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US Federal Reserve loss tops 300 billion and its turns 100 years old
Livas1
post Posted: Feb 12 2014, 07:51 PM
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Just came across this article in Forbes magazine from mid last year.
At least someone else is paying attention..
http://www.forbes.com/sites/robertlenzner/...-doesnt-matter/
The Federal Reserve Will Lose Billions But It Just Doesn't Matter
In May the Fed lost $155 billion in paper value on its $3.2 trillion portfolio of assets. That means the Federal Reserve's capital resources of $55 billion would have been wiped out nearly three times over had it been necessary for the central bank to mark its portfolio to market, or to sell a large amount of its $3.2 trillion holdings.Don't run for cover. The Fed does not have to mark its portfolio to market, nor recognize the loss in value. In fact, the Fed has not sold any of the U.S. government securities it owns; not the $560 billion in one- to five-year Treasury paper, or the $870 billion of five- to 10-year government securities, or for that matter any of the $1.7 trillion U.S. Treasuries maturing in more than 10 years.The Fed does not have to sell any of these securities right now, because with quantitative easing still its official policy, the central bank is on schedule to accumulate another $45 billion in Treasuries in June, bringing its total ownership up just a nudge above 15% of all the Treasury securities that exist. Sovereign wealth funds and foreign central banks, like those of Japan and Chin, own 50% of all U.S. government securities.

The Fed faces potential paper losses of roughly $3 billion for every one-hundredth of a percentage point increase in yield, but it has a clever arrangement with the Treasury that enables it never to recognize these losses, because it would wipe out the whole of its capital base. Technically, the Fed will never be insolvent and it won't recognize any losses unless it actually sells some of its holdings at lower price than it paid for them.

The Fed worked out an arrangement with the Treasury Department in 2010 that allows it to avoid the risk of actually having to report a loss. Bob Eisenbeis, chief monetary economist at Cumberland Advisors and a former Atlanta Fed official, tells me that the Fed simply puts the paper losses into a deferred asset account, and as the interest payments on the debt from the Treasury accumulate, they would reduce the size of the deferred asset. In other words, the deferred asset is simply treated as a claim against future Treasury payments to the Fed.

Eisebeis worries that this means Fed remittances to the Treasury will be smaller in the future, and the federal deficit will be larger. In 2012 the Fed remitted to the Treasury some $82 billion from the receipt of interest payments on its portfolio. If QE is ended or substantially reduced in dollar terms, the result will be that "the taxpayers will have to make up the losses on the Fed's portfolio, explains the Cumberland Advisors economist.

"How will this look abroad?" he asks me, suggesting that some foreign central banks may get wary of the U.S. financial strength because the Fed's capital account has in some potentially dangerous way been compromised.

Don't worry too much, says James Bianco of Bianco Research. The highly respected Treasury bond expert in Chicago tells me definitively, "the market will not care. It did not care about the ECB's holdings of Greek, Portuguese, Spanish and Italian bonds last year when they were sitting on massive unrealized losses and probably in a negative equity position. Why should it be any different with the Fed?"








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Carsha
post Posted: Dec 30 2013, 03:48 PM
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In Reply To: Carsha's post @ Dec 29 2013, 04:35 PM

A GLOBAL retirement crisis is bearing down on workers of all ages

The National Institute on Retirement Security estimates that Americans are at least $US6.8 trillion short of what they need to have saved for a comfortable retirement. For those 55 to 64, the shortfall comes to $US113,000 per household.

http://www.news.com.au/finance/work/world-...r-1226791660815


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Carsha
post Posted: Dec 29 2013, 04:35 PM
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This story is a few months old but worth a look for the debt charts.

The view of the writer seems to be yes the US has a large debt but so does just about everyone else so its ok.

How bad are US debt levels?

Taken out of context, the numbers are staggering. The US has a total debt pile of almost $17 trillion (£10.6 trillion), which is expected to rise to almost $23tn in the next five years.

But how does that compare with other major economies?

Link Below

http://www.bbc.co.uk/news/business-24541140

 
kahuna1
post Posted: Dec 24 2013, 10:56 AM
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In Reply To: Carsha's post @ Dec 23 2013, 07:09 PM

Hi,

Yep a lone voice from a while ago.

It is whether this is a structural move or a cyclical move.

People getting older over the next 15 years as 40 million more US citizens retire and become over the age of 65 is a structural move. One the USA with 110% of Debt to GDP has ignored, removed from forward budget estimates by up to 70%.

Cyclical, the move is man made. one the US fed and government has encouraged. Lowered rates lowered risk and made it appear its a structural move, that is a permanent move vs a man made action.

Cost has been a loss of 300 billion of the US fed, all its capital.

Government 110% of GDP rising to 130% in 2017 and cast in stone now they have agreed to 2014 and 2015 budgets.

Meanwhile I join a long and distinguished list of bears, bears who are wrong on the US market. As my 1,810- level in the S+P 500 is now a memory, I will just watch and wait as always.

Merry Christmas to all



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All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own reseach and consult a professional investment advisor before investing.
 
Carsha
post Posted: Dec 23 2013, 07:09 PM
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Philly Fed Pres. Charles Plosser on QE: "we’ve dug ourselves a very large hole"


Link to the interview below

http://hedgeaccording.ly/2013/05/philly-fe...sser-on-qe.html


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kahuna1
post Posted: Dec 23 2013, 07:01 AM
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In Reply To: Carsha's post @ Dec 23 2013, 05:46 AM

Hi,

Unlikely. US fed does reports each month, each quarter and actually holds auctions for its interventions into the market. So from this we can see them acting, see their holdings and even the mark to market impact.

Its all out in the open.

Even the topic at the head of this thread, about a 300 billion LOSS in 2013, up till June 2013 buried in the quarterly report is a loss of 120 billion till June 2013. In June 2013 the long bond rates had moved less than half, it increased to 133 billion by Sept 2013 which, was and is very low. In the upcoming one for end of Dec they will not be able to fudge it too much or remove it.

Back to their actions, pretty sure what they say they do is correct. It balances everywhere.



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All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own reseach and consult a professional investment advisor before investing.

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Carsha
post Posted: Dec 23 2013, 05:46 AM
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Mark

I see elsewhere a claim that the fed has been spending over a 120 billion a month on QE not the reported 85 billion

This information supposedly came from reputable people working inside the fed.

Could there be any truth to this claim or just hysteria?

CS

 
kahuna1
post Posted: Dec 20 2013, 03:49 PM
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Hi,

bit long, bit heavy ...

its part of the Christmas thing,


Starts .....

A NATION ON FOOD STAMPS





For a long time I have wondered how central banks could have missed the GFC and its lead-up. In late 2013 I am even more in amazement of the lack of understanding and common sense being displayed on all levels.

If you have ever seen the comic Rowan Atkinson, who plays Mr Bean I was wondering where he went ? Well Mr Bean, is visiting Australia and he is now the deputy head of the Bank Of England. Like my favourite episode of the Comedy where Mr Bean cooking the Christmas Turkey eventually gets it stuck on his head, I was amused to be able to recognise the deputy Bank Of England Chief immediately when his picture appeared in the paper today.

His quote : "Historians will judge Ben Bernanke as one of the Great Central bankers" was the give-away along with the roast turkey on Mr Beans head.




Here is the PDF


Oh and yes the deputy head of the bank of England is someone who called Charles Bean


Attached File  A_Nation_On_Food_Stamps.pdf ( 126.88K ) Number of downloads: 69





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All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own reseach and consult a professional investment advisor before investing.

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kahuna1
post Posted: Dec 19 2013, 05:58 PM
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In Reply To: veeone's post @ Dec 19 2013, 02:19 PM

Hi vee,

It brings me no joy having my neck out for ridicule again. Times and prices dictate events.

I do have it in a Christmas package I am preparing. Nice, long, but neat. As always the GFC and what caused it were in plain view. Always. What is causing this imbalance as Mr Bear puts it USA is slightly above and we are slightly below, as I have numbers back to the mid 1700's, I for one have not seen such an imbalance ever without a good reason. Of course the reason is again in plain sight. Calling a slight imbalance a market where one needs to rise 50% to meet the other, or the other needs to fall 33% to meet the other is not a SLIGHT.

This all happened post 2009, so this imbalance happened over 4 years.

What is the tipping point ?

Bond market just imploded. Next will be profit reports ... I will cover that in the Christmas package, then US fed going oh by the way our mark to market loss means all capital is gone.

How the hell does one loose 300 billion ?

Its like the joke, how to keep an idiot in suspense .... I will get back to you Janet.



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All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own reseach and consult a professional investment advisor before investing.

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flower
post Posted: Dec 19 2013, 02:29 PM
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In Reply To: veeone's post @ Dec 19 2013, 02:19 PM

QUOTE
You just have to wonder what's going to happen in the end!! V1


You certainly do---it has to end in tears long term. In the short term however you also have to wonder about the savvy of US players who have been fed on decades of false figures and negative effective interest rates and yet when the very first and token minimal reduction to money manufacturing is made the market celebrates higher big time, so what happens if every couple of months Yellen eases again and again and the market shoots ever higher, the bubble grows ever bigger until.......

Interesting thing last night was the US bond market that turned not a whisker at the FOMC meeting's results, lets see if it repeats tonight.



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Combining Fundamental comments with Fundamental charts.
 
 


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