*****The Fed Is Running Out Of Room On Its Balance Sheet*****

Fed's Assets Broken Down

1) Since the start of 2009, the Fed has bought 1,178 billion securities (including 899 billion of long term mortgage backed secuties). Despite the size of these purchases, the Fed's balance sheet has remained essentially unchanged since the beginning of the year (increasing only 75 billion).

2) Without these enormous purchases of US debt, interest rates would be higher.

3) Securities held outright (toxic and treasury securities) now total 1,673 billion, filling 75% of the Fed's balance sheet. This leaves little room for the Fed to keep buying US debt without expanding its balance sheet (printing money). For example, the Fed bought 71 billion mortgage backed securities in the last week, and expanded its balance sheet by 54 billion.

Fed's Liabilities Broken Down

Reserve balances with Federal Reserve Banks (purple) stood at 1,049 billion last week, the highest ever. Banks who own these reserve balances can withdraw them at any time, in which case the Fed must print and deliver the cash.

The dollar index

The dollar collapse is already underway. The gentle downward slide will turn into a freefall when food shortages become apparent and prices spike.

My reaction: The Fed is running out of room on its balance sheet, which leaves it caught between a rock and a hard place:

1) The only way it can keep purchasing US debt over the next year is by significantly increasing the size of its balance sheet (printing a lot of money). If the Fed starts rapidly expanding its balance sheet now, it will undermine what little faith is left in the dollar, sending it plummeting.

2) If the Fed stops buying 120 billion worth of US debt each month, interest rates are going to quickly head up, killing the economy and enormously increasing the government's interest expense.

Conclusion: This is another example of how everything is reaching the breaking point as we approach the end of 2009.

This entry was posted in Currency_Collapse, Federal_Reserve, News_Developments, Wall_Street_Meltdown. Bookmark the permalink.

7 Responses to *****The Fed Is Running Out Of Room On Its Balance Sheet*****

  1. Anonymous says:

    And there you have it people...

    Simple, factual and easy to understand...

    This is the reality, and one we cannot wish away...

    Nice job Eric!

  2. Farmer with silver coins says:

    Why do people work for something that others can create in unlimited amount in a computer? Why don't farmers and others require payment in gold and silver for the food they produce?

  3. Phil says:

    See http://www.lewrockwell.com/celente/Future-Trends-2012-Celente.pdf for full article.

    The public has been trained to believe that the Federal Reserve operates independently of Washington. But when the President and Fed Chairman use the identical, inane “if-your-neighbor-is-smoking-in-bed” analogy, it should make the alert citizen question any claim of independence.
    The Federal Reserve was Washington and Washington was the Federal Reserve. Before being appointed by President Obama as Secretary of the US Treasury, Timothy Geithner was President of the Federal Reserve Bank of New York. Who could imagine that the Fed — with complete control of the money presses and the keys to the treasury now in the hands of one their boys — was not running the show?

  4. GBAILEY says:

    Liquidity trap.

  5. Sam the Farmer! says:

    Go here:


    Click on the ATS links on the last few posts. We may have far heavier things to discuss that the market in a few weeks...


  6. Martijn says:


    Considering the attention you have provided to the Fed's balance sheet, this article seems to be a must read for you.

  7. chinkachu83 says:

    Since when has the Fed ever balanced their sheets? They've created this empire by NOT being balanced. By printing trillions of fiat dollars and debasing the currency.

    Since when do you know exactly what the Fed is up to? No one has ever audited them, so it is impossible to know what their books look like.

    You're absolutely right that the dollar will crash. At the last G20 summit, Japan, China and another country were already talking of dumping the dollar as world reserve currency.

    You're right about hyperinflation. But it was the central bankers of this world that brought about the inflation and economic stability and helped bring Hitler to power. Those same central bankers are destroying our currency now. They created our dollar with the intention of one day destroying it, and taking our way of life away with it.

    An excellent documentary: The Money Masters:

    Fiat Empire:

    Books: The Creature from Jekyll Island by Edward G. Griffin

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