The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.
But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.
"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."
"Guest Post" was excellent! Thank you
ReplyDeleteYes Great Read; Chris!
ReplyDeleteCapitalism in America no longer exists.
ReplyDeleteOnly a Corporate State kleptocracy.
US Capitalism died when the credit /money markets collapsed and shut down in 2008.
Because a debt ridden Ponzi system of massive government ,commercial ,and private debts could not keep up with its interest /dividend promises on past debt issuance .
The finance sector was weighed down by its need to pay out dividends on trillions of dollars in fraudulent bonds and derivative bet losses associated with that.
The middle class already up to its neck in debts could not keep up with its mortgage payments especially after falling house values locked up the ability to use the house as a refinance ATM.
Government was already weighed down by its debts to bondholders
for past wars and government services financed by deficit spending .
A bi-partisan emergency financial coup, TARP, was arranged to take over the Treasury department and to collude with the privately owned Fed bank to take over money printing and socialize the losses of the finance sector at taxpayer expense in the hope that this would kick start the money market /credit supply back into existence.
This required turning even more to the printing press .
But the bad debts and losses and insolvency is so huge that one bailout is followed by another.
The bankster centered finance sector gets issued cheap or interest free money from the fed and to cover the extent of the problem of trying to issue the massive amounts of money being issued in a market unable to purchase all of the government debts as Treasury bonds ,the Fed itself openly steps in to purchase the Treasury bonds.
So it is fraud and scams all round between Treasury (with now falling tax revenues)
and the Fed that allow government to spend trillions of dollars in deficit spending every year.
All that cheap money is fine for the big investors and banksters, but this cheap government supplied money gives an unfair competition advantage to them over other competing capitals in profit making .
Using Fractional reserve banking the ability of banks to loan multiples of the dollars given to them free by the Fed gives them another advantage over existing investments of ordinary people .
Here is how the Fractional Reserve banking system works:
Fractional reserve banking is practiced by all modern commercial banks.
The practice of fractional reserve banking expands the money supply (cash and demand deposits) beyond what it would otherwise be. Due to the prevalence of fractional reserve banking, the broad money supply of most countries is a multiple larger than the amount of base money created by the country's central bank. That multiple (called the money multiplier) is determined by the reserve requirement or other financial ratio requirements imposed by financial regulators, and by the excess reserves kept by commercial banks
http://en.wikipedia.org/wiki/Fractional-reserve_banking
In fact the cheap money and fractional reserve banking advantage in the hands of the bankers allows them to snap up any existing shares and properties held by the middle class cheap .
But ,ordinary investment of money as capital just cannot compete with near interest free money multiplied by multiple loan money issuance by fractional reserve banksters.
Ordinary investors capital cannot compete and make a profit therefore the old capitalist system is dead.
And that of course is the purpose of the bailout money, as there are no real profits to be made in a collaped Ponzi system, the only profits that can be got by the banksters are from using fractional reserve advantages of cheap money for looting the assets of the middle class.
See:
"The Ultimate Cost of 0% Money" -- to broadcast that putting money almost free has contributed to widespread capital destruction in the US Economy,
http://www.gold-eagle.com/editorials_08/willie122910.html
yes ,good work EA the guest post is great.
ReplyDeletewe are lucky that you research hard everyday to find these good articles.
This is precisely why noone can with any accuracy predict what the economy will or will not do in the future.
ReplyDeleteThe game changes on a monthly basis as needed and the only rules are there are no rules
It is also why there will be no collapse - the central bank/s are all of one mind and cannot go broke with the above scenario.
Simple really, but pretty damn smart if you ask me.
The guest post is incredible - I now want at least 10 of our hate posters to come back with some great factual revelations regarding the last paragraph.
ReplyDeleteThey don't really ever have any facts such as this really well written piece does; but I feel they are tied into their own little " pied piper" scheme of sorts and it is always great to smoke these rats out
As the sign says
believe NOTHING that does NOT agree with your own moral judgement !
NOTHING
Excellent post.
ReplyDelete