The Fed's Balance Sheet

Always good to keep things in perspective. The most recent Fed Balance Sheet reading of $2.16 trillion is a doozy and is only getting higher, and a couple hundred bucks away from the highest ever recorded of $2.17 trillion a month ago. This is just the beginning: Bernanke and Co. have committed to monetizing $1.75 trillion of securities this year, of which $1.21 trillion remain to be purchased still. This means that the chart will likely pass the $3 trillion mark at some point over the next 3-6 months. As to the yield on these securities once the total is over $3 trillion, if the current trendline of UST pounding is any indication, look for something north of 5%.

Just as a reminder, the total foreign central bank holdings of Treasuries and Agencies is $2.7 trillion.

Very soon America's largest creditor will be... America.



Source: Federal Reserve H.3 and H.4.1 releases.

Comments

[Dave Wrixon]

I know it sounds like a daft question, but why do they call it a Balance Sheet?

2009 May 26 02:23 PM

[doubleguns]

But we can't pay ourselves back!!!

2009 May 26 02:23 PM

[dybydx]

its called balance sheet because it works like a balance (ie that little weight scale you see lady justice holding at the court house).

the balance sheet balances the asset on left side which is offset by liability and equity (or net asset/reserve)


On May 26 02:23 PM Dave Wrixon wrote:

> I know it sounds like a daft question, but why do they call it a
> Balance Sheet?

2009 May 26 02:32 PM

[FE812]

We'll be paying ourselves back through inflation. That is afterall, the idea of this exercise correct?

2009 May 26 02:35 PM

[linenoise]

Can't we just forgive the debt we owe ourselves? Oh right. Privately owned central bank. Nevermind.

2009 May 26 02:38 PM

[Swashbuckler]

duh


On May 26 02:32 PM dybydx wrote:

> its called balance sheet because it works like a balance (ie that
> little weight scale you see lady justice holding at the court house).
>
>
> the balance sheet balances the asset on left side which is offset
> by liability and equity (or net asset/reserve)

2009 May 26 02:44 PM

[[e-mail]]

Would I invest in this organization? Would you? Because of taxes we do not have a choice. Probably one of the worst investments we will ever have to make.

2009 May 26 02:52 PM

[Dave Wrixon]

So what happened to the assets?


On May 26 02:32 PM dybydx wrote:

> its called balance sheet because it works like a balance (ie that
> little weight scale you see lady justice holding at the court house).
>
>
> the balance sheet balances the asset on left side which is offset
> by liability and equity (or net asset/reserve)

2009 May 26 03:02 PM

[SW Richmond]

Did we skip "sublime" on our way to "ridiculous"?

2009 May 26 03:21 PM

[Alex Trias]

Here's a thought. The question of how much low quality debt the Fed owns is irrelevant. The question of whether the risk-adjusted yeild on that low quality debt is lower than the Fed's borrowing costs is all that matters. If so, we're in trouble. If not, the Fed is running the best risk/arb fund in the history of global finance. This will end in disaster or feast, and for my part, I have no forecast on which outcome is most likely because I cannot put my finger on any data suggesting the Fed is more adept at pricing stuff than the market is. Generally, I'd say "nuts" to the argument that the Fed can succeed in outpricing risk, but during a credit crisis, there may have been, and continue to be, attractive risk/ return scenarios that the Fed is capable of trading.

2009 May 26 03:27 PM

[JPPennypacker]

Wondering if they would take a post dated check for the 3 trillion and we could call it all even. There was a time when a billion was considered pretty big bucks. I guess trillion is the new billion, hope we can avoid ever reaching quadrillion level debt ceilings.

2009 May 26 03:30 PM

[spald_fr]

Ding! Ding! Ding! We have a winner.


On May 26 02:35 PM FE812 wrote:

> We'll be paying ourselves back through inflation. That is afterall,
> the idea of this exercise correct?

2009 May 26 03:36 PM

[square to the shooter]

Interesting point. But the real question is .....Does the Fed have a clue about its own balance sheet?

Watch Rep. Grayson ask the question several different ways to discover that Elizabeth Coleman, the Fed's Inspector General, really has no idea what lurks within its balance sheet.

www.youtube.com/watch?...

2009 May 26 03:39 PM

[Jeff Nielson]

Linenoise, you bring up an important point which is rarely mentioned.

Instead of the U.S. government simply printing money, unencumbered by anything, the Treasury Department creates new bonds, GIVES THEM to the PRIVATE BANKERS of the Fed, and then the Fed SELLS those bonds to the American people indebting Americans (to those odious private bankers) for every dollar of money printed!!!!!!!!

Also, when we're talking about "IOU"s, no one should forget the $3 TRILLION stolen from the Social Security "trust fund" (lol) - that will NEVER be repaid. Bye-bye "Social Security" for anyone under 50.


On May 26 02:38 PM linenoise wrote:

> Can't we just forgive the debt we owe ourselves? Oh right. Privately
> owned central bank. Nevermind.

2009 May 26 03:40 PM

[Market Sniper]

"Balance" sheet? What "balance" sheet? The Fed creates "money" out of thin air! And the Fed has NEVER been audited, for good reason. Their lame attempt at modern alchemy would be exposed. All dollars and digital dollar equivalents are created out of DEBT. We do not have any "dollars" in circulation. We have Monetized Debt Units (MDUs). There is a reason for the legend appearing on ALL MDUs...This note is legal tender for all debts public and private..such a recitation MUST appear on fiat. Why? If I owe you $100 and tender a Ben Franklin for the debt and you refuse my tender (you might want a hub cap or my cigarette lighter instead), you have just CANCELLED the debt! You MUST accept my tender!

2009 May 26 06:54 PM

[Speedspirit]

The simple fact is we do not live in a free trade state. We have ran full speed into the wall of enslavement. Like I have said before step by step little by little the Power Elite are implementing thier plan for ultimate control. Too many sheep, too many blind followers, too many mistakes. Freedom is a right that comes from within and there we can find freedom from all external forces and eliminate them with the power of knowledge.
The Federal Reserve needs to be abolished and a National State of Credit to monotize real productivity for the economy is needed to save us from ourselves.
And since we wont come to our senses any time soon roll with the punches.

2009 May 26 06:54 PM

[mkreisel]

If there is a balance sheet, then there is also the "Equity" after subtracting the Liabilities from the Assets.

Now, how does the Fed increase or decrease its "Equity", and what would happen if the Fed's Equity goes below zero?

2009 May 26 07:13 PM

[The Geoffster]

Democracies don't last because the people always vote themselves the fisc. The only question now is whether cold fusion or some other miracle will save us from dictatorship.

2009 May 26 09:29 PM

[shrike]

Lame.

A single entry does not make a balance sheet.

I suspect the author means the assets total. So, copied straight from Wikipedia and out of date already --

"Gold certificate account 11,037
Special drawing rights certificate acct. 2,200
Coin 1,870
Securities, repurchase agreements, term auction credit, and other loans 1,525,857
Securities held outright 967,070
U.S. Treasury 534,969
Bills 18,423
Notes and bonds 516,546
Federal agency debt securities 64,511
Mortgage-backed securities 367,590
Repurchase agreements 0
Term auction credit 455,799
Other loans 102,988
Net portfolio holdings of Commercial Paper Funding Facility LLC 242,431
Net portfolio holdings of LLCs funded through the Money Market Investor Funding Facility 0
Net portfolio holdings of Maiden Lane LLC 26,481
Net portfolio holdings of Maiden Lane LLC II 18,253
Net portfolio holdings of Maiden Lane LLC III 27,429
Items in process of collection 1,147
Bank premises 2,191
Central bank liquidity swaps 282,863
Other assets 56,855
Total Assets 2,198,613"

Its not that hard to find.

2009 May 26 09:47 PM

[Donald Ingram]

Here is a quote from Ludwig von Mises - "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crises should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." This gentleman is a founding member of the 'Austrian School of Economics'. Keynes and those that follow his teachings have led us down the garden path to sure folly!

When will some common sense prevail? When heavily in debt - you don't go farther into debt to solve your debt problem! Come on! Get real! Stop this silliness before there is irreparable damage done. Its not to late. However the clock is ticking.

2009 May 26 10:54 PM