"Off-balance sheet operations": where it takes and where it hides the money the US Federal Reserve

The US Federal Reserve has an impact not only on US policy, but also on world politics. And on the economy, of course. The ruble exchange rate, for example, can be shaken not by a decision, but only by a statement from the Fed. Why, there is a ruble, which runs for oil, like a peg, - the comments of the Fed leadership easily affect even the indices of Asian exchanges. However, in recent years, something is not going well in the American financial kingdom ...

In foreign exchange trading last Wednesday, the ruble suddenly went up. This happened after the statement of the Fed. On 19: 58 MSK. dollar got down to the Russian ruble on 72 pennies.

Asia Pacific stock exchanges on Thursday morning too showed growth. As of 07.49 Moscow time, the Shanghai Composite Index (Shanghai Stock Exchange) increased by 0,44%, the Hong Kong Hang Seng Index - by 1,07%, and the Korean KOSPI - by 1,23%. It is noted that these exchanges are growing after the US market after the speech of J. Yellen.

The thing is that the head of the Fed has promised to raise interest rates in the United States, but only very gradually. There will be no strong increase at all. Speaking to Congressmen, Madame Yellen reportedthat the Fed will collapse a large-scale portfolio of bonds, but at the same time it will closely monitor the level of inflation.

According to Yellen, the economy in the country is growing slowly, but the increase in the number of jobs continues, and consumer spending is kept at a confident level. In addition, increased investment in the business.

The result of the influence of Janet Yellen's statement on the home economy: on the US stock markets on Wednesday there was an increase, and the Dow reached a record high.

According to some experts, Washington has enormous problems because of the growing debt, and the Fed has already turned its back on supporting the US debt pyramid. There is also an opinion that Janet Yellen will soon say goodbye to the post of the Fed chairwoman.

The hypothesis that the Fed has great difficulty in maintaining the debt pyramid of America is considered by the well-known economist Valentin Katasonov on the pages of the publication "Fund of Strategic Culture".

The expert reminds: the holes of the US federal budget are plugged with debt securities issued by the US Treasury (bonds, notes, notes). However, it is becoming increasingly difficult to insert a “gag”. There are three reasons for this.

1. Some states reduce portfolios of US debt securities. China has long been the largest foreign buyer of US Treasury securities. But if at the end of the first quarter of 2016 of the year China had $ 1.242,8 billion in treasuries, then a year later, at the end of the first quarter of 2017, the figure decreased to $ 1.092,2 billion.

2. Traditional conservative investors began to refuse treasury securities: social security funds, pension funds, insurance companies. These papers do not provide the yield they need: over the years, these conservative investors have become gambling financial market players, according to Katasonov. Bottom line: in the group of major institutional investors in the United States (pension and insurance funds), the share of treasure bonds in assets decreased to 10%.

3. In 2014, the Federal Reserve completed its quantitative easing program, which provided for the purchase of US Treasury and mortgage securities. Now, the Fed must begin "unloading" the balance, resembling a bubble. "Unloading" involves the sale of treasury securities, but to whom to sell at low demand?

Overall result: it became difficult for the government to maintain the state’s debt with treasury bills. And the obvious primary means here is raising the Fed's key rate (which, we recall, is interpreted by J. Yellen, based on "gradualness"). This should increase the yield of US Treasury securities and revive demand. However, Katasonov (more precisely, the American Ministry of Finance) sees many solutions to this solution.

The Ministry of Finance has already recalled: almost two hundred billion dollars is spent on servicing the US debt annually (approximately 7-8% of federal budget spending). Increasing the rate, apparently, will lead to the fact that the cost of servicing the debt will become the main item of expenditure.

In recent years, “exotic” buyers have appeared at the treasurers. “At the end of the first quarter of 2017 of the year,” writes V. Katasonov, “the volume of treasury securities held by foreign owners was equal to 6,07 trillion. dollars compared to 6,24 trillion dollars a year before. The reduction was only 0,17 trillion. dollars It would be much larger, but the massive sales of a number of countries were offset by a number of exotic states and jurisdictions acting as buyers. New jurisdictions have appeared in the list of the main foreign holders of US Treasury securities, which before the financial crisis 2007-2009. and the COP program in the US was not in the top twenty. These are Ireland and the Cayman Islands, which today took the third and fifth places in the list of leading holders of US government securities. The value of the US Treasury portfolios in these jurisdictions far exceeds their GDP. Countries such as Belgium, Luxembourg and Switzerland were among the leading holders of US Treasury securities a decade ago, but their activity in purchasing such securities has increased significantly in the current decade, especially after the completion of the American COP program. ”

Such “compensations” are provided mainly by private investors. It is known that the mentioned jurisdictions are offshore (more than seven hundred companies of American origin are registered in Ireland alone). The same with the Cayman Islands, a thriving offshore center. Experts believe that investing huge amounts of money in treasury investors are pushing hopes to increase the yield of securities.

Katasonov is voicing a different version: the purchases of US government securities are carried out ... by the US Federal Reserve itself! The program of quantitative easing is over, and now the US Fed is buying securities in secret, acting through funds and companies owned by its main shareholders and located in jurisdictions. Canadian financial analyst Rob Kirby and American bank specialist Ellen Brown point out that the former Fed Chairman, Ben Bernanke, started the “backstage buying”. This version is supported by economist Paul Craig Roberts.

Katasonov himself is confused by “only one moment”. Where does the money come from? What are the huge purchases?

The expert recalls the so-called off-balance sheet operations - approximately the kind that the Federal Reserve carried out during the years of the financial crisis that began in 2007. In those years, Michael Bloomberg managed to achieve a partial audit of the Fed through the US Congress. It turned out that the Federal Reserve had issued loans worth over 16 trillions dollars at the time. Ben Bernanke was unable to say anything intelligible to the congressmen, and then the matter was hushed up.

It remains to believe that the Fed continues to buy treasury securities, simply using the "printing press".

In connection with the hypotheses of American experts and the assumptions of Katasonov, the information on the probable decision of President Trump is very interesting.

It is curious that Mr. Trump is going to change the Fed authorities: instead of Janet Yellen, he will put another person on the post of the Fed head.

The US president is leaning toward the nomination for the post of head of the Federal Reserve Gary Cohn. Replacement may occur next year. About this anonymously сообщают informed persons from the White House.

The aforementioned Mr. Kohn now heads the National Economic Council at the White House, and previously worked as president of Goldman Sachs. The publication "Politico" says he writes that Cohn is guaranteed to be appointed to the post of Fed Chairman.

As for the replacement period, everything is obvious: Madame Yellen began her work in February 2014 of the year, and the term of office of the head of the Fed is 4 of the year. No later than February of next year, the system will have a new chief, and the world exchanges are expecting new shocks, for the whole world is still spinning around the dollar. It is also possible that in 2018, Mr. Trump and the new bosses of the printing press will try to improve the affairs of the American state with the help of a winning war.

Observed and commented on Oleg Chuvakin
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    1. +6
      July 17 2017
      As long as the dollar is actually the ONLY world currency, the Fed will have “room for maneuver,” that is, for various speculations. Not in vain, as soon as someone begins to threaten the world’s greatness, the US begins to be “worried” about “undemocratic” and “color revolutions” begin to flourish in that region
      "People die for metal" - times are changing, but nothing is changing
      1. +2
        July 17 2017
        Quote: svp67
        "People die for metal" - times are changing, but nothing is changing

        "Satan rules the ball there." Times change, and with them we .. Latin: Tempora mutantur et nos mutamur in illis. I don’t think that everything is so sad. Stalin has been blackened now. Perhaps we recall and try Marx in a new way.
        1. that's for sure am
          history is very politicized, everyone considers it from the point of view of its own benefit. Flowers can be considered as a beautiful, divine creation, or as genital organs of plants
      2. 0
        July 20 2017
        Something the rise in price of the ruble on the population of the Russian Federation does not affect in any way, and the cheapening is so instant. belay
    2. +3
      July 17 2017
      the world still revolves around the dollar

      Therefore, neither finance nor economics correspond to at least some logic or “omnipotent laws of the market”. Almost everything depends on the statement of one person or the actions of speculators in the world where the dollar is spinning.
      1. +7
        July 17 2017
        "Tahiti, Tahiti ... We were not in your Tahiti. We are fed well here, too." For our native Central Bank, it was a "discovery" that inflation flew up due to the rise in price of white cabbage by 50%. And having broken Ugra bank (right or wrong, it’s not important), it is calmly declared. Depositors do not worry. We’ll print the money for the DIA. The machine works for us. There is enough paper for everyone.
        1. +2
          July 17 2017
          you do not represent the system of the Central Bank. they will print exactly as much money as they have in the ZV reserves. not a penny anymore. Moreover, the course will be beneficial to foreign importers.
      2. +1
        July 17 2017
        Quote: rotmistr60
        neither finance nor economics match at least some logic

        In fact, the logic is very simple: The power of the dollar is a system of issuing securities and issuing them in the form of loans to democratic and not so governments for many years to come. The labor and resources of these governments give rise to material support for the dollar.
        1. +2
          July 19 2017
          It is also curious that, unlike Russia, the United States does not forgive anyone a dollar debt and hang it with interest on the next generation of the population of those countries that, for one reason or another, cannot repay these debts on time ...
      3. 0
        July 21 2017

        Logic in economics was systematized by K. Marx. Everything is simple. One must clearly understand the concept of surplus value. The role of this surplus value in the development or decline, degradation and destruction of society.
        What we have at the moment. This is not likely to exceed the money supply of unsecured goods. This is a debt system that cannot be resolved.

        By the way, these indices, with strange names like Dow John. There are subjective components, which means that this is a gag and full bullshit.
        1. 0
          July 21 2017

          Capitalism - cost + surplus value. ALWAYS leads to a crisis of the economy.

          SOCIALISM - only the cost. The economy is balanced.

          Communism-socialism - there is no monetary system. There is no money as such.
    3. The comment was deleted.
    4. 0
      July 23 2017
      the purchase of their securities through third parties is the last thing

      And he cried out strongly, with a loud voice, saying: Babylon, the great harlot, has fallen, fallen, has become the habitation of demons and the shelter of every unclean spirit, the shelter of every unclean and disgusting bird; for she watered all nations with the fierce wine of her fornication, 3 and the kings of the earth committed fornication with her, and the merchants of the earth became rich from her great luxury.

      4And I heard a different voice from heaven, saying: Come out of her, my people, so as not to participate in your sins and to undergo her plagues; 5 For her sins have come to heaven, and God remembered her iniquities.

      6 Give her back as she gave you, and give her back twice according to her deeds; in the bowl in which she prepared the wine for you, cook it in half.

      7How much she was famous and luxuriant, give so much torment and sorrow to her. For she says in her heart: "I am sitting as a queen, I am not a widow and I will not see sorrows!"

      8That one day, executions, death, and weeping, and famine, will come upon her, and will be burned by fire, because the Lord God who judges her is strong.

      9 And the kings of the earth will mourn and lament for her, having fornication and having escaped with her, when they see the smoke from her fire, 10 standing away from her torment fear and saying: Woe, woe to you, great city of Babylon, mighty city! for in one hour your judgment came.

      11And the merchants of the earth will weep and cry for it, because no one is buying their goods, 12goods of gold and silver, and precious stones and pearls, and fine linen and porphyry, and silk and scarlet, and all fragrant wood, and all kinds of ivory and all kinds of products from precious trees, made of copper and iron and marble, cinnamon and incense, and peace and incense, and wine and oil, and flour and wheat, and cattle and sheep, and horses and chariots, and human bodies and souls.

      14And the fruits that were acceptable to your soul were not with you, and all the stout and brilliant departed from you; you will not find it anymore.

      15Traders all this, enriched by her, will become far from the fear of her torment, crying and sobbing 16 and saying: woe, woe to you, a great city, dressed in fine linen and purple and scarlet, adorned with gold and precious stones and pearls, 17ib died in one hour such a wealth! And all the helmsmen, and all the sailing ships, and all the shipbuilders, and all the merchants on the sea were far away 18, seeing the smoke from her fire, they cried out, saying: What city is like a great city!

      19 And they ashied their heads, and cried out, weeping and weeping: woe, woe to you, great city, whose jewels have all been enriched with ships on the sea, for it is empty in one hour!

      20 Rejoice in this, heaven and holy apostles and prophets; for God completed your judgment on him.

      21And one strong Angel took a stone like a large millstone and cast it into the sea, saying: with such an aspiration Babylon, the great city, will be defeated, and it will no longer be.

      22 And the go'los playing the harp, and singing, and playing the flute, and blowing trumpets in you will no longer be heard; there will be no artist in you, no art, and the noise from the millstones will not be heard in you; 23and the light of the lamp will no longer appear in you; and the golos of the bride and groom will no longer be heard in you: for your merchants were nobles of the earth, and all nations were misled by your magic.

      24And in it is found the blood of the prophets and saints and all those who were killed on the earth.

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