Fed Buys 91% of 2009 Debt

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leo0648's picture
leo0648
Status: Bronze Member (Offline)
Joined: Oct 6 2008
Posts: 48
Fed Buys 91% of 2009 Debt

Anyone care to comment?  How can this be if their QE program was only 300 billion? 

 

http://www.zerohedge.com/article/ultimate-shell-game-federal-reserve-funds-us-deficit

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: Fed Buys 91% of 2009 Debt

Hello leo0648,

Thanks for the great dig from Zero Hedge.  The Fed buying 91% of U.S. deficit is not a good sign.  The New York Fed runs the FOMC (open market committee) which buys from dealers and auctions.  When they buy securities, they build reserves for all member banks.  The Federal Reserve creates the money for free in buying U.S. securities and the dealers get a percentage.

The reserves may used by member banks to provide cash and coin for their vaults (customer service) and to create "high powered" money.  High powered money is a term for multiplying the reserve account balance by a factor, for example 10:1.  Reserve money may be used for loans or to create money for the bank's account, which may then be invested.  TARP changed the rules to give the banks another alternative, the money that they allow to sit in their reserve account at the Fed collects a small amount of interest.

If you are shaking your head wondering how the private Fed and their members can make huge profits for free; from our national debt, you get it!  This is why banks, like Goldman, give so much money to politicians, judges, regulators, etc.  

Larry     

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