Federal Reserve Balance Sheet

October 11th, 2008 9:35 pm | by John Jansen |

The Federal Reserve’s balance sheet has undergone an explosive transformation as the central bank enngages in desperate methods to keep the system afloat.

I just came across this recent posting by Professor James Hamilton at Econbrowser in which he provides illuminating insight into the recent machinations which the Federal Reserve has employed to keep the system awash in liquidity.

It is must reading to understand the operations of the Fed.

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  1. 9 Responses to “Federal Reserve Balance Sheet”

  2. By Milton Arbogast on Oct 12, 2008 | Reply

    If I read this correctly, Bernanke, I would say essentially alone, is trying, by preventing hyperinflation, to save western civilization.

    Bernanke’s reading of history appears to have convinced him that hyperinflation will bring another Hitler to power in the US, easily the most militaristic nation the world has ever seen.

    One man. Wow.

    Think of the pressure to inflate out of debt. Who are the debtors on the playing field?

    1) The United States government.

    2) The United States population.

    3) The United States “financial industry” (an oxymoron for all time).

    One man fighting them all.

  3. By Dan on Oct 12, 2008 | Reply

    hyperinflation is bad for everyone, even the wealthiest of the population store the bulk of their wealth in financial securities which are the most adversely affected in a hyperinflation. business owners cannot pass on expenses quick enough, employees cannot afford food…when food becomes unaffordable you get riots.

    an ugly deflation is preferable to hyperinflation any day.

  4. By www.slycapital.com on Oct 12, 2008 | Reply

    My FX margin account has been slashed!

    I have been wondering if this would happen but to actually see it is shocking. My currency trading account has had its margin slashed from 100:1 to 20:1! Without any notification which is obviously illegal.

    This takes my positions from an average leverage of 3% which is a very conservative play to 16% which is getting very dangerous.

    People that had higher leverage than me and are not paranoid enough to check their accounts on the opening of the currency markets will get margined out of even winning positions if they have high leverage and their positions temporarily move against them.

    Your brokers are in survival mode – beware!

  5. By Anonymous on Oct 12, 2008 | Reply

    A much clearer description of the same events were recently published in the Financial Times Alphaville, entitled “Follow the Money” and written by John Kemp

  6. By Milton Arbogast on Oct 12, 2008 | Reply

    Anonymous,

    Thanks very much for the reference to Kemp’s article.

    What it adds is the role of China. I agree with Anonymous that it, too, is “must read”.

  7. By troy on Oct 13, 2008 | Reply

    John, Thanks for this article.

    It clearly reminds me that fiat money will ultimately end with an inflationary hell. Wheather you hit deflation or stagflation the ultimate goal is to debase the USD. I for one am taking advantage of this futile USD bunce to shift assets to CHF/Ag/Au.
    GL all.

  8. By Chris on Oct 13, 2008 | Reply

    JDH is a national treasure.

  9. By Dave on Oct 13, 2008 | Reply

    I disagree with the idea authors idea that Ben will simply withdraw the increased reserves when the crisis “settles”. That wealth isn’t comming back, its been wasted. If the Treasury tries to withdraw the new money its created the system will just start to collapse again.

    When these “temporary” lending facilities started I had a feeling they were as temporary as most government programs.

  10. By Ron on Oct 14, 2008 | Reply

    The Federal Reserve is Guilty of Helping Create the Global Financial Meltdown

    Many investors and concerned citizens around the world are showing their outrage at what the Federal Reserve has done to the American economy with their easy money policies which caused the credit & real estate bubble and subsequent global financial meltdown.

    Join the thousands who are signing & commenting on the Abolish the Federal Reserve Petition at http://www.petitiononline.com/fed/petition.html

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