Chart canGOLD   Chart canSILVER  
 
Food for thought
'The truth is not for all men, but only for those who seek it.
Ayn Rand  
Search for :
LATEST NEWS  :
MINING STOCKS  :
Subscribe
Write Us
Add to Google
Search on Ebay :
PRECIOUS METALS (US $)
Gold 1304.25-0.13
Silver 20.890.02
Platinum 1474.80-2.95
Palladium 867.75-1.08
WORLD MARKETS
DOWJONES 17087-30
NASDAQ 447418
NIKKEI 15329-15
ASX 556733
CAC 40 43767
DAX 975419
HUI 239-1
XAU 1000
CURRENCIES (€)
AUS $ 1.4252
CAN $ 1.4444
US $ 1.3459
GBP (£) 0.7900
Sw Fr 1.2147
YEN 136.6800
CURRENCIES ($)
AUS $ 1.0589
CAN $ 1.0729
Euro 0.7430
GBP (£) 0.5870
Sw Fr 0.9023
YEN 101.5450
RATIOS & INDEXES
Gold / Silver62.43
Gold / Oil12.50
Dowjones / Gold13.10
COMMODITIES
Copper 3.200.00
WTI Oil 104.30-0.29
Nat. Gas 3.75-0.02
Market Indices
Metal Prices
RSS
Precious Metals
Graph Generator
Statistics by Country
Statistics by Metals
Advertise on 24hGold
Projects on Google Earth
Fed Considers Unconventional Measures
by Robert Blumen - 24hgold
Published : April 13th, 2008
464 words - Reading time : 1 - 1 minutes
( 0 vote, 0/5 ) Print article
 
    Comments    
Tweet

 

 

 

 

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

 

 

 

 

 

Tweet
Rate :Average note :0 (0 vote)View Top rated
Previous article by
Robert Blumen
All articles by
Robert Blumen
Next article by
Robert Blumen
Receive by mail the latest articles by this author  
Latest comment posted for this article
Be the first to comment
Add your comment
TOP ARTICLES
MOST READ
TOP RATED
MOST COMMENTED
Editor's picks
RSS feed24hGold Mobile
Gold Data CenterGold & Silver Converter
Gold coins on eBaySilver coins on eBay
Technical AnalysisFundamental Analysis

Robert Blumen

Robert Blumen is an independent software developer based in San Francisco, California
Most recent articles by Robert Blumen
7/13/2014
6/10/2014
4/4/2014
11/22/2013
9/19/2013
All Articles
Comment this article
You must be logged in to comment an article8000 characters max.
 
Sign in
User : Password : Login
Sign In Forgot password?
 
Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.
Disclaimer