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    « Quit while your ahead!! | Main | Fed Loans Guided by Raters Grading Subprime Debt AAA »
    Tuesday
    Dec232008

    Federal Reserve balance sheet

    Machiavelli, the Karl Rove to the Medicis, asked whether it is better to be scared or just confused? OK that wasn't exactly his question but check out the Federal Reserve's own financial projections. See if you can make heads or tails of the Federal Reserve Balance Sheet.

     

    Federal Reserve Balance Sheet

     

    James Hamilton

    December 22, 2008

    Here I survey how we got here, where things currently stand, and what it all means.

    Let me begin by reviewing some first principles of what the Fed is all about. How did the cash currently in your wallet get there? You withdrew it from an ATM, perhaps. But these wonderful contraptions don't just give you the green stuff for free-- you had to have deposits in the bank to be able to withdraw the cash. You can think of your account with your bank as credits you can use to get cash whenever you want it.

    But where did your bank get the cash? It likely has an account with the Federal Reserve System, which account, just like the one you have with your bank, shows a certain level of deposits that the bank has in its account with the Fed. Your bank can then go to the Fed and withdraw those deposits in the form of cash. So you can think of your bank's deposits with the Fed as credits it can use to get cash whenever it wants

    Read Full Article at: http://www.rgemonitor.com/financemarkets-monitor/254852/federal_reserve_balance_sheet

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