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Post by jeffolie on Jun 29, 2008 8:09:45 GMT -6
I have been reading alot of reports that The Crisis of The Summer of 2008 is upon us. The problem is that it is extremely difficult to guess how deep the Crisis is now and for the next month or so. Crisises are 'handled' by the 'system' well or badly. From what I can tell of the Fed's balance sheet, there is enough money there in the form of Treasuries to handle a collapsing Lehman, a collapsing Indy Mac but beyond those two, then the Fed's balance sheet is touch and go. The Congress may create more financial staying power for the Fed, but the politics of giving more to the Fed is getting tough.
So, all in all, I have written before that I believe the 'system' has enough 'juice' to survive The Crisis of The Summer of 2008. And now I am only pretty sure. I have accelerated my purchasing of silver coins just in case I am wrong.
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Post by unlawflcombatnt on Jun 29, 2008 11:42:45 GMT -6
Jeff,
Back several months ago, some analysts estimated that the Fed had used up about ½ of their money — leaving them with something like $300-$400 billion remaining. It seems logical that they'd have even less money now.
How much money do you think they still have left? Or, to put it another way, how much more do think they can loan out?
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Post by jeffolie on Jun 29, 2008 12:01:08 GMT -6
I do not know how much they have left. The last article I read seemed to think it was less than $200B. But the Fed does NOT follow generally accepted accounting rules. They do not mark to anything in particular and they are pretty much self regulating. So, their balance sheet can be described in any way they want to declare it to be. For example, many of the newly created "facilities" were done under Depression era precidents that happened for 'emergencies'. The Fed has declared this an emergency thus taking in crap collateral. These 'facilities' were stated by the Fed as to last as long as the emergency which is circularly defined by the Fed as lasting as long as the Fed defines. The Fed plays with itself and pretty much does whatever it wants with the twist of a phrase.
If the Fed gets the power to charge interest on the Fed's treasuries then theoretically it can issue as many treasuries as it wants. The Fed has asked for this power. Then the Fed could loan out as much as it wants to loan out using their newly created treasuries while only having to cover the interest payments which could be had as obligations from whoever it loans the new money to. I am pretty sure Congress would grant this new power to the Fed in a crisis that the Fed might construe just to get the new authority.
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