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According to its latest report, the Federal Reserve now owns over $1 trillion of mortgage-backed securities, which is 45.6% of all assets owned by it. One year ago mortgage-backed securities were only 0.6% of the Federal Reserve’s total assets.
The Federal Reserve is very highly leveraged, much more than most banks. It is carrying $2,157.0 billion of debt on $52.8 billion of capital, giving it a leverage of 40.8-times more debt than capital. The mortgage-backed securities it owns are 19-times greater than the Federal Reserve’s capital, meaning that if the true value of these assets is less than 5.3% of their book value, the Federal Reserve’s capital is depleted, effectively making it another insolvent institution.
Given that Fannie Mae is itself insolvent and most other mortgage generating federal agencies are not far from perilously sliding down to that same dire financial condition, it is reasonable to assume that the true value of these mortgage-backed securities is less than 94.7% of their book value. Consequently, the Federal Reserve is therefore – on a strict accounting basis – insolvent. It remains liquid because banks continue to provide it with funding and because people continue to accept in commerce and use without question the Federal Reserve’s liabilities, i.e., the paper currency it issues. But for how much longer? (fgmr)
According to its latest report, the Federal Reserve now owns over $1 trillion of mortgage-backed securities, which is 45.6% of all assets owned by it. One year ago mortgage-backed securities were only 0.6% of the Federal Reserve’s total assets.
The Federal Reserve is very highly leveraged, much more than most banks. It is carrying $2,157.0 billion of debt on $52.8 billion of capital, giving it a leverage of 40.8-times more debt than capital. The mortgage-backed securities it owns are 19-times greater than the Federal Reserve’s capital, meaning that if the true value of these assets is less than 5.3% of their book value, the Federal Reserve’s capital is depleted, effectively making it another insolvent institution.
Given that Fannie Mae is itself insolvent and most other mortgage generating federal agencies are not far from perilously sliding down to that same dire financial condition, it is reasonable to assume that the true value of these mortgage-backed securities is less than 94.7% of their book value. Consequently, the Federal Reserve is therefore – on a strict accounting basis – insolvent. It remains liquid because banks continue to provide it with funding and because people continue to accept in commerce and use without question the Federal Reserve’s liabilities, i.e., the paper currency it issues. But for how much longer? (fgmr)
The MBS market has actually shrank the last several years so they're essentially monetizing the other asset classes without admitting that's what they're doing.
. . . . It remains liquid because banks continue to provide it with funding and because people continue to accept in commerce and use without question the Federal Reserve’s liabilities, i.e., the paper currency it issues. But for how much longer? (fgmr)
Yep. Ignore the man behind the curtain. I am the Great and Powerful Wizard of OZ!
Sooooo. Since it does not take much a map to see where this path is leading, it seems the real question is How Do We, the (little) People take ourselves Off the Dollar?
Gold. Like everyone outside the USA has decided. Today it crossed the $1200/oz level for the first time ever.
Heh, ever try to purchase groceries with gold? A company tried to create gold backed dollars and they got raided and had all of the gold in their vaults "siezed" or more accurately stolen by the powers that be. Google liberty dollars.
Heh, ever try to purchase groceries with gold? A company tried to create gold backed dollars and they got raided and had all of the gold in their vaults "siezed" or more accurately stolen by the powers that be. Google liberty dollars.
I am well aware of the Liberty dollar and it is irrelevant to the question asked. From a constitutional standpoint I believe they were within their rights, and the case has yet to be definitively decided in the US courts. Alternative currencies to the federal reserve notes are not unprecidented in the USA especially considering they have existed for less than 100 years.
In any case, the question wasn't on what to use for change in your pocket as currency. The question was on what to do to preserve wealth. Other than that the close to 40 years that it was illegal for Americans to own gold between 1933 and 1971 you tell me when was the last time that someone has been unable to trade gold for paper money? I would be interested to hear what you have to say about that, if anything.
There are a lot of people making misguided arguments against gold, yet the price continues to rise as it has been doing for the last decade. If gold was useless for money, then way does the Fed have more gold stored in its basement in NY than the US has stored in Ft. Knox? It's because they know the worth of the stuff even though they say otherwise.
Gold. Like everyone outside the USA has decided. Today it crossed the $1200/oz level for the first time ever.
Sure, I follow that is the cliche, no-thought-involved "answer." But Gold tends to completely impractical to use, it does provide any utility, and cannot serve as food, nor fuel, nor shelter, and we (again, little) people do not tend to produce it.
That all adds up to is we would have to produce things of value to trade for this thing of no practical value (Gold) from people that do produce it.
Overall, that does not seem so smart.
I was hoping to dig a little deeper into some thought on this topic, if anyone cares to.
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It's a secret.
