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I see no one here has ever taken an accounting course where Assets - Liabilities equals Net Worth. In the left hand column, we have the Fed purchasing Mortgage Backed Securities, in the right hand column, we have the Fed creating dollars and in the end if you buy something for $1 with $1 of debt what is your net worth? Zero. It's right pocket, left pocket. Wake up!!! and stop watching CNBC and Fox News!!!
yes, it will add to america debt, it's simply federal note which's is same as paper money.
Budget
The Federal Reserve is self-funded. The vast majority (90%+) of Fed revenues come from open market operations, specifically the interest on the portfolio of Treasury securities as well as "capital gains/losses" that may arise from the buying/selling of the securities and their derivatives as part of Open Market Operations. The balance of revenues come from sales of financial services (check and electronic payment processing) and discount window loans.
They buy bonds to keep interest rates low so lending is more attractive, thus stimulating the economy. These PHDs live in a world of theory and are really gonna f*ck things up. There is over 2 trillion dollars worth of bonds on the Fed's balance sheet and they are going to have to unwind all of this at some point. It's gonna be ugly.
Buying and selling bonds is one strategy employed by the federal reserves to control the money supply. Buying bonds is additive, and selling is subtractive. There are a couple other ways they can control the money supply, although buying/selling bonds is considered the more conservative and safer approach. Trust me... You don't want the fed to going to plan B...
Quote:
Originally Posted by FrmlyBklyn
I see no one here has ever taken an accounting course where Assets - Liabilities equals Net Worth. In the left hand column, we have the Fed purchasing Mortgage Backed Securities, in the right hand column, we have the Fed creating dollars and in the end if you buy something for $1 with $1 of debt what is your net worth? Zero. It's right pocket, left pocket. Wake up!!! and stop watching CNBC and Fox News!!!
Yes, but as long as there are investors and institutions lining up to purchase these securities, the system in place works to some extent. The question is, how long before these securities are no longer viewed as safe and attractive?
Perhaps the largest issue with this is the money seems to collect at the top, while very little actually "trickles down". In the end, savers and the middle class end up in worse shape.
Let's get one thing straight. Fed policy does not add to the national debt principal. The Treasury Dept issues debt.
As the Fed buys T-bonds and lowers interest rates, it is lowering the cost of debt. And since it transfers its profits (which includes interest paid on the bonds it owns) back to the Treasury, that debt is essentially free to the government.
With real interest rates negative, we are literally being paid on our debt. That is an enviable situation.
Ben isn't just some PhD theorist - he knows what he is doing, and his inflation record is the best of any post-WWII chairman. We will be fine. Don't freak out.
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