Æлена (barskaya) wrote,
Æлена
barskaya

Next Troubled Bank: The Fed

This is kind of frightening, the Fed is leveraging its capital at 48 to 1.
No wonder the banks are doing better, the Fed and the GSEs are loading up on their crap.

А что дарлинги, кто еще не знаком с термином inflationary depression (инфляционная депрессия)?
Каким образом она возникает? Как вообще может возникнуть инфляция если потребление падает?
В основном из-за того, что потребители боятся потерять работу, в то время как их зарплата (и доход вообще) уменьшается. Именно снижение дохода - это то, что породило необходимость занимать. Кредиты, которые Wall Street был счастлив выдавать ( увеличивя тем самым еще большую потребность населения в кредите -- ибо платить по минимальным процентам население еще способно, а вот выплачивать основной кредит - уже нет).
What a deal!


 

The FED's balance sheet will only prove to deteriorate over time, and they will print more money to fill that void. They print by crediting the primary dealer's account at the NY Fed when they buy assets from them. Right now they are buying agency MBS and treasuries from primary dealers. That electronic credit, a mouse click, is modern day money printing. But this money is not being lent, it is being held in excess reserves, which the FED pays interest on since last October.
Why hoard? Because banks will need those funds to service their own debts and to maintain capital ratios as performing assets start to deteriorate. Is not just a subprime problem, but all classes/quality of debt that was securitized. Whole loans are a mess waiting to happen because they are held in HOLD books, and only marked down when the entire book starts to non perform. So, those marks are too high.

The question is, will the FED admit that they are taking losses and their portfolio is deteriorating? Will that cause a disturbance? Will that cause a loss of faith in the dollars? Is that the gold trade? Will they just print more?

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