Tuesday, May 26, 2009

Off the top of my head...

...I can't remember if I posted something here or if I was replying to somebody somewhere else, but the question was asked: what is going on with the 2B that the Fed isn't accounting for lately? My theory was that the Fed isn't advertising where the 2B went because it was largely used to purchased Treasuries that the government couldn't get foreign nations to buy. They wouldn't want people to know they were doing it, because that would be a clear indicator that other nations were refusing to buy Treasures - and the dollar's days would be very numbered at that point.

So much for keeping it a secret, though. China seems to have figured it out.

UK Telegraph Online
China warns Federal Reserve over 'printing money'
China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed's direct purchase of US Treasury bonds.
By Ambrose Evans-Pritchard
Last Updated: 9:40AM BST 26 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal...

...The Oxford-educated Mr Fisher, an outspoken free-marketer and believer in the Schumpeterian process of "creative destruction", has been running a fervent campaign to alert Americans to the "very big hole" in unfunded pension and health-care liabilities built up by a careless political class over the years.

"We at the Dallas Fed believe the total is over $99 trillion," he said in February.

"This situation is of your own creation. When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them," he said.

His warning comes amid growing fears that America could lose its AAA sovereign rating.

Oh, yeah - I forgot. Your pension and medicare are toast, too.

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