FED Balance Sheet Explodes

April 20th, 2014 by

Since the credit crisis has made its appearance the economy seems to stabilize. Especily when you believe the mainstream media. And that’s what most people do. The FED has had a huge role in propping up everything that was threatened. And still is about all depends on the FED .

Monetary Base
The stock markets depends on actions by the Fed . The money printing machine made the monetary base has grown since 2007 from roughly $ 800 billion to $ 4,000 billion today. The financial situation of America is a mess . The national debt of America has now risen to $ 17,581 billion . An amount that they can never repay . Indeed , the debt is becoming harder . The Fed has more than $ 1,400 billion in mortgage and more than $ 2100 billion of bonds in the books . The equity of the Fed is about 1 % of the total balance sheet .

The tapering, reduction of money printing, is launched this year. The monthly incentive of $ 85 billion is reduced to $ 55 billion in steps . Note that this is on paper . The FED appears to print a lot more then this number. Estimates run toward the $ 120 billion per month . Countries like China have a lot of their reserves in U.S. government bonds and buying less and less . The Russians have in recent months been dumped U.S. Treasuries . Iraq bought in February this year, 36 tons of gold . Gold as a perfect hedge on the reserves in U.S. Dollars .

The fall of the dollar
The U.S. dollar is still further under pressure. Geopolitical tensions between America and Russia have increased . The currency wars are in full swing . Russia is increasingly making plans for resources not to deal in dollars but in other currencies such as the ruble , Euro or gold. The start of trend, which I expect will be stronger and stronger. The petrodollar is slowly put offside which weakens the foundation of U.S. Dollar.
When countries like China to buy U.S. government bonds barely more than it is increasingly difficult for America to finance the national debt. Only higher interest rates may increase demand but rising interest costs is a big problem with such a debt. The FED will continue to play its role as a buyer of bonds. I think the so-called tapering will be temporary.

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