Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Fed Considers Unconventional Measures

IMG Auteur
24hgold
Published : April 13th, 2008
464 words - Reading time : 1 - 1 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

 

 

 

 

During the Great Deflation Scare of 2002 -- you remember, the brief interlude between the collapse of the stock market bubble and the rise of the housing bubble -- researchers at the Fed authored a series of papers exploring "unconventional measures". These studies and other musings were reported in speeches by Bernanke and papers published on various regional Fed web sites (in an earlier piece,, I identified 14 such papers and speeches). These so-called "unconventional" measures consisted of the outright monetization of assets and, failing that, various bizarre money-crankish schemes for debasing the dollar.

 

It looks as if these plans, and other similar ones developed since then, are now being put into effect. Last week, the Wall Street Journal reported (on their paid site) Fed Weighs Its Options in Easing Crunch.

 

WASHINGTON -- The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail.

 

Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed's name rather than the Treasury's; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011.

 

So far, the Fed has not been monetizing assets as such. They have been taking distressed debt off the balance sheet of banks and then selling an equal amount of US Treasury securities from it's own balance sheet. (However, Steve Waldman on his blog has called this covert nationalization; and the (UK) Telegraph has reported that the Fed may consider outright nationalization of insolvent banks.)

 

But if you accept the mainstream analysis, the Fed is not increasing the monetary base because, on net, they are purchasing and selling the same quantity of securities. The article devotes considerable space to the possibility that the Fed might run out of assets on its own balance sheet, and what steps can be taken to prevent this.

 

But why? The Fed does not want the Fed Funds rate to drop, as would happen if it made net purchases of securities from the banking system. But, in the end, the Fed does not need to swap assets for assets. In can simply purchase distressed or worthless assets and write a check on itself to pay for it. And so, further down:

 

Fed officials also are investigating the feasibility of the Fed issuing its own debt and using the proceeds to purchase other assets or make loans. It has never done so; the legality is unclear. Some foreign central banks, such as the Bank of Japan, do so.

 

 

 

Robert Blumen

 

 

Robert Blumen is an independent software developer based in San Francisco, California

 

 

 

 

 

Data and Statistics for these countries : Japan | All
Gold and Silver Prices for these countries : Japan | All
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Robert Blumen is an independent software developer based in San Francisco, California
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
MOST READ
March 27, 1980 : Silver Thursday, or the end of the The Hunt Brothers Story - History of Silver - Playboy  (4)
The US Constitution and Money - Michael S. Rozeff - Mike S. Rozeff  (8)
The Gold Bug (Edgar Allan Poe) - Treasures and Gold Fever - Edgar Allan Poe  (13)
What is Money? - Mike Hewitt - Dollar Daze
Most commented articles More... 
TOP RATED
The Gold Bug (Edgar Allan Poe) - Treasures and Gold Fever - Edgar Allan Poe  (13)
Discovery of Governmentium, the heaviest known element - Food for thought - Hat Trick Letter  (18)
The US Constitution and Money - Michael S. Rozeff - Mike S. Rozeff  (8)
Introduction to Economic Sophisms - Frederic Bastiat  (4)
Most commented articles More... 
MOST COMMENTED
100 Items That Disappear First in a Disaster - Beans Bullets Bullion and Bible - 24hgold  (17)
Most commented articles More... 
Latest Comments
‘Real’ Performance Comparison
26 MarChristopherbalz
Question: In the method of figuring inflation referenced, what is the rationale for adding population growth to productivity growth? Sugge...
100 Items That Disappear First in a Disaster
23 Markevthorne
68, 69 probably not that safe - particularly if you're growing your own vegetables - keep a Maine Coon cat instead: does the job automatically.
Farage Interviews Le Pen: “Prison of the EU”
21 Marneville1
BRITANNIA RULES THE WAVES AND NOW BREXIT WAIVES THE RULES. GO FOR IT FRANCE AND RID YOURSELVES FROM THE CHAINS OF IDIOTS. NOT SIN...
How the Fed Operates — And Why It's a Problem
20 Marramasart
In a nutshell, the Fed facilitates the theft of the value of the dollar, as they can control the increase in supply which at the same time inverts ...
How the Fed Operates — And Why It's a Problem
20 Marneville1
With all due respects for outlining how the crooked american Fed works or should work. From all our research we find the following the Fed...
Sparta - Gold prohibition in a collapsing economy
18 Markevthorne
You've answered none of the authors points: your comment is flat rubbish.
America Too Broke to Fix Crumbling Infrastructure? “Bridges, Roads,...
16 MarCameron Waugh1
Just like the leaders of the Bolshevik revolution were not Russians, those formulating belligerent US foreign policy are not Americans, and they ha...
POTUS at SOTUS
16 MarDRGEORGE1
Try explaining that to my patients dying on public waiting lists or getting ripped off by exorbitant private specialist fees!
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS