Fed's Balance Sheet Tops $3 Trillion, But...

Tyler Durden's picture

... that's not true. The Fed's balance sheet, from a transaction basis, topped $3 trillion some 5-6 weeks ago. The only reason the Fed reported a $3 trillion number in today's H.4.1, or $3.013,333 trillion to be precise, is because all those MBS purchased in September and October following the September 13 reactivation of QE4EVA finally settled. In reality, the Fed's balance sheet is now some $3.12 trillion as there is about a $80-$120 billion lag between what the Fed has actually purchased, and what has settled. Luckily, at least Treasury purchases take far less to settle.

None of the above should come as a surprise to anyone: the Fed's balance sheet has been, even purely nominally, at $2.8/2.9 trillion for months. Wake us up when the Fed's balance sheet is $4 trillion, in precisely 11 months.

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inevitablecollapse's picture

man, you are lucky - unfortunately, i lost everything in my storage garage in a nasty conflagration

Obchelli's picture

333333 cause this number was filtered by Topeka Capital Markets Analyst

Kreditanstalt's picture

What nobody seems to understand is that the Fed NEVER needs to "shrink its balance sheet".

This is a perpetual money machine as long as people insist on using the FRN...

Joe moneybags's picture

We all understand that the Fed never need, or will, shrink its balance sheet.  It was designed as a perpetual money machine.

Ham-bone's picture

There is sooooo much liquidity in excess reserves that we can't even have the slightest of selloffs before all those with "money" r looking to deploy...wonder how high this bubble will get and just how this will end???

Kreditanstalt's picture

It was designed as a perpetual money machine.


We all know that - but it doesn't stop loads of supposedly-intelligent commentators discussing what will happen when "the Fed has to shrink its balance sheet"...

U4 eee aaa's picture

You are right. The confidence game continues until the confidence or the confidence man runs out (and it is almost always the confidence man that ends it).

Many are betting on the probability that when 'they' are ready, the presses will stop dead in their tracks. Just like they did with the housing bubble, watch for the spike

ebworthen's picture

I love my dollars.

They seem to buy less and less, especially since 2008, for some reason...

hooligan2009's picture

ponders whether mbs being "settled" means the mortgages are paid off, marked to market, in foreclosure, stuck with MERS, 


being rolled over

and also how much of the interest being paid on mbs is actually interest on mortgages and how much maturing is principal 


why, if the Fed owns 80% of the mortgage market, why rates on the MBS it is buying are 2-3% lower than the mortgage rates being paid by those people buying hosues with mortgages.


mortgage deductibility means that at least 100,000 people can be employed in a circle jerk to rip off mortgagees (tax payers.

I won't bring up the fact that the cost of insuring the house and its contents and employment of the mortgagee exceeds the mortgage interest cost anyway. 

PUD's picture


madcows's picture

"We are not printing money"  Berstankee to Congress. 

Papasmurf's picture

Technically, he isn't.  Debt isn't money.

de3de8's picture

That's all? He'll, let's party!

Clesthenes's picture

What’s more interesting – only because no one else has noticed – is the acrobatics regarding the collateral behind issued Federal Reserve notes (the scrip we carry in our pockets).

About 150 years ago, gold was the collateral for issued bank notes; from 1863 (the National Banking Act) to about April of 2009, federal debt instruments replaced gold as this collateral.

During the first week of Dec 2007, $5 billion of this collateral went missing.  Judging by “statistical releases”, H4.1, it was a conscious decision by Fed bureaucrats to make this collateral go missing – just to see what havoc it would cause in world markets.  It was the same week that began the disappearance of nearly $1 trillion of bank reserves.

By April of 2009, only 53% of “currency in circulation” was collateralized – and no one noticed (outside of those who made it happen).

It was staggering: the world’s reserve currency… and no one noticed it was only half collateralized at one point in time.  Imagine what would have happened if the collateral had been gold… and no one had noticed it had gone missing.

Here, you have a chance to be the first in your nation to notice this.


ebworthen's picture

And the sheeple say:  "What's a collateral?"

"Is that some kind of new screen pattern in the NFL?"

"Is that a new game to play in the bedroom, on your sides?"

falak pema's picture

so how does this compare to the ECB balance sheet?

hooligan2009's picture

well you have this:


looks like its around a trillion euros (if you go to "Open Market Operations".

then you have the circle jerk facilities like the EFSF here, amount lent to portugal, ireland and greece (mainly) c. 140 billion euros


i don't lknow where to look for market operations involving the repo'ing of sovereign debt by various countries central banks in exchange for cash, here are the eligibility rules. 


maybe this has soemthing to do with target2 that settles an average of 2.4 trillion euro a day


so....somewhere between 1.1 trillion and 3.5 trillion depending on how you look at it

yogibear's picture

Obama, the Senate and Congress can dump all of the debt on the Federal Reserve. Bernanke and the Federal Reserve banksters can make it disappear.

Bubble Bernanke is good hiding crap and lying.

Fraud is the game now and everyone is playing the game.

How much of the debt was actually put on the fed's balance sheet or is some the garbage off-balance sheet?

edifice's picture

So, what happens when the FED owns everything?

css1971's picture

They cancel all the debt and we live happily ever after.

Bunga Bunga's picture

You are simply owned by the banks, you are a happy slave!

ebworthen's picture

Only $3 Trillion?

Debt is at $16 Trillion.

Unfunded liabilities over $65 Trillion.

Shadow banking deriviatives at over $700 Trillion.

I don't see a problem here; 5 billion or so dead people should fix this.

Uncle Zuzu's picture

Lyrics from "Crime of the Century" by Supertramp

"Now they're planning
the crime of the century.
Well, what will it be ? 

Read all about
their schemes and adventuring;
Yes, it's well worth the fee.

So roll up and see
how they rape the universe,
how they've gone from bad to worse.

Who are these men
of lust, greed and glory ?
Rip off the masks and let's see.

But that's not right !
Oh no, what's the story ?
Look, there's you and there's me.

That can't be right..."

OMG's picture

They TPTB do not care about the deficits and know it does not matter all will see that pretty soon.




youngman's picture

I used to think I was doing pretty well....but to have 3 trillion in your account...whew.....I got a ways to go....maybe when I get there I can have a white badge at Davos

q99x2's picture

3 Trillion = Party Time Bitchez.

IridiumRebel's picture

Dude! I'm naked snorting champagne with a ribbon tied hard on right now I'm so happy! Long Daughter's tears.....

toros's picture

Where do we get our "3,000,000,000,000!" hats?

sansnobel's picture

Did anybody see Alan Blinders interview recently?  He says it should be no big deal when it comes time to unload the Fed's balance sheet back into the market.  I'm kinda curious what he may be thinking.  Once the digitaly created money is sucked out of the economy thru the sale of securities on the Fed's ledger they will have to "uncreate it" or burn it.  It's all one big accounting charade aparently.  So the next question would be how do you uncreate 1's and 0's?  Guess since it's all on a computer they can pretty much do whatever the hell they want with all the liquidty they will have to draw out of the economy.  Wonder what interest rates will do and what the stock market will do this time when the markets hear that giant sucking sound......

helping_friendly_book's picture

The FRBNY will soak up, conjured, liquidity by raising the discount rate. Banks pay more interest to the FRBNY and they take the notes out of circulation. 

Money dries up and the big fish eat the little fish. Those over extended fail and those with dry powder get rich in Treasury bonds paying 10%+.

This jacked up market is a suckers bet to lure capital into the market so the FRBNY can pull the rug out from under your feet.

When T-bonds start paying over 10% those over extended start crying.

Move to cash NOW. It might take a year but, you don't want to miss out on high yield Treasury debt.

Bear's picture

If you believe the prediction that the FED BS will approach 4T this year then you also must believe that ES will go to 1600 and at least some of it's money will find its way into silver/gold shorts. You can't have 1T added to the slop and not see it lift markets. If someone has an alternative narrative, I would love to hear it, because I am the Bear.

jonjon831983's picture

Yawm, 120 Billion here or there, it doesn't seem to matter anymore. It just sounds so little.

Me_Myself_and_I's picture

Father Ben says Gold is not money.

polo007's picture


The 2007 Federal Open Market Committee (FOMC) transcripts were released last week. Media reports have concentrated on the Fed's forbearance during the credit meltdown. Implied, but not stated (in what I have read) is the major reason for such nonchalance: The Fed only acknowledges flows, not stocks. This might sound boring. It is also very important to understand.

This approach to central banking has not changed. All of the major central banks use the same framework. The media and Wall Street spend most of their time interpreting the meaning of central-bank talk. Central banks will never mention a growing concern about loan defaults since the academics can always thwart potential catastrophes by modeling preventive flows (e.g., liquidity). The catastrophic financial failure that most of us endured in 2007 and 2008 was not a failure at all, according to central bankers. Their models still conclude there is always a central-banking solution that will prevent any catastrophe. In conclusion: when the current financial bubble topples, there will no forewarning from central bankers, the media, or Wall Street. Given their processes of thinking, they will be more surprised than the average hairdresser.

"Stocks," in this case, does not refer to common stocks, but the accounts and categories in which assets (and their liabilities) accumulate. The Fed, a creature of academia, knows everything. Knowing everything limits policy to sufficient "liquidity": flows. It - to be more precise - its DSGE model, does not care about accumulations: stocks.

The Fed was taken unaware when credit cracked up in the summer of 2007. Unlike many local realtors and carpenters, the FOMC did not understand the connection between flows (bad loans pouring into off-balance sheet Special Investment Vehicles) and stocks (of mushrooming mortgage credit going sour). The Fed presumably noticed pieces of the mortgage machine (subprime lenders, appraisers, Fannie Mae, commercial banks, investment banks, CDOs) even though it did not comprehend the artificiality of this contrived structure. Hence, the Fed missed the connection between the economic expansion of the mid-oughts and its artificial nature. (As we know now, the Fed does not blanch at running an economy by rigging its prices, so, we know now, central banks do not understand an artificial economy is unsustainable.)

All of which is to say the Fed and its FOMC did not know a loss of forward momentum would be followed by an abrupt shift to backward momentum. Again, this has not changed. Despite talk of deleveraging, the U.S. economy has continued to lever up since the non-catastrophe of 2007 and 2008. Total non-financial debt has risen from 240% of GDP in the fourth quarter of 2008 to 249% of GDP after the second quarter of 2012.

The Fed does not understand the artificial credit created by central banks that has flowed since 1971 has coagulated into unsustainable imbalances around the world. The FOMC will be in the caboose when government debt loses its imaginary, "riskless" character (e.g., banks do not need to reserve against most sovereign bonds). As in 2007 and 2008, the stated price of artificially produced assets is illusory, so the assets cannot stand on their own without ever increasing flows to support prices. The flows accumulate in stocks, the artificial composition of which will topple.

CJHames's picture

I have to agree, the Jew bashing shit must stop.  Prejudice is the sign of a weak mind.