Fed Monster

This post from the Daily Bail shows the beginnings of the Fed ramp-up. My thoughts are that at least another Trillion or two will be added to this balance sheet in an effort to keep the dead-man-economy upright and walking.

Of course it won’t work. The inevitable will happen despite the machinations of politicians and their allies to prevent it.

The issue is not how the Fed balance sheet ever returns to normal. It won’t and can’t. The issue is how big does it grow before the economy collapses?

Even Don Quixote (Ron Paul) arrives too late to change this outcome.

CHART SHOCK: Fed’s balance sheet grows to record size

by DailyBail

After flattening out, it’s headed higher once again with QE2.  One question, when the Fed wants to sell MBS and other securities, who’s gonna buy?

(Source -Reuters)   The U.S. Federal Reserve’s balance sheet expanded for a sixth straight week, bolstered to a record by purchases of Treasuries, Fed data released on Thursday showed.

The balance sheet, a broad gauge of Fed lending to the financial system, rose to $2.364 trillion in the week ended Dec. 8 from $2.329 trillion the previous week.

Last month, the U.S. central bank began a second bout of quantitative easing, known as QE2. The Fed expects to buy about $600 billion in U.S. government debt purchases over an eight-month period in an effort to stimulate the economy.

The balance sheet exceeded the previous record of $2.333 trillion set in May as the Fed was about to end its initial round of bond purchases that involved $300 billion of Treasuries and $1.425 billion in mortgage-related securities.

The Fed’s QE2 follows its use of proceeds from maturing mortgage securities in its portfolio to buy Treasuries — a move that started in August. Since that time, it has purchased about a combined $175 billion in Treasuries.

The central bank’s holdings of U.S. government securities totaled $949.61 billion on Wednesday, up from $917.45 billion last week.

Continue reading…

Answer this question Bernanke:

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  1. “The issue is not how the Fed balance sheet ever returns to normal. It won’t and can’t.”

    Not unless we abolish the Fed altogether. Then guess what happens? The Treasury’s debts to the Fed just simply vanish, just as if the Treasury has printed and issued the money themselves.

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