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Created on: 12/18/2012 4:22:58 AM Last Update: 12/18/2012 4:33:39 AM Posted by: RTT WARNING: This entry is 4420 days old. It may contain broken links, out-dated or misleading content. Please read on with caution.
1 POST
The US Fed balance sheet is alive, it is alive !
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The US Federal Reserve balance sheet begins to grow. What does it mean?
- The Fed is buying per month $45 Bn of US Treasuries (30 yr) to keep interest rates down. The FED is the only buyer in the long bond market. If they were not then interest would be rising fast. The truth is that a good economy has rising interest rates and not falling rates. This is a running bailout of the US Government spending.
- The Fed is buying per month $40 Bn of MBS or Mortgage Backed Securities (MBS) from the banks. This is a pure asset swap. The Fed is the only buyer in this market. They are buying MBS at full price, when they not even worth half of the original setup valuation. The Fed is giving good solid CASH to the banks to do as they wish. This is a running bailout of banks with MBS.
The banks will use the CASH to speculate. The banks can not make a buck with mortgage rates so low, there is no money in mortgages any more! The banks have to find yield from speculation in the markets, with greater leverage. You got it, nothing has changed.
Consider ... 1) The US Fed balance has been a laggard behind the ECB (EURUSD) and BOJ (USDJPY). The central bank laggard has the stronger dollar. Therefore the fed must expand the balance sheet to debase the currency to avoid a stronger dollar than its exporting partners. 2) The Fed is worried about the fragile US economically and cant afford to allow USD to appreciate. 3) The USD is cheap currency for the carry trade to fund risk assets. A rising USD would frustrate these transactions.
Peter Schiff has more
The US Federal Reserve balance sheet is ticking up. Is this why the banking sector raced to higher prices the week before Christmas. (See BAC, GS,C, AIG, EUFN, JPM, WFC, DB, etc)
Keep an eye on Gold and Silver. Readtheticker.com is not a gold bug site, but facts are facts folks.
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Investing Quote...
.."There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. Not many can always have adequate reasons for buying and selling stocks daily – or sufficient knowledge to make his play an intelligent play."...
Jesse Livermore
.."Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it"..
Thomas Sowell
.."Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception"..
George Soros
...“Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter”...
Ayn Rand
..."This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President Woodrow Wilson signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill."...
Charles August Lindbergh Snr
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