Posts Tagged ‘Monetary policy’
By Annalyn Censky @CNNMoney
NEW YORK (CNNMoney) — One Fed official owns thousands of acres of farmland and at least $1 million in gold. Many own individual blue chip stocks, while another appears to hold no major assets other than his home and an employee benefit plan.
Americans got an unprecedented peek at the wealth of the Federal Reserve’s top ranks this week, when the central bank released nearly 600 pages of financial disclosure documents from its current regional presidents.
The Fed released financial disclosures for Chairman Ben Bernanke and the Fed Governors last year, but this is the first look at the wealth of the Fed presidents. As the heads of the Fed’s regional banks, these 12 officials have a say in the central bank’s decisions on monetary policy and play a key role in regulating the financial industry.
Unlike Bernanke, whose assets were in no-frills retirement accounts, money markets and U.S. Treasury securities, several top Fed members have more interesting investments.
Richard Fisher, president of the Dallas Fed, is one of the richest of the 12. He accrued a portfolio of at least $21 million after working 22 years in the financial industry as a banker, stock broker and hedge fund manager.
Fisher owns more than 7,000 acres in Texas, Georgia, Iowa and Missouri, in addition to more than $1 million in SPDR’s Gold Trust (GLD), and at least $50,000 in platinum and uranium each.
He also holds common stock in at least 43 companies, including more than $500,000 in Google (GOOG, Fortune 500).
Some of the other presidents’ investments are more plain vanilla.
Minneapolis Fed President Narayana Kocherlakota invested in index funds and some savings bonds. Richmond Fed President Jeffrey Lacker has little other than a checking account at Bank of America (BAC, Fortune 500) and less than $50,000 in a money market mutual fund.
Eric Rosengren, of the Boston Fed, owned shares of Jetblue (JBLU), Intel (INTC, Fortune 500) and Pfizer (PFE, Fortune 500).
Atlanta’s Dennis Lockhart recently had stock in Apple (AAPL, Fortune 500), Amazon (AMZN, Fortune 500), Boeing (BA, Fortune 500), Coca-Cola (KO, Fortune 500), eBay (EBAY, Fortune 500), Exxon Mobil (XOM, Fortune 500) and Oracle (ORCL, Fortune 500), just to name a few.
Meanwhile, James Bullard, president of the St. Louis Fed, filed a form that revealed some things, such as outside organizations he is involved in, but said nothing about his assets. The St. Louis Fed’s ethics officer said Bullard’s investments — like his home and his holdings in an employee benefit plan — did not fall under the disclosure requirements.
Beyond the basic holdings are a few curious situations.
About two weeks ahead of the Fed’s decision in November 2010 to launch a major stimulus program known as QE2, Lockhart put about $289,000 in index funds tracking the Russell 1000 (IWF) and S&P 500 (SPX), and another $47,000 in a Vanguard emerging markets fund.
Stocks went on to rally following the announcement of the $600 billion stimulus plan. His disclosure form indicates he held the investments at least through the end of 2010.
Like many other Fed presidents, Lockhart’s assets are managed by a third-party firm. An Atlanta Fed spokeswoman said that Lockhart holds a combination of assets, some of which he directly controls and others which he does not.
Fed employees, like all employees at other government agencies, are restricted from owning shares of companies that they regulate, said Craig Holman government affairs lobbyist for Public Citizen.
Fed presidents are also restricted from selling or buying securities of any kind during the seven days both before the central bank’s policymaking meetings.
Philadelphia’s Charles Plosser was found in violation of that rule in 2007, when he transferred money into mutual funds that he held jointly with his children. Fed letters show that once he realized the error, he notified the Fed’s lawyers, and the mistake quickly prompted the central bank to remind its officials about the blackout period at subsequent meetings.
New York Fed President William Dudley’s assets are perhaps the most controversial, after an investigation by the Government Accountability Office last year revealed a few potential conflicts of interest.
Among Dudley’s assets were 500 shares of AIG (AIG, Fortune 500) and 4,500 shares of General Electric (GE, Fortune 500) that he owned while the Fed was negotiating emergency aid for the insurance giant and the broader financial industry.
He had acquired the assets before joining the Fed, and by the time the central bank began to weigh measures to assist the financial services industry, it was considered inappropriate for him to sell those shares because of the inside information he possessed.
The Fed instead decided to make him sell the shares at a random date in the future. Dudley unloaded the AIG shares in 2010 and the GE shares in 2011.
Overall, the financial disclosures don’t necessarily offer a complete picture of each Fed member’s total worth.
Dudley, for example, at first appears to own a minimum of $8.6 million in assets. But after the Fed also said Dudley’s $1.45 million in TIPS amount to less than 5% of his assets, it’s clear his portfolio is worth at a minimum, $29 million. 
http://money.cnn.com/2012/02/02/news/economy/federal_reserve_stocks/index.htm?iid=HP_LN
http://www.bbc.co.uk/news/business-13922857
The Bank for International Settlements (BIS) has warned that low interest rates across the globe are a threat to world financial stability.
The BIS warned low cost of borrowing had resulted in a credit and property price boom that was fuelling inflation, especially in emerging economies.
Central banks across the globe have cut interest rates in an attempt to boost growth after the 2008 financial crisis.
However, BIS warned that the policy may prove to be counterproductive.
“The prolonged period of very low interest rates entails the risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those advanced countries most affected by the crisis,” the bank said.
While lose monetary policies and availability of easy credit have triggered growth, there has been a flip side to it as well.
Emerging economies, especially in Asia, have had to deal with rising prices for food and other essential commodities.
This has pushed up the cost of living and has threatened to derail growth in many developing nations.
The BIS warned that the central banks needed to change their policies in order to deal with the situation.
“Tighter global monetary policy is needed in order to contain inflation pressures and ward off financial stability risks,” it said.
“It is also crucial if central banks are to preserve their hard-won inflation fighting credibility,” the bank added.
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this is absolute crap..the BIS is working on the premise of a huge recovery hitting the world in the next 2 years..yeah..fairies at the bottom of the garden stuff..but when the BIS speak governments act..cant have the plebs with money due to low interest rates..lets screw them over..uh huh..
“low interest rates across the globe are a threat to world financial stability.”
401
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Phoenix Capital Research
I want to take a moment to address the US Dollar’s collapse.
The US Dollar which most investors follow is the US Dollar index. This represents the US Dollar’s value against a basket of major currencies: the Euro, Japanese Yen, etc.
Think about that for a moment: the way we measure the US Dollar’s value is against a collection of other un-backed paper currencies all issued by over-indebted, bankrupt nations.
In other words, its nonsense.
Case in point, the Euro comprises over 50% of the US Dollar index. What’s the Euro? A currency backed by a loose group of bankrupt nations with maybe two solvent members in the bunch. Greece has already asked for an extension on its bailout repayments (like they’re ever going to repay anything), Spain is bankrupt, ditto for Ireland, Italy, Portugal, and others.
As for the more solvent European members (Germany and maybe France) their political leaders are getting crushed in the elections because NOBODY who actually works for a living (or has a working brain) wants in on the Euro.
So in Europe we’ve got one perhaps two solvent countries that are supposed to bailout 5+ insolvent ones (like that’s even possible). And the solvent countries are comprised of people who want no part of the Euro.
Man, now that’s what I call a real currency.
In simple terms, to claim the Euro is a viable currency is pure insanity. And yet, this “currency” comprises 50% of the US Dollar index (not as though the Yen or US Dollar are worthwhile either).
My point in all of this is that measuring the greenback using the Euro is insane. 100% totally insane. Which is why claiming the US Dollar is not collapsing is BS. If you actually go outside the US (which 99% of commentators don’t) you’ll find that the US Dollar is worth much less than the Dollar index is telling you.
I was recently on a trip to South America looking at real estate. While there I was told repeatedly by developers that they didn’t want to sign a contract in US Dollars. Instead they wanted to do it in the local currency. This has NEVER happened before during my trips abroad (even as recently as 2009).
When I pushed for having contracts based in Dollars, the price went up EVERY week.
The reason? The US Dollar is falling in relation to the local currency on a daily basis.
So here are local businessmen, (not economists or analysts), people who actually work for a living, refusing to accept US Dollars during business transactions.
That alone should tell you just where the US Dollar stands on the international stage.
In plain terms, the US Dollar crisis is already underway. If you ignore the stupid headlines and pay attention to the real world you can already see it. Prices of goods are EXPLODING higher. It’s being hidden because retailers are downsizing the size of their packages OR packing less goods in the same space (look inside any cereal box or other dry good and you’ll find that at best it’s 75% full).
So if you think things are fine because the US Dollar chart shows we still have a few lines of support, you’re being mislead. The US Dollar is worth far, far less than the chart shows you. So if you want to prepare yourself for a currency crisis you need to move now.
On that note, if you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
Prepare Now!
Graham Summers
PS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy.
You can access this Report at the link above
http://www.zerohedge.com/article/don’t-believe-chart-us-dollar-dropping-stone
By Andrew Gavin Marshall
The following is an excerpt of a chapter by Andrew Gavin Marshall from the new book by Global Research Publishers, “The Global Economic Crisis: The Great Depression of the XXI Century.”
Introduction
To understand the historical context of the current crisis, it is pivotal to address the nature of the most vital and powerful force within the capitalist global political economy: the central banking system. One of the least understood, most widely ignored, and mysteries of capitalism, the central banking system, is also the source of the greatest wealth and power, essentially managing capitalism – controlling the credit and debt of both government and industry.
Any notion of a “free market” must be dispelled in its true meaning, for as long as the central banking system has been dominant, central bankers have managed and controlled capitalism for the benefit of the few and at the expense of the many. Comprehending the nature of central banking is necessary in order to understand the nature of the current economic crisis.
The Origins of Central Banking
Central banking has its origins in the development of bank-issued money, which falls under three categories: (1) Deposit money subject to written check or oral transfer; (2) Bank-issued paper money (bank notes); and (3) Bank-issued legal tender paper money. In 1609, the Bank of Amsterdam was founded “as a bank of deposit slipping secretly into the practice of monetary issue towards the middle of the 17th century.” At the same time, “the goldsmiths of England are generally supposed to have introduced both deposit money and the earliest English unofficial bank note.” And importantly, “In Sweden we find what are widely regarded as the first true bank notes in Europe being issued in 1661 by a private bank founded by Johan Palmstruch.”[1]
As early as 1656, “the Bank of Amsterdam violated the one-hundred per cent reserve principle and, thus, created money,” while “the goldsmiths in England became active as lenders in 1640.” Further, the State Bank of Sweden “was founded November 30, 1656, and to Palmstruch, its founder, is attributed the first use of bank bills as credit money, not fully covered by the coin reserve.”[2]
As economist John Kenneth Galbraith explained in Money, “The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent. The deposits of the Bank of Amsterdam just mentioned were, according to the instruction of the owner, subject to transfer to others in settlement of accounts,” and thus “the coin on deposit served less as money by being in a bank and being subject to transfer by the stroke of a primitive pen.” Further, “another stroke of the pen would give a borrower from the bank, as distinct from a creditor of the original depositor, a loan from the original and idle deposit.” Galbraith elaborated:
The original deposit still stood to the credit of the original depositor. But there was now also a new deposit from the proceeds of the loan. Both deposits could be used to make payments, be used as money. Money had thus been created. The discovery that banks could so create money came very early in the development of banking. There was that interest to be earned.[3]
Expanding on this notion of money-creation, economist Rupert J. Ederer explained, in regards to the Bank of Amsterdam, that both the depositor “and a borrower could affect a purchase with the same money at the same time, [thus] we had here some increase in the quantity of money.” However, “the more serious infractions followed when the Bank began to lend money to the government of Amsterdam and eventually succumbed to the temptations offered by the [Dutch] East India Company.” As Ederer articulated, “What this bank did surreptitiously was soon to be institutionalized and to form the essence of a new monetary technique.” Thus, this bank established a “new monetary era”:
A marvelous new power probably equal to the potentialities of the discovery of coinage had evolved. The Bank had created money literally for over a hundred years without being discovered. Even after it was discovered, the Bank could have continued in operation in this new way except for public prejudice. The public was not yet ready to accept a money with no guarantee save the word of public authorities. It had been too seriously and too frequently misled in the past, and, paradoxically enough, it had fled to the banks for a more efficient money. Out of this flight grew the private money creation which is the essence of modern commercial banking.[4]
Thanks to everyone for taking the time to send in your entry for this contest.
from Bill Fleckenstein, May 2009
Now I’d like to make a comment about the funding crisis—the third in the three-baseball-game analogy that I dreamed up last fall as a way to be able to think through all the enormous problems we faced. The first and second games (crises)—financial and economic, respectively—were pretty easy for folks to understand, as they were front and center to the news.
Essentially, the financial crisis now lies behind us (with the economic crisis in full bloom, the recent economic “bounce” notwithstanding). That, due to all the moves put together by Hank Paulson and other government officials—which, as those actions stopped the vaporization of the financial system — essentially gave everyone a do-over. But therein lay the seeds for the funding crisis, if the dollar is called into question (as now appears to have begun) and if the Fed’s monetization cannot lower rates (and in fact causes them to rise, due to the consequences of money printing), then the Fed is trapped. The more it tries to solve the problem with money printing, the worse it all becomes.
The best reader definitions…..
Winner:
A funding crisis happens to a country when other nations or institutions believe that the value of its sovereign debt or the value of its currency will decline significantly over time due to poor fiscal or monetary policies.
When that happens, fewer and fewer people are willing to purchase the sovereign debt of that country, leading to a sharp increase in interest rates and greatly increased difficulty in the ability of that country to raise new debt.
A funding crisis thus refers to the inability of a country to finance itself without resorting to outright money printing. This can lead to a vicious cycle of currency depreciation, rising interest rates, poor economic performance and poor investor sentiment, all of which feed on each other in a downward spiral.
A funding crisis can only end when proper monetary and fiscal discipline is restored, usually at the expense of severe economic hardship.
This one earned a tie as it was almost as good AND he used the search so well
In gentle criticism to the Rap Reader who inspired this little exercise, it may be useful and prudent to read a majority of those “so many references” pertaining to the “Funding Crisis”. I searched “Funding Crisis” and read everything that had a score of over 25. In this review, I discovered you started describing the “Funding Crisis” in the middle of 2006, but you did not give it a ‘handle’ until late 2008. I am glad I participated in this exercise as I learned a great deal and have a more clear financial picture of where we have been, where we currently are and where we may be going.
A Funding Crisis: the successor to the financial and economic crises; created mainly as a result of Federal Reserve policy over the last twenty years. A funding crisis occurs due to a lack of credibility in the Federal Reserve (and, the United States) to instill confidence in the value of the US dollar and repayment of current and future liabilities. The result of a US funding crisis is: a declining value of the US dollar and rising interest rates in debt markets.
By Mike Whitney Global Research
The equities markets are in disarray while the bond markets continue to surge. The avalanche of bad news has started to take its toll on investor sentiment. Barry Ritholtz’s “The Big Picture” reports that the bears have taken the high-ground and bullishness has dropped to its lowest level since March ‘09 when the market did a quick about-face and began a year-long rally. Could it happen again? No one knows, but the mood has definitely darkened along with the data. There’s no talk of green shoots any more, and even the deficit hawks have gone into hibernation. It feels like the calm before the storm, which is why all eyes were on Jackson Hole this morning where Fed chairman Ben Bernanke delivered his verdict on the state of the economy on Friday.
By now we all need a laugh…Thank you Gary…~jude
by Gary North:
Part 1
It is far easier to translate Bernanke than Greenspan. Both men had this task: to deceive the public. Greenspan adopted verbal obfuscation as his technique. Bernanke has adopted boredom.
I hope this exercise will help you understand his speech of August 27.
CHALLENGES AND DAUNTING CHALLENGES
People who are unfamiliar with Bernanke’s strategy of downplaying everything, in good professorial fashion, may miss the significance of what he said.
On the whole, when the eruption of the Panic of 2008 threatened the very foundations of the global economy, the world rose to the challenge, with a remarkable degree of international cooperation, despite very difficult conditions and compressed time frames.
Translation: (1) “The world rose to the challenge.” Hank Paulson nationalized the mortgage market unilaterally. He let Lehman Brothers go bust, so as to catch Congress’s attention. Then he got Congress to bail out AIG and the largest banks. I cooperated. The FED swapped liquid Treasury debt at face for heavily discounted promises to pay that were held by the largest banks for which there was no market.
Then the Financial Standards Accounting Board reversed itself on FAS 157. Banks would not be required to list their assets at market value. This kept them solvent.
Then other central banks and politicians imitated Paulson and me by bailing out their largest banks. We set the pattern. They followed suit.
(2) “Despite very difficult conditions and short time frames.
Notwithstanding some important steps forward, however, as we return once again to Jackson Hole I think we would all agree that, for much of the world, the task of economic recovery and repair remains far from complete.
Translation: Everyone knows the economy is slowing. The two stimulus packages totalling $1.5 trillion barely reversed the recession, assuming it reversed at all. Meanwhile, the pantywaists on the National Bureau of Economic Research committee that decides when recessions end decided in April not to decide. That left me holding the bag. So the FED has declared that it ended in April 2009. Like it or lump it.
by rjs
Federal Reserve Balance Sheet Update: Week Of February 18 – New Records In Total Assets And Excess Reserves - The Federal Reserve’s balance just hit another record high, at $2.29 trillion, jumping by a whopping $54 billion sequentially (the biggest weekly increase since mid-November).
- Securities held outright: $1,967 billion (an increase of $60.9 billion MoM, resulting from $56 billion increase in MBS and $5 nillion in Agency Debt), or a huge $53.6 billion increase sequentially. The fed is now 95% complete with its purchases of MBS, and 96% complete with purchases of Agencies. The Fed has completed $167.2 billion of its $175 billion agency debt purchase program through February 17. The Fed’s MBS total is now $1.188 trillion, and by the end of the first quarter of 2010, the Fed will have purchased $1.25 trillion.
- Net borrowings: $127 billion. The monetary base increased by $50 billion in the past fortnight to $2.06 trillion. The ratio of total assets to Monetary Base remained constant at 1.08x, elevated from the historical ratio of 1.00x.
- Float, liquidity swaps, Maiden Lane and other assets: $194 billion. The CPFF program was at $7.7 billion. FX liquidity swaps are now non-existent.
Fed: we need to shrink our balance sheet, but how? – The Federal Open Market Committee released the minutes of the Jan 26-27 session on Wednesday. The meeting minutes revealed disagreement — or at the very least, debate — over the nature and timing of any moves to reduce the size of the Federal Reserve balance sheet. …staff noted that the Committee might want to address both the eventual size of the Federal Reserve’s balance sheet and its composition. Policymakers were unanimous in the view that it will be appropriate to shrink the supply of reserve balances and the size of the Federal Reserve’s balance sheet substantially over time. Moreover, they agreed that it will eventually be appropriate for the System Open Market Account to return to holding only securities issued by the U.S. Treasury, as it did before the financial crisis. Several thought the Federal Reserve should hold, eventually, a portfolio composed largely of shorter-term Treasury securities…
Bernanke on the Fed’s balance sheet - (charts) Federal Reserve Chair Ben Bernanke last week released a statement of how the Fed intends to manage its bloated balance sheet over the next few years. Here I offer my interpretation of what his plan involves. Bernanke drew a distinction between three different categories of assets that the Federal Reserve has held on its balance sheet. The first involve extension of short-term emergency credit to financial institutions: This lending came in the form of a wide variety of new facilities, which summed to almost $1.6 trillion by the end of 2008, but are now almost entirely wound down or phased out, as Bernanke observed:
Posted on 2010 02, 16 by duo
By Thomas Mullen
It is still a tiny minority who understand that central banking is a collectivist institution that is completely hostile to liberty. It is, by definition, an instrument of theft that purports to stabilize economic conditions for the collective by controlling the supply of money and credit. The fact that its only means to do so is to steal from savers to finance well-connected borrowers is a seldom-mentioned detail. That people only use the central bank’s currency because they are forced to do so by legal tender laws is spoken of even less. In this late stage of the Age of Government, the rights to liberty and property are expendable as our rulers “get the work of the American people done.”
Hopefully, the question of whether there should be a Federal Reserve will be on the table soon. However, once one concedes the existence of the Fed, there is a further question to ask: Can it do what it purports to do?
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