Sunday, July 17, 2011 – 06:00 p.m.
If it doesn’t alarm you it should.
The U.S. Federal Reserve is holding $2.6 trillion in U.S. Government-issued bonds and bank-issued mortgage-backed securities on its balance sheet.
It seems the fed has purchased the securities as a part of its two quantitative easing’s meant to help stabilize the economy.
The Fed also says it intends to keep reinvesting proceeds from maturing securities.
In essence we, the U.S. Treasury, are printing money and in-turn loaning it to ourselves (The Federal Reserve). It’s as simple as that.
And it’s scary to say the least.
To view the latest Federal Reserve balance sheet click here.
By buying the securities in the open market, the fed has been keeping interest rates artificially restrained.
It’s never healthy for a country’s central bank to buy its own country’s debt obligations. In a way it’s gaming the system. And it’s also a symptom of just how bad things really are.
Without a massive tax increase and deep spending cuts at all levels of government the situation will snowball into something worse.
People can feel something’s not right and they are rightfully cautious on the economy and their job prospects.
Don’t put it past the government to purchase equities on a large scale to keep the stock markets shored up.
However global investment markets collectively have become too large for any one central bank to reign in.