Could the U.S. central bank go broke?

[sumfuka]

It's impossible for the FED to go broke, why..... because they determine the value of all assets/debts/you name it. Whenever they get a negative number in their "accounts" they just turn it into a positive number.

Kind of like:

(-2) x (-2) = +4 .....

Plus they are in the Money Making business. LITERALLY!

 

[Visaria]

I'm so surprised you Yanks don't do a "Tunisia" and riot on the streets against all your crazy govt policies including all that QE bullshit. I mean Bernanke has explicitly said he thinks your cost of living is too low and is committed to raising it! He wants to you guys to pay more for everything under the sun!

Your balls are obviously a lot smaller than those of these Tunisian chaps.

 

[jem]

Quote from PocketChange:

What? Are you kidding?

If and when he dollar loses reserve currency status its game over.
1990 Saddam petitioned OPEC to drop the dollar and trade oil in gold.
Present day concerns are escalating.

We are engaged in the middle east to ake sure the dollar is used to transact business period.

I love asking this question....
Why does being a reserve currency matter in an floating currency economy, with digital currencies?

You don't like the reserve currency... tell your banker what you do want. They flip a switch and the currency changes.

 

[Visaria]

The other party wants dollars, doesn't want to deal in whatever you want to trade in.

 

[jem]

Quote from Visaria:

The other party wants dollars, doesn't want to deal in whatever you want to trade in.

fine -- thats a financial choice not some sort of manipulated "reserve currency" status choice.

 

[Visaria]

Ok, liquidity concerns. You want to do your multi billion dollar deal say in South African rand, however your bank kindly tells you the liquidity isn't there, only in dollars.

 

[jem]

I agree its a choice...

an analogy would be that English is not the "reserve language" because we struck a deal with saudis.

Its because English speaking countries have very large markets.

When I was in college lots of people were taking Japanese. Now I bet there are a bunch of people taking Chinese.

 

[PocketChange]

Ponder for a moment that the Dollar is dropped and international transactions are all done in gold or instrument backed by Gold. The Dollar was last backed buy gold in 1968. The dollar would be valued proportionally to our Gold Reserves... probably deflates the dollar 50x1... Who really knows what gold we hold.

This would impact the treasury/federal reserve's ability to intervene and pump money. Controlling the transactions basis world wide is a matter of national security. I think our foreign trading partners are well aware that the dollar is a credit instrument backed only by the good faith and force of our Govt.

A few years back FINCENs intervened and quashed mobile digital currency.
I can't recall the company but they were marketing a form of stored value cards that our govt said competed with US currency.

Quote from jem:

I love asking this question....
Why does being a reserve currency matter in an floating currency economy, with digital currencies?

You don't like the reserve currency... tell your banker what you do want. They flip a switch and the currency changes.

 

[Tsing Tao]

Quote from Visaria:

The Fed has a strong bias against raising short term interest rates since this is bound to push long term yields higher and bond prices down, thus decreasing the value of their bond portfolio.

Basically the Fed is a mess, it should declare insolvency and close down. It's more or less inevitable anyway, just a matter of when.

this would be true if the balance sheet of the fed were mark-to-market. however, since the fed claims it can hold items to maturity and is not there to "trade" these items, it uses mark-to-unicorn instead. of course, there is no consideration of the fed's assets becoming worthless in that life cycle, but dont confuse the issue with pesky facts.

 

[5yrtrader]

Quote from Visaria:

The Fed has a strong bias against raising short term interest rates since this is bound to push long term yields higher and bond prices down, thus decreasing the value of their bond portfolio.

Basically the Fed is a mess, it should declare insolvency and close down. It's more or less inevitable anyway, just a matter of when.

This is absolutely not true, the Fed is not an investor, they have no interest in whether or not their "portfolio" makes or loses money.

Right now the Fed is worried about deflation, once deflation takes hold it is very hard to get out of the "deflationary spiral." Bernanke, as a student of the great depressions (what commentators always say) knows all too well what deflation can do to an economy. He is doing everything in his power to bring about monetary inflation, he could care less what the value of his "portfolio" is.

The Fed is not a mess, it can't declare bankrupcy, it controls the print press for US dollars. If someone says you owe me X dollars to the Fed, it can just print off new ones. Unless the rules change the Fed can't go bankrupt or be insolvent.


5yr