Federal Reserve holds $2 trillion in U.S. debt

cnsnews.com ^ | August 19, 2013 | Terence P. Jeffrey

[Toddsterpatriot]

This in effect is no different than some banana republic just printing money that is increasingly worthless.

It is different. When a banana republic prints money, they spend it into the economy. Backed by nothing. Prices skyrocket. Central bank prints more.

The Fed prints money and uses it to buy guaranteed bonds. The money is backed by the bonds. And a few hundred billion in gold.

If prices start to climb, the Fed can sell the bonds,lend the bonds out, for cash, (reverse repo) or let the bonds mature, all of which would reduce the money supply.

[Toddsterpatriot]

When this all crashes, the Federal Reserve (which is a group of banks) will own and possess all of our gold and a huge amount of real estate.

The Fed doesn't buy, doesn't want real estate. They buy bonds.

[RckyRaCoCo]

Shutdown the Fed...and we'll see where the economy is REALLY at.

Can you say...Unnngh?

[Cringing Negativism Network]

What America needs now, is industry.

American industry.

Bring back our industry now. Stop buying everything from everywhere.

Buy things made in America.

Now.

[1010RD]

Why the low QE? We’re credit starved. Someone said they’re trying to keep a 1.3/1 parity with the Euro.

[expat_panama]

Someone said they’re trying to keep a 1.3/1 parity with the Euro.

People say all sorts of stuff, just like the goofy article that started this thread, but the fact remains that the Fed doesn't care about exchange rates and the Fed doesn't have anything to do with the national debt.  The Fed only works with monetary policy, period.  All this talk we're hearing about QE supporting Obama and wallstreet is nonsense --the Fed's treasury holdings as a % total debt is about average.  Sure, it looks big in absolute terms--

--but as a % total debt--

-- it's not an issue...

[1010RD]

One of the things to remember is that there used to be bank clearing houses doing essentially the same thing the Fed does today. The Fed eliminated them in favor of a political entity.

[kabar]

Is that percentage of holdings to the publicly held debt or the entire debt?

[ctdonath2]

Yup, not an issue.

Until they can’t make the interest payment for whatever reason.
Then it’s over.

[expat_panama]

--the Fed's treasury holdings as a % total debt is about average.  Sure, it looks big in absolute terms-- --but as a % total debt-- -- it's not an issue...

Yup, not an issue.  Until they can’t make the interest payment for whatever reason.  Then it’s over.

Who is the Fed supposed to make an interest payment to, and why?  Look, say what you want about your worries about $2T in Fed holdings but my concern is the $16T in federal debt.

[expat_panama]

Is that percentage of holdings to the publicly held debt or the entire debt?

Here are a couple links that I like to use: Debt to the Penny --

Current	Debt Held by the Public	Intragovernmental Holdings	Total Public Debt Outstanding
08/21/2013	11,950,216,351,494.50	4,788,205,758,940.44	16,738,422,110,434.94

-- and Federal Debt Held by Federal Reserve Banks 2013:Q1: 1,796.0 Billions of Dollars.

[ctdonath2]

That’s what I meant. If the government can’t make interest payment in real currency on $16T debt, it doesn’t matter what the Fed issues.

[expat_panama]

Ah thanks for clarifying things get foggy before finishing my morning coffee. 

You're absolutely right, the problem's the national debt and not what's being held by the Federal Reserve.  I'm hoping more and more people catch on to what you're saying about the interest rates.  A year or two ago when T-bill rates were 0.15% the interest payments were 'only' $¼T/year, no more than they were in '06.  Problem is that back then T-bill interest was over 5%.  As rates go back up we could be paying more on interest than or any other spending.

Tax hikes would only make revenue fall more; the choice will be immediate and clear: cut spending or watch America go Greece.