$3.39T Quantitative Explosion: Fed Owns More Treasuries and MBSs Than Publicly Held Debt....

This is pretty crazy! Well, if we really wanted to we could get our government to wage war on the fed reserve and call them out on domestic terrorism and take all their money. So I ask you congress, commoooonnn!! Commooonn!

xuenchen
If the Federal Reserve is 'buying', where does their 'money' come from ?

Or are they 'borrowing' from somebody else ?

Sounds like a big ponzi scheme con game.

The federal reserve creates the money, and does so at interest. They don't borrow from anyone. Fractional reserve banking has some resemblance to a ponzi scheme but with proper regulations isn't one. Most notably, the money creation can't be in private hands but rather in public ones such as congress. It's not a new concept, fractional reserve banking has been in use since the 1600's. The difference between then and now is that for the past 100 years we've had a private entity controlling the money supply. They're free to do with it as they wish, which usually involves boom and bust cycles that allow for mass profit when property can be collected for a fraction of it's value. We actually had some good regulation that prevented a large part of this but got rid of it in the 90's, it was called glass-steagall. When that was actually enforced, private banks couldn't take depositors money and then invest it at no risk to themselves.

Cynic
Just wait until the Chinese call their bonds or the Middle East decides to value oil in Euros.
Sit back and watch the fun.

They would never do this, every developed nation is indebted to every other nation as a form of security. By indebting to each other, and then backing the value of your currency with that debt it creates an economic safeguard against war. By going to war, the debt is erased. When that happens the currencies destabilize and everyones economies melt down overnight. It's another form of MAD and it was set up deliberately to prevent war. The truth is, even doing something like the talking points tend to suggest and paying down our debt destabilizes our system. National debt doesn't work the same as public debt, with national debt the responsible thing is completely contrary to all logic which is to let debt accumulate and not pay it off... only pay the interest. This actually strengthens the currency (which is why the debt ceiling argument every few years is absurd, and actually quite dangerous to argue over). We would actually spark WW3 and crash the worlds economy if we came up with and followed through on a plan that eliminated the national debt in say 5 years.

A nation accepting currency other than dollars is a much bigger deal, but I don't understand reserve currency theory enough to go into detail on that.

Wrabbit2000
If they actually OWN the nation through debt? Well, it's not a shadow thing anymore and their power isn't figurative or behind the scenes...but real and legitimate, right out in public view, right?

I figured this out after the 2008 collapse since that was the first time I had really paid attention to it. When things go as planned this is how a home loan works for the banks:
Step 1: The home buyer comes in with 15% down on a $100,000 house. The bank approves the loan.
Step 2: The bank through the power of leveraging and fractional reserve banking creates between $150,000 (10:1 which is actually quite healthy) and $1,125,000 (75:1 which is extremely dangerous and what Lehman did, Chase does, and so on) worth of credit in their accounts. The bank then uses this money to make investments. It often goes to things like college loans, commercial paper, and so on.
Step 3: The bank gives the home buyer a loan repayment schedule for around $135,000.
Step 4: The economy goes south, the home buyer is $45,000 into his repayment and falls behind. Soon foreclosure happens.
Step 5: The bank keeps their $45,000 as well as holds the remaining $90,000 as an asset unless it gets discharged in bankruptcy. They also take the house. Note that the $45,000 repaid was in actual cash which means it can be leveraged like the initial amount down.
Step 6: The bank puts the home up for sale for $125,000 due to appreciation and repeats the process.

The end result is that it's actually in the banks interest for the home buyer to default. If a default happens such as in this case they gained a property worth $125,000 as well as $60,000 in reserves. All together they profited $180,000 in direct assets and far more through the loans they made when leveraging cash.

Given enough time by causing economic boom/bust cycles (easy to do for the fed, since they own the money supply) they can pick up massive amounts of property for very little money. Often times actually being paid to take the property away.

The entire concept of interest, needing to repay more than was originally put in is one that says given enough time the banks will own everything. That works because our money is created at interest. The only fix is to have debt free money, which has worked many times throughout history and even worked twice in US history (greenbacks and colonial script).

schadenfreude
I think ppl who invest in gold/silver are naive. (sorry) They confiscated it once before, and may so again.
I've heard ppl say "I'll just hide it", so what good is it then?

I'm more accepting of silver than gold. It's easy to monopolize gold production, while silver being much more common is harder to monopolize. That said, neither are what you want in an economic collapse. If the economy collapses a two things are going to happen:
1. Whatever commodity is being used for currency is going to be nationalized. It was done in the past with gold. At this point your asset is going to be stolen, it's going to be illegal for you to posses or use it, and it's going to be taken by the government.
2. Most commodities are sent out to people through claim checks. Slips of paper that say they have a claim on X amount of the stuff at a certain warehouse. In a collapse those claims are going to be invalid, whoever possesses it will own it until the government comes along and takes it.

IkNOwSTuff
"The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class." — Rothschild Brothers of London, 1863

I understand the system (mostly... it really is quite complicated, and the sheer volume of the currency involved is staggering), but make no profits from it. I even support parts of the system. Other parts are outright bad though. The real shame is that our government doesn't understand the system. That has allowed the bankers to get far more control than they should have.

That's what they are doing. Printing money out of thin air and buy up America disguised as helping the economy which they messed up in the first place.

reply to post by amfirst1


This would appear to be the equivalent of a hostile takeover.

reply to post by Aazadan


Your post is interesting and there is some I agree with, if perhaps agreeing just a bit off the same points. However, there are a couple that are just flat wrong. Dangerously wrong and how our economy has reached the point of near collapse. It's not even that hard to see, because it's happened before. We helped cause it, that time. We (The US) directly helped cause it.

The 80's led to the end of the race to destruction between the USSR and the US. If they hadn't fallen fairly quick, WE WOULD have at the trending rates as they were and how Reagan had put us on the highway to war or peace in short term, ultimate outcomes. They failed before we did.....and by the same economic forces. We spent fortunes to get the most high tech while they spent comparative fortunes in quantity and frankly, maintaining a creaky infrastructure.

They stole our stuff in plans as well, so they could save by factors of spending in development cost. Although...that too cost 'em and cost them huge. (See: Soviet Siberian Explosion - 1982) A nasty war being played by both sides. That was some trojan horse to take though.

Now why does all this matter? World Debt Visualized

If you look at the bottom of that somewhat dated infographic (The numbers are all higher now. Some by a little and ..well.. we know our own numbers and how bad it is), you'll find a summary of major world powers by their debt.

Russians learned. They learned well. Instead of repeating this:

The conflict has heated up in recent days amid mounting indications that the Soviet Union is having trouble gathering funds from the various republics and may in coming months be unable to meet all its debt payments.

Martin Kohlhaussen, chairman of Commerzbank, said that Moscow had so far paid "every pfennig" of its obligations to his bank on time and that such a rich country should not be a candidate for debt rescheduling.

The United States, on the other hand, has been quick to look beyond Moscow's current confusion to the likelihood of payment shortfalls before the end of the year. This would be a new chapter for the Soviet Union, which so far has been one of the world's most creditworthy countries because of its oil and gold resources.

Source: New York Times, October - 1991.

They can now just about pay off the existing debt they have with hard currency reserves they hold. ....while folks explain to Americans how more unpayable debt is a good thing ....into oblivion. (Their debt is, ironically, roughly equal to just what US spending on defense was last year. Coincidence for how they line up...but Putin has raised their debt a bit in some high priority spending.)

What is happening here for debt isn't a new thing, we just sat on the other side of it the last time an Empire fell. As we all know now, by that article date? Those words came before it all fell apart sometime shortly there after, leaving the Soviet Union as a part of history to review and understand.

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The end result is that it's actually in the banks interest for the home buyer to default. If a default happens such as in this case they gained a property worth $125,000 as well as $60,000 in reserves.

The other part is the notion that it's beneficial to banks to have property taken right now to sit. Not really...not in this economy it isn't. You're not taking into account the conditions millions of homes are in and are commonly left in by foreclosure time. There are code issues in many cases that take a lot of that profit...if not having to all but tear them down in others. All over the nation right now.

Taking homes may be some kind of evil way to expand profit in booming times ..but it's the fast track into their own financial ruin right now. If the Fed wasn't buying that bad paper instead of the banks, they'd be ruined already. (As really needed to happen to let the market work and repair in the long term.....)

We've delayed the inevitable and insured it's worse when eventually, it cannot be avoided any longer. IMHO.

Wrabbit2000
reply to post by Aazadan

 

Now why does all this matter? World Debt Visualized

If you look at the bottom of that somewhat dated infographic (The numbers are all higher now. Some by a little and ..well.. we know our own numbers and how bad it is), you'll find a summary of major world powers by their debt.

The thing is, debt is largely irrelevant to a nation. Creating more money devalues currency for sure, but debt is a form of security. The US owns a lot of foreign debt, just as a lot of foreign nations own US debt. Something that doesn't make the news much for example is that China owes the US about $800 billion, France owes us 200 billion, Spain owes us 50 billion, Portugal owes us 4 billion, Italy owes us 35 billion, Ireland owes 40 billion, Greece owes 7 billion, Japan owes 245 billion, Germany 175 billion, UK 580 billion. These are 2011 numbers so it's higher now. That's 2.1 trillion in foreign owned debt and we haven't even covered South America, India, or Russia (not sure how much we own there). That's still less than the amount of debt others hold of ours but it balances things out and we're one of the highest overall holders of foreign debt. Monetizing debt is the trick being used to stabilize fiat currencies, and between our high foreign debt holdings and the fact that the dollar is the reserve currency our debt is pretty much meaningless.

Provided the dollar remains the reserve currency through 2020 (the time when it's estimated the US will be energy independent and becomes a net exporter) even losing reserve currency status past that point is unlikely to effect anything.

We're not in great shape due to the damage caused by the banks, but relative to the rest of the world we're in an excellent position.

What is happening here for debt isn't a new thing, we just sat on the other side of it the last time an Empire fell. As we all know now, by that article date? Those words came before it all fell apart sometime shortly there after, leaving the Soviet Union as a part of history to review and understand.

National debt, particularly with a world reserve fiat currency is irrelevant. If there were the political will we could pay the entire debt off tomorrow (minus interest to the Federal Reserve). I'm not saying it's a good idea to do that due to the economic and political fallout associated with such a move, but it's within the realm of possibility. It's a luxury that most other nations don't have. The most responsible thing to do is to always pay the interest on the debt, and to grow the debt at a rate equal to or greater than the growth of the economy because more foreign owned debt makes our currency more stable (particularly when we print money to buy others debt). It doesn't work the same way as an individuals credit card.

The other part is the notion that it's beneficial to banks to have property taken right now to sit. Not really...not in this economy it isn't. You're not taking into account the conditions millions of homes are in and are commonly left in by foreclosure time. There are code issues in many cases that take a lot of that profit...if not having to all but tear them down in others. All over the nation right now.

The home and land still count as assets at X market value. What you're referring to are toxic mortgages which are a security where the bank made investments on the premise they'll gain X dollars to maintain their necessary currency holdings. When their investments failed, they didn't get those holdings which forced them to call in short term debts as an emergency measure. When people couldn't pay it leads to the bank not having enough capital on hand. They have a situation where they have say 1000 claims to a dollar with 5 of those claims being redeemed, but the bank now only has enough money to pay 3 of those claims when it had planned to have enough for 6. They still own the house, and it still counts as an asset but they were unable to sell the asset at that time meaning it wasn't liquid at a time when they needed liquidity from the mortgage in order to pay investors.

Taking homes may be some kind of evil way to expand profit in booming times ..but it's the fast track into their own financial ruin right now. If the Fed wasn't buying that bad paper instead of the banks, they'd be ruined already. (As really needed to happen to let the market work and repair in the long term.....)

We've delayed the inevitable and insured it's worse when eventually, it cannot be avoided any longer. IMHO.

We seem to agree here. Chase and BofA are going to cause the downfall of our country. No bank that was TBTF should have been allowed to get bigger, instead we should have started dividing them up. Instead we massively grew them by letting them absorb competition. The next time there's a banking crisis (and going by historical precedent we're due for one within the next couple years) the damage will be even worse. The last one was so bad we still haven't fixed even 25% of the issues it caused.