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Started By
Message
re: Fed balance sheet - a question
Posted on 8/17/10 at 11:10 am to Interception
Posted on 8/17/10 at 11:10 am to Interception
Why?
1
Posted on 8/17/10 at 11:16 am to RaysGoodLiquor
quote:
All of the treasury obligations, mortgages, etc. that the Fed buys in exchange for newly issued dollars.
Actually, the Fed issued more bonds, not currency, but that's a small detail. The Fed simply bought one set of bonds and sold some others to pay for them.
If the bonds that were purchased (mortgages) don't bring in enough dollars to offset the interest on the new Treasury debt, the result is simply a reduction in money supply.
All else being equal, of course.
Posted on 8/17/10 at 11:20 am to foshizzle
quote:
If the bonds that were purchased (mortgages) don't bring in enough dollars to offset the interest on the new Treasury debt, the result is simply a reduction in money supply.
What new Treasury debt? How does the purchasing of mortgages by the fed cause the treasury to issue more bills and bonds?
So its just a coincidence the total value of their assets including treasury bonds, mortgages, gold, etc. happens to slightly exceed the total value of their liabilities, including issued federal reserve notes and deposits?
This post was edited on 8/17/10 at 11:21 am
Posted on 8/17/10 at 11:20 am to Poodlebrain
quote:
Poodlebrain
quote:
There are no assets on the books of the government
Check out p. 49 of the Complete Report.
This post was edited on 8/17/10 at 11:43 am
Posted on 8/17/10 at 1:00 pm to RaysGoodLiquor
Why does the FED have a negative Balance Sheet (excuse me), negative income on Income Statements?
Your making the hypothetical situation up and I'm telling you there are is "no free lunch" forever. The FED can raise rates to help improve their income statement. They can also try to raise funds through auctioning off bonds.There are also others options available.
You have not explained why they are in the red? The FED controls the game. They don't lose.
Your making the hypothetical situation up and I'm telling you there are is "no free lunch" forever. The FED can raise rates to help improve their income statement. They can also try to raise funds through auctioning off bonds.There are also others options available.
You have not explained why they are in the red? The FED controls the game. They don't lose.
Posted on 8/17/10 at 1:31 pm to Interception
quote:
You have not explained why they are in the red?
Let's say they buy $1,000,000,000,000 worth of home mortgages and they turn out to be worth $1,000,000,000 instead. How do they make up the difference?
This post was edited on 8/17/10 at 1:32 pm
Posted on 8/17/10 at 1:55 pm to RaysGoodLiquor
quote:Think about what you're saying: the dollar is backed by dollars. That is really what you're saying.
What assets "backing the dollar" are you referring to?
All of the treasury obligations, mortgages, etc. that the Fed buys in exchange for newly issued dollars.
U.S. government debt issued by the Treasury Department are dollar investments which pay interest. If the Fed buys government debt, they are buying dollar instruments.
Those instruments don't "back" the dollar. They are dollars. If it was the way you think it is, it would be one giant circle revolving off into infinity.......and beyond!
ETA:
quote:This doesn't happen. You really need to read up on how the Fed works.
that the Fed buys in exchange for newly issued dollars.
This post was edited on 8/17/10 at 1:57 pm
Posted on 8/17/10 at 2:04 pm to RaysGoodLiquor
quote:They don't.
Let's say they buy $1,000,000,000,000 worth of home mortgages and they turn out to be worth $1,000,000,000 instead. How do they make up the difference?
Posted on 8/17/10 at 2:09 pm to foshizzle
quote:When did the Federal Reserve issue bonds? I must have missed that news release.
Actually, the Fed issued more bonds
Posted on 8/17/10 at 2:40 pm to LSURussian
quote:
When did the Federal Reserve issue bonds?
I'm deliberately simplifying matters. The point is that the government as a whole is not losing assets that "back" the balance sheet, it's just exchanging one set of bonds for another. If the purchased bonds result in less money coming in than money paid out in interest, that's just changing the size of the money supply.
I did make one mistake though, that's an increase in money supply, not a decrease.
To the OP - Treasury obligations are not backed by assets in the first place. They are backed by "full faith and credit" and always have been. The government can sell assets to repay debt but doesn't have an obligation to.
Posted on 8/17/10 at 2:55 pm to foshizzle
quote:Ok. To my knowledge the Fed has never issued bonds.
I'm deliberately simplifying matters.
I don't think the Fed even has the legal authority to issue its own debt. It was brought up a few years ago when there was some concern how the Fed could go about sopping up liquidity in the banking system quickly but that idea never went anywhere.
Posted on 8/17/10 at 3:04 pm to LSURussian
quote:
Think about what you're saying: the dollar is backed by dollars. That is really what you're saying.
The dollar is backed by promises to pay a debt in dollars. Yes.
quote:
U.S. government debt issued by the Treasury Department are dollar investments which pay interest. If the Fed buys government debt, they are buying dollar instruments.
Those instruments don't "back" the dollar. They are dollars. If it was the way you think it is, it would be one giant circle revolving off into infinity.......and beyond!
How "are" they dollars? The dollar bill in my pocket doesn't pay interest. What about all the things the fed buys that aren't treasuries?
quote:If the fed doesn't issue dollars in exchange for all the mortgage debt they are buying, what do they issue? Lollipops?
You really need to read up on how the Fed works.
Posted on 8/17/10 at 3:05 pm to LSURussian
quote:
quote:
Let's say they buy $1,000,000,000,000 worth of home mortgages and they turn out to be worth $1,000,000,000 instead. How do they make up the difference?
They don't.
So what incentive does the fed have to buy safe assets? Why don't they just buy up junk bonds instead?
Posted on 8/17/10 at 3:05 pm to RaysGoodLiquor
:awjeez:
Posted on 8/17/10 at 3:34 pm to RaysGoodLiquor
I can explain it to you, but I can't understand it for you.
Posted on 8/17/10 at 3:45 pm to LSURussian
quote:
I can explain it to you, but I can't understand it for you.
Then please explain it to me. What is the fed using to buy the mortgage securities it is obtaining?
ME
quote:
All of the treasury obligations, mortgages, etc. that the Fed buys in exchange for newly issued dollars.
YOU
quote:
This doesn't happen.
What doesn't happen?
This post was edited on 8/17/10 at 3:47 pm
Posted on 8/17/10 at 4:03 pm to RaysGoodLiquor
Sorry, but I'm wasting my time and yours trying to explain the Fed to you when you don't understand basic monetary economics or how implementation of monetary policy works in the U.S.
It's like you're asking me to explain calculus to you when you don't know how to add or subtract.
Get yourself a basic monetary economics textbook, read it and then come back and ask questions.
It's like you're asking me to explain calculus to you when you don't know how to add or subtract.
Get yourself a basic monetary economics textbook, read it and then come back and ask questions.
Posted on 8/17/10 at 4:08 pm to LSURussian
quote:
Sorry, but I'm wasting my time and yours trying to explain the Fed to you when you don't understand basic monetary economics or how implementation of monetary policy works in the U.S.
But you have yet to try to explain anything. All you've done is issue snotty remarks to make sure the world knows how smart you are.
You can't even explain what the fed uses to buy mortgage securities with. Must be dizzy way up there!
Posted on 8/17/10 at 4:11 pm to LSURussian
quote:
quote:
All of the treasury obligations, mortgages, etc. that the Fed buys in exchange for newly issued dollars.
This doesn't happen. You really need to read up on how the Fed works.
Done.
quote:
Open market operations--purchases and sales of U.S. Treasury and federal agency securities--are the Federal Reserve's principal tool for implementing monetary policy.
LINK
Looks like you were wrong.
Posted on 8/17/10 at 4:25 pm to RaysGoodLiquor
quote:Oh, but I have. You just didn't comprehend the answer.
But you have yet to try to explain anything.
quote:An electronic entry on the Fed's wire transfer system: it credits "securities" and debits "cash."
You can't even explain what the fed uses to buy mortgage securities with.
Do you think the Fed ships bags of dollar bills to whoever it's buying a security from? Or maybe the Fed just gets a money order from Western Union....???
quote:It only appears to you that I'm way up high.....
Must be dizzy way up there!
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