Shocking Bank Reserve Numbers This Week
I got some shocking numbers this week (31 March 2008 issue) of Barron’s on the Federal Reserves balance sheet.
Non-Borrowed Reserves: -61,788 (Millions)
Free Reserves ----------: -75,379 (Millions)
These categories have shifted to the negative by nine or ten orders of magnitudes in the past three months!
Non-Borrowed Reserves
17 Dec 2007: +43,797 (Millions)
31 Mar 2008: -61,788 (Millions)
Free Reserves
17 Dec 2007: +1,627 (Millions)
31 Mar 2008: -75,379 (Millions)
In the case of Non-Borrowed Reserves, this is like having assets of $43,797 in December and then three months later you find yourself -61,788 in debt, times a million.
Here are some BEV charts on the Fed’s balance sheet. Note that 20% of their Treasury holdings are gone since December 2007.
We have not seen a similar drop in this category since the late 1940s. Back then the US had massive gold holdings backing the US Dollar, but who knows what is left of the US bullion reserves now days?
Note also that Total Fed Credit has increased during this period.
So if the Fed has traded or swapped 20% of their Treasury’s reserve holdings, what have they replaced them with to maintain Total Fed Credit at its current levels?
My best guess is that the Fed has swapped 20% of their US Treasury reserves with toxic waste from Bear Sterns and other troubled Wall Street financial houses at the discount window.
How long will this farce last?
On another note. Barron’s this week (31 March 2008 issue) has a book review on Greenspan’s legacy at the Fed by Robert Auerbach. Mr. Auerbach is a former congressional staffer for the House’s Banking Committee. It seems that Dr. Sir Alan Greenspan took the 90 day wonder track at NYU for his PhD. I refuse to think that he was too dumb to get it the hard way, most likely he was smart enough not to waste his time and money for what nonsense a PhD in Economics delivers.
Let’s face it, all of our current monetary, and indebted problems were inflicted upon us under the supervision of the best minds in economics. Idiots and buffoons all! Who else would be so stupid as to swap out 20% of the Fed’s balance sheet of US Treasury securities and replace them with junk mortgages from Bear Sterns? It seems that these mortgages could not be sold to anyone else but the Federal Reserve. Isn’t former Federal Reserve Director Wayne Angel still employed at Bear Sterns?
After this monetary crisis is completed, the first thing I think is needed is a law requiring every economic PhD in government employment to wear a red rubble Bozo nose and floppy clown shoes while on duty. This would be a warning of the clear and present nonsense they speak on issues concerning the management of money.
Remember how Greenspan could mumble for hours and say nothing of value and still have the financial press and congress eat it up? “Maestro” Ha! Come to think of it, red rubber Bozo noses should be a requirement for many people while on duty.
March 31, 2008
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