    q99x2's picture

    Tautology is what made Chauncy Gardener appear to be so smart. Hey it worked for him why not for the Bernank.

     

    Fri, 12/07/2012 - 06:23 | Link to Comment London Banker
    London Banker's picture

    This is a bit silly.  All central banks hold reserves in the form of sovereign debt securities in the dominant reserve currencies.  A chart showing foreign central bank holdings of US Treasuries would probably show a similar - or even more marked - upward trajectory as US issuance of Treasuries has massively surged since 2007 with the explosion of the federal deficit. 

    Yes, the Fed holds euro- and yen-denominated government debt.  Frankly, I'm relieved that their exposure to Agencies is falling as a proportion of their asset mix.  Greece may be a cesspool of corruption, but is still better than Fannie and Freddie.

    Fri, 12/07/2012 - 06:26 | Link to Comment Melody7773
    Melody7773's picture

     I really liked the comment about December,21=) But to be honest, I am so angry, this is such a shame for Americans to have people like we do have rulling our country.

  • Treasurys: $1,655,889 million
  • Mortgages: $883,627 million
  • Other assets: $209,863 million
  • Agency debt: $79,283 million
  • This is just unacceptable. You know what, I like how they call it: Other assets. I am just out of words. Let me repeat myself: This is a big shame for  Americans. We are only left to hope for the best now( bu what can we hope for with news like this one). Good luck to all of us, it was  Melody from PaydayLoans @ online company.

    Fri, 12/07/2012 - 07:16 | Link to Comment bobbydelgreco
    bobbydelgreco's picture

    this is a hint of essence of ben dollar devaluation if ben & his succesors can pull it off you zh pm lovers will win; but as time goes on it will get tougher to do

    Fri, 12/07/2012 - 07:33 | Link to Comment More_sellers_th...
    More_sellers_than_buyers's picture

    Seems so corrupt.  Way too many zeros.  You can run an entire clandestine foreign policy this way.  Oh. Mr. China...you don't like our dollar policy? Not happy owning our treasuries? Do not make a fuss.  Just create some bullshit bond at say, oh I don't know 40 percent intrest and we will buy the whole lot.  Let me call my friend Benny.

    Fri, 12/07/2012 - 07:41 | Link to Comment alexdg
    alexdg's picture

    They could easiily buy up some Portuguese debt and "fix" that economy pronto!

    Fri, 12/07/2012 - 07:58 | Link to Comment overmedicatedun...
    overmedicatedundersexed's picture

    I know most reading here understand this but lets put it in black and white: the DHS, TSA, CIA, NSA, ...all are assets of the FED, without ben buying our debt they could not happen, oh ,add the odd war or two to the list..see no evil hear no evil..how do we value those assets?

    Fri, 12/07/2012 - 09:16 | Link to Comment Jimmy_the_G_Man
    Jimmy_the_G_Man's picture

    Two thoughts:
      

    1. Obviously the foreign bonds do not just miraculously appear in the Fed's account; some TBTF firm traded them to the Fed and would know exactly what they hold. Even if the Fed bought them directly from the ECB, we should be able to sniff out the trail.
    2. The real scary thought is what happens when the Fed eventually tries to SELL these securities? To whom and at what price? What could be the unintended consequence they do not expect? Maybe no liquidity when they try to sell? What if they end up holding defaulted securities in the case of Greece? Is the Fed allowed to hold such an encumbered asset? Unlike MBS which you can hang on to and get your money back eventually, sovereign debt doesn't pay down (pre-pay at par) in a short duration, eventually "maturing", it is a bullet maturity at some time in the future that forces you to have to sell in the open market to get your money back early. And then possibly at a loss.

      They never think these things through completely, and they are now playing in securities with which they have NO EXPERIENCE!!!

      God help us....

    Fri, 12/07/2012 - 09:24 | Link to Comment Undecided
    Undecided's picture

    they trying to debunk you tylor

     

    http://alea.tumblr.com/post/37396001099/zerohedge-debunked

     

     

    Do NOT follow this link or you will be banned from the site!