Tag: Federal Reserve

*VIDEO* Senator Rand Paul Rails Against The Unchecked Federal Reserve


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H/T The Daily Sheeple

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Federal Reserve’s Ownership Of U.S. Debt Breaks $2 Trillion For First Time

$2,001,093,000,000.00: Fed’s Ownership Of U.S. Debt Breaks $2T for First Time – CNS

The Federal Reserve’s holdings of publicly traded U.S. Treasury securities – federal government debt – pushed above $2 trillion for the first time last week, hitting approximately $2,001,093,000,000.00 as of Aug. 14, according to the Fed’s latest weekly accounting.

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The Fed’s accounting for the previous week showed that it had owned approximately $1,993,375,000,000.00 in U.S. Treasury securities as of Aug. 7.

Back on Dec. 31, 2008, before the Fed began its strategy of “Quantitative Easing,” the Fed owned only $475.9 billion in U.S. Treasury securities. Since then, the Fed’s holdings of U.S. government debt have more than quadrupled.

Launched in 2009, the Fed’s Quantitative Easing (QE) efforts have attempted to stimulate the economy.

“Under QE,” explains a February 2013 Congressional Research Service report, “the Fed attempts to lower long-term Treasury and MBS [mortgage-backed security] yields directly through purchases that drive down their yields, in the hope that lower Treasury and MBS yields will indirectly filter through to reductions in other private long-term yields. (Lower Treasury yields do not directly stimulate economic activity – they are only stimulative if other yields fall as a result.) This could occur because Treasury securities are considered a ‘benchmark’ against which other private securities are priced, so that other securities are automatically repriced when Treasuries are repriced (although the change is unlikely to be one-to-one).”

(In its latest weekly accounting, the Fed also said that as of Aug. 14, it owned approximately $1.299831 trillion in mortgage-backed securities that had been issued by Fannie Mae, Freddie Mac and Ginnie Mae. Back on Jan. 14, 2009, the Fed owned only $5.6 billion in mortgage-backed securities.)

By law, the Fed is not permitted to buy U.S. Treasury securities directly from the Treasury. Instead it buys them in the secondary market. However, when the Fed buys U.S. government debt even on the secondary market it creates a closed circle: The Treasury pays the Fed the interest owed on that part of the federal government’s debt, and almost all of that interest – considered “profit” by the Fed – is paid back to the Treasury.

“Monetizing the deficit refers to financing the budget deficit through money creation rather than by selling bonds to private investors,” said the CRS. “Hyperinflation in foreign countries has consistently resulted from governments’ decision to monetize large deficits.

“According to this definition, the deficit has not been monetized,” said CRS. “Section 14 of the Federal Reserve Act legally forbids the Fed from buying newly issued securities directly from the Treasury, and all Treasury securities purchased by the Fed to date have been purchased on the secondary market from private investors.”

“Nonetheless,” said CRS, “the effect of the Fed’s purchase of Treasury securities on the federal budget is similar to monetization whether the Fed buys the securities on the secondary market or directly from the Treasury. When the Fed holds Treasury securities, Treasury must pay interest to the Fed, just as it would pay interest to a private investor. These interest payments, after expenses, become profits of the Fed. The Fed, in turn, remits about 95 percent of its profits to the Treasury, where they are added to general revenues. In essence, the Fed has made an interest-free loan to the Treasury, because almost all of the interest paid by Treasury to the Fed is subsequently sent back to Treasury.

“The Fed could increase its profits and remittances to Treasury,” said CRS, “by printing more money to purchase more Treasury bonds (or any other asset).”

As of Aug. 15, according to the Bureau of the Public Debt, the total value of Treasury securities held by the public was $11,952,073,953,024.85. (The rest of the federal government’s debt is “intragovernmental” debt – n.b. money that the Treasury owes to federal trust funds, such as the Social Security trust fund.)

The $2,001,093,000,000.00 in Treasury securities now owned by the Fed equals 16.7 percent of the U.S. government’s debt held by the public. Another $5.6006 trillion in U.S. Treasury securities is owned by foreign entities, according to the Treasury’s latest report on foreign holders of U.S. debt. The combined $7,601,693,000,000.00 in U.S. Treasury securities owned the Fed and foreign entities equals about 64 percent of all extant U.S. Treasury securities.

After the Fed, entities on Mainland China are the largest owners of U.S. government debt, holding $1.2758 trillion as of the end of June.

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Federal Reserve Announces New Round Of Soon-To-Be-Failed Economic “Stimulus”

Federal Reserve Announces New Round Of Economic Stimulus – NPR

The Federal Reserve announced it would spend $40 billion a month on bond purchases in an effort to stimulate the economy and drive the the unemployment rate down.

The Wall Street Journal says that unlike the first two rounds of Quantitative Easing, this time the Fed will focus solely on buying mortgage-backed securities.

In its statement, the Federal Reserve said the economy was growing but at a sluggish pace.

“The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions,” the Federal Open Market Committee said. Remember the Fed has a dual mandate from Congress: keep inflation and the unemployment rate in check.

This action also represents an open-ended commitment on the part of the Federal Reserve, which said it was not concerned about inflation at this time.

“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability,” the Fed said. That last line means that the Fed promises to tweak this program if inflation begins to be a problem.

Another big announcement, is that the Federal Reserve will keep its federal funds rate at near zero through mid-2015.

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Would you trust Paul Krugman to mow your lawn?

Frankly, I would not trust Krugman to brush his teeth without adult supervision frankly. He is, truly, one of the stupidest human beings on this, or any other planet. Smitty, does not rate Krugman very high on the intellect scale either. And Smitty ponders the train wreck that would result from Krugman being named Fed Chair

Admittedly, newspapers are headed down the extinction trail on our current national course, along with liberty. So in that sense, why not hand over the Federal Reserve to a boob like Kruge?”

Love this quote from Krugman

[Quantitative Easing] is very uncertain in its effect, but the [Federal Reserve] should be doing more of that.”

So, we do not know what its effects will be, but do more of it anyway? Good Freaking Grief how does this guy get on TV?

Video at the link. Tell me Krugman does not remind you of that drunk guy bugging you at happy hour? You know, the guy that just will not shut up? The guy who jabbers on incoherently about his job, politics, and so on. Yep, that is Krugman.

*VIDEO* Everything You Need To Know About The Leftist ‘Occupy’ Movement In America

Daily Benefactor News – Federal Reserve Reveals Trillions Dished Out To World Banks To Aid Financial Crisis

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Federal Reserve Reveals Trillions Dished Out To World Banks To Aid Financial Crisis – Daily Mail

The Federal Reserve has revealed details of the trillions of dollars it gave in emergency aid to U.S. and foreign banks during the financial crisis.

New documents show it paid out a staggering $1.5trillion (almost €1trillion) to British banks – over a third of the total money lent – in an effort to prop up the financial sector.

The Fed dished out $2.2trillion to banking giant Citigroup, $2.1trillion to Merrill Lynch and $2trillion to Morgan Stanley.

In addition, payments have also been made to Bear Stearns ($960billion), Bank of America ($887billion), Goldman Sachs ($615billion), JPMorgan Chase ($178billion) and Wells Fargo ($154billion).

And foreign banks who benefited from the Fed’s aid included European Central Bank, Bank of England and the Bank of Japan as well as Swiss bank UBS, which borrowed more than $165billion, Deutsche Bank ($97billion) and the Royal Bank of Scotland ($92billion).

The documents serve as a reminder of how crippled the financial system had become during the crisis and how much it’s recovered since.

Banks earned $14billion from July through to September this year, showing that the green shoots are definitely showing.

Large non-banking U.S. companies which borrowed from the Federal Reserve included General Electric, who used a total of more than $16billion, Harley-Davidson $2.3billion and a group of independent Caterpillar dealers $733million.

In all the Fed disclosed more than 21,000 transactions, totalling $3.3trillion to financial institutions, which was required under the new financial laws.

‘The system basically failed because banks stopped lending to each other,’ said Paul Miller, a banking analyst at FBR Capital Markets.

‘After Lehman failed… the Fed essentially opened the floodgates and pushed as much liquidity into the system as possible. And it worked. It helped stabilize the system.’

The Fed also detailed the $1.25trillion in mortgage securities it bought from Fannie Mae and Freddie Mac to help drive down mortgage rates, ease credit and provide some support to the crippled housing market.

‘There’s very much a sense from the data that the Federal Reserve was not just providing liquidity to U.S. banks but was creating stability for the entire world’s financial system,’ said Linus Wilson, assistant professor of finance at the University of Louisiana, who has studied the financial crisis.

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