Dissecting the Fed

[$#*]

Bart, I believe it would be great if you could open a thread called "H4.1 and Fed financial magic for dummies". There are so many interesting to discuss and so many people are intimidated about looking to that balance sheet. Extremely simple things can appear very complicated and intimidating.
Really interesting idea... but I wonder if there's much interest in it beyond a few Fed data & report 'sluts'? It's not a trivial task as you likely know... and some of it really & truly is very arcane and odd and complex, depending on the level of detail & explanation desired. For example, a good knowledge of accounting can be a hindrance since the rules for central bank accounting aren't the same as for a bank or corporation.

Even the title of the H.4.1 weekly report is a huge mouthful: "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks".

Part of the difficulty is summed up with:
“The process by which banks create money is so simple that the mind is repelled.”
-- John Kenneth Galbraith
and
"Only the small secrets need to be protected. The big ones are kept secret by public incredulity."
-- Marshall McCluhan


I can answer your one question though - the Fed will be buying the Treasuries with money literally created from thin air, via an entry at a Fed computer where they will simply credit the accounts of primary dealers (like GS, BoA and Citi - full list at http://www.ny.frb.org/markets/pridealers_current.html), who are actually the entities that buy from the Treasury.

Thanks bart for invitation

I'll start with a definition:
The Federal Reserve System is the Third Central Bank of the United States (the previous two being terminated due to the fraud and corruption they were responsible for) and it is a hybrid monopoly, respectively a private banking consortium which has the power of issuing the currency of the United States of America enforced by the government.

Instead of taking it line by line in the balance sheet, I propose to use simple examples at first, explain them, and at the end we can assemble everything in a concise way.

I'll bring here the example I put on Finster's thread:

Now let's imagine the following scenario. Super leveraged european banks need $1.3 trillion in order to prevent a catastrophic deleverage. They really need those dollars. At the same time., let's say, the europeans have some $600 bil in US debt in treasuries.

If the Fed starts real printing then they may buy $600 bil in treasuries and transform them into dollars. Normally this would create a huge inflationary effect and would tank the dollar. But if those $600 are going to be soaked pronto in the European banking sector, the dollar will not fall.The Fed transforms $600 bil in government guaranteed debt (European dollar assets) in $600 bil in dollars (power money, wiping out $600 bil of European liabilities)

Is there something wrong with this logic ?

[marvenger]

no but the fed doesn't just do this, they also get corresponding treasuries from the tax payer for having created this money out of nothing, the balance sheet is expanded. Its a private cartel remember.

[$#*]

no but the fed doesn't just do this, they also get corresponding treasuries from the tax payer for having created this money out of nothing, the balance sheet is expanded. Its a private cartel remember.
I didn't get that. Can you expand? (no sarcasm here)How is the Fed getting the treasuries from the taxpayer?

[marvenger]

They don't cancel the Tbills. They created the money out of nothing and now have TBills.

[Rajiv]

How is the National Debt created? The government borrows money to create money and then pays interest on that money to the private cartel. If the national debt is not paid off soon through taxation, the compounding interest mounts till the interest payments overwhelm the government budget. However if the government repays the debt, the money supply shrinks -- causing deflation, and a retrenchment in society. Hence the continued need for real economic growth in the current system. However continued economic growth is not possible on a planet with finite sources!

See Hudson's work, and Margrit Kennedy's work.

[$#*]

They don't cancel the Tbills. They created the money out of nothing and now have TBills.

Yup. That is correct. The T bills are not canceled. They remain as Fed assets, that is why the balance sheet expands permanently.

Question for bart or anybody else who can answer. If the Fed's balance sheet expands with assets, where are the liabilities?


How is the National Debt created? The government borrows money to create money and then pays interest on that money to the private cartel.
Hmmm....I'm not sure I understand this part. If I buy a $1000 T-bil I just lend for a year to the Treasury $9980 (probably these days) . I had those money in my mattress. And the Treasury gets my money and throws it in some whatever government project to build a bridge to nowhere


If the national debt is not paid off soon through taxation, the compounding interest mounts till the interest payments overwhelm the government budget.
That makes sense.

However if the government repays the debt, the money supply shrinks -- causing deflation, and a retrenchment in society.
If at the end of the year I have to pay $1000 in taxes and use the money I got from my 1 year bill, why do we have to have deflation? I just jept my tax money in a T-bill for one year before actually paying the tax.


Hence the continued need for real economic growth in the current system. However continued economic growth is not possible on a planet with finite sources!

Not sure I understand that ( or better said stand-under that)...

[Rajiv]

Try going through Chris Martenson's "The Crash Course (http://www.chrismartenson.com/crashcourse)"

I am framing it below for convenience

<iframe src="http://www.chrismartenson.com/crashcourse" title="The Crash Course" height="600" width="800">><br /> </IFRAME</HTML></iframe>

[marvenger]

I get it Rajiv. As Hudson points out treasury hasn't had to borrow from the fed in a long time though, the private system has created enough money and its been recyled through surplus nations back to the US where treasury borrows from foreigners rather than the fed. The money cycles and the cheap crap goods pile up in the US and treasury IOU's pile up in Surplus nations central banks.

[Rajiv]

Yes you have to realize that "money" is a Ponzi Scheme -- and that the working people are like a hamster on the wheel -- but the question is who is benefitting, and who is losing -- and that is where the three Es that Martenson talks about, come into the picture. And my issue of a finite planet and infinite greed.

[marvenger]

ok i'll look into 3 e's. I totally agree about finite planet, that's why I like jacque fresco's resource economy and the venus project and the zeitgeist movement; but I don't have many people agreeing with me on that one, like zero which is pretty unfortunate. :)

[bart]

I'll bring here the example I put on Finster's thread:
The Fed transforms $600 bil in government guaranteed debt (European dollar assets) in $600 bil in dollars (power money, wiping out $600 bil of European liabilities)

Is there something wrong with this logic ?

No, nothing basically wrong with the logic, but it appears your example is only looking at world effects and an implied sterilization, and does not take the longer term into account when the dollars come home after European liabilities are cleared.

[bart]

...
If the Fed's balance sheet expands with assets, where are the liabilities?
...


The largest item on the liability side is currency & coin in circulation, followed closely by reserve balances with the Fed.

That total today is about $1.68 trillion out of the total $2.04 trillion on the Fed's balance sheet... and is also known as monetary base or M0.

As an aside, its yet another item showing a certain blogger's problems with understanding of the Fed, Central Banks and basic economics.

[$#*]

No, nothing basically wrong with the logic, but it appears your example is only looking at world effects and an implied sterilization, and does not take the longer term into account when the dollars come home after European liabilities are cleared.
Great point Bart. But the dollars do always have to come home? Can't they just fly away from the Fed's nest when they grew enough to continue their existence as independent adults? Wasn't that what happened essentially with the petrodollars and eurodollars?



Rajiv thanks for the link to Chris Martenson. I think this would be the relevant clip:


<object width="425" height="344">


<embed src="http://www.youtube.com/v/p3_Q1SiRN-A&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></object>




About this clip I have two questions:
a) At 2:00 he says that all money is loaned into existence. I'm not sure I can understand that. It seems to me that the Fed creates currency by retiring debt not by creating debt. Since the FED is apparently a not for (direct) profit institution and any surplus is returned to the Treasury, basically when they create dollars, don't they actually cancel US government debt?
b)between 4:00 and 4:37 in the clip it says that each year new money has to be loaned into existence in order to cover the interest of all outstanding loans. That simply doesn't make any sense to me and it IMHO sounds like a non sequitur fallacy. Can someone explain to me in simple terms why each year new money has to be loaned into existence to cover interest on outstanding debt?

[bart]

Great point Bart. But the dollars do always have to come home? Can't they just fly away from the Fed's nest when they grew enough to continue their existence as independent adults? Wasn't that what happened essentially with the petrodollars and eurodollars?


No, yes and yes... and I was both answering in the context of your original example and also noting that flows do go both ways, which your example did not cover.

The basic point is that if dollar strength perception or confidence weakens or continues to weaken, the dollars will come home more & more... which will help to create a "currency event" or events.

A Fed based way to look at the same thing is that if the balance sheet expands way more than other Central Banks do, that will eventually affect the dollar value - regardless of what the ESF or anyone else can do. We're in "confidence game" mode, in both meanings.

[$#*]

The largest item on the liability side is currency & coin in circulation, followed closely by reserve balances with the Fed.

That total today is about $1.68 trillion out of the total $2.04 trillion on the Fed's balance sheet... and is also known as monetary base or M0.

As an aside, its yet another item showing a certain blogger's problems with understanding of the Fed, Central Banks and basic economics.
Thanks bart, but please let's not derail this thread with issue of the limited understanding of a certain blogger. We should open another thread for that, or better open another forum, because that issue is immensely vast :)

Going back to the subject. So, on the liability side from the treasuries they buy there is coin&currency, basically printed dollar bills. Does that mean that when the Fed magically creates money with which it buys US debt (treasuries) the "deposit" (liabilities) they create is just banknotes and the Fed does not pay any interest for those liabilities? Can we actually talk about liabilities since nobody will ever come with a wad of $100 bills to make a withdrawal ?



Quote:
<table width="100%" border="0" cellpadding="6" cellspacing="0"> <tbody><tr> <td class="alt2" style="border: 1px inset ;"> Originally Posted by $#* http://www.itulip.com/forums/images/buttons/viewpost.gif (http://www.itulip.com/forums/showthread.php?p=86468#post86468)
Great point Bart. But the dollars do always have to come home? Can't they just fly away from the Fed's nest when they grew enough to continue their existence as independent adults? Wasn't that what happened essentially with the petrodollars and eurodollars?
</td> </tr> </tbody></table>
No, yes and yes... and I was both answering in the context of your original example and also noting that flows do go both ways, which your example did not cover.

The basic point is that if dollar strength perception or confidence weakens or continues to weaken, the dollars will come home more & more... which will help to create a "currency event" or events.
So let's say China loses confidence in dollars and begins to "send dollars home", creating a "currency event". That means the dollar will fall with respect to yuan or the basket of currencies China is exchanging the dollars into? That may create a poor incentive for China to send the "dollars home". And it's a matter of perception anyway. As long as the dollar stays strong there will be no comming home for the dollars fighting abroad.

A Fed based way to look at the same thing is that if the balance sheet expands way more than other Central Banks do, that will eventually affect the dollar value - regardless of what the ESF or anyone else can do. We're in "confidence game" mode, in both meanings.
And if the Fed convinces the whole Coalition of the Zirping (COZ) to expand their central banks balance sheets (as theiy are doing it now), does that means that if Fed retires debt and magically creates money, the dollar doesn't fall with respect to the currencies of the COZ, but it may fall with the currency of the countries not participating in COZ?

Would that create an incentive for China to expand the PBoC ballance sheet since the yuan will soar with respect to all COZ currencies (which are the main export markets for China)?

[bart]

Thanks bart, but please let's not derail this thread with issue of the limited understanding of a certain blogger. We should open another thread for that, or better open another forum, because that issue is immensely vast :)

What, no gratuitous economic slams or psycho dog "educational experience" attempts?! :eek: ;)

Seriously though, my basic point was that an expansion of monetary base goes directly along with an expansion of the Fed's balance sheet and ignoring one means ignoring the other - not a wise thing to do.


Going back to the subject. So, on the liability side from the treasuries they buy there is coin&currency, basically printed dollar bills. Does that mean that when the Fed magically creates money with which it buys US debt (treasuries) the "deposit" (liabilities) they create is just banknotes and the Fed does not pay any interest for those liabilities? Can we actually talk about liabilities since nobody will ever come with a wad of $100 bills to make a withdrawal ?

Other than the recent change that allowed the Fed to pay interest on reserves, its correct that the Fed pays no interest on their liabilities.
Its also true that printing cash via a Fed order to the Treasury is one thing they will do to offset asset growth. Currency in circulation has been growing at an annual rate of over 9% recently.

Also keep in mind that the Fed controls required reserve percentages too, so they could raise them and lock up some of the existing reserves as well as raise the interest paid on excess reserves to also lock up some existing reserves. I'm not saying that they will, just that its one option.


In the liabilities column is also "Other liabilities and capital (17)" which is defined in note 17 as follows:
"17. Includes the liabilities of Commercial Paper Funding Facility LLC, the LLCs funded through the Money Market Investor Funding Facility, Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs."
It's "only" about $54 billion as of last week but has been a lot higher.
Read "Maiden Lane" as AIG and Bear Stearns.

Another current liability is what the Fed owes the Treasury from the Supplemental Financing Program (the money used to send $600+ billion to the ECB, SNB, etc. at the height of the dollar crunch). It's "only" about $200 billion now, and has been as high as about $660 billion.

The Fed also can go off balance sheet too, like they have with some of the Securities Lending Open Market operations.



So let's say China loses confidence in dollars and begins to "send dollars home", creating a "currency event". That means the dollar will fall with respect to yuan or the basket of currencies China is exchanging the dollars into? That may create a poor incentive for China to send the "dollars home". And it's a matter of perception anyway. As long as the dollar stays strong there will be no coming home for the dollars fighting abroad.

Yes, the dollar would fall under those conditions... but it wouldn't be that blatant or public. China or anyone with a huge dollar position would benefit by being the first ones through the door though.



And if the Fed convinces the whole Coalition of the Zirping (COZ) to expand their central banks balance sheets (as they are doing it now), does that means that if Fed retires debt and magically creates money, the dollar doesn't fall with respect to the currencies of the COZ, but it may fall with the currency of the countries not participating in COZ?

Generally yes, and another way to state that is competitive devaluation which is part of a "normal" economic cycle.

http://www.nowandfutures.com/images/economic_cycle.png


Those who don't participate much end up being less competitive in the various export markets since their products have higher prices.


Would that create an incentive for China to expand the PBoC balance sheet since the yuan will soar with respect to all COZ currencies (which are the main export markets for China)?

Yes, and they've not only committed something like $600 billion to fiscal stimulus (about 20% of their GDP) but also have established a credit growth rate target of 20% for 2009.

Their M3 is growing at about 19% currently too... and they also have done nothing to my knowledge to their general peg of the yuan to the dollar - it has only gained about 18% value against the dollar since way back in 2005... while the Big Mac index shows its undervalued by over 50% (which in my opinion is too much - I'd put it closer to 30%).

[Sharky]

The government borrows money to create money and then pays interest on that money to the private cartel.

If by "cartel" you mean the Fed, that's true, however, the Fed only holds about 7% of the total national debt (or they used to, before the current crisis). Plus, all interest paid to the Fed is rebated to the Treasury every year, after deducting the Fed's expenses.

If the Fed's balance sheet expands with assets, where are the liabilities?

When the Fed buys Treasuries, the Treasuries become an asset and the money they created to buy them becomes a liability. The Fed can't unilaterally add to their assets without also adding to their liabilities. Regular banks are limited in the same way.

The way the Fed creates money is basically by using a "magic" checkbook, that they can only use to buy things. Money is never created by actually printing it. Printed money is actually purchased by the Fed from the Treasury for the cost of the ink, paper, etc, and then exchanged for digital money on deposit with the Fed, upon request by the banks, at the face value of the FRNs.

[marvenger]

When the Fed buys Treasuries, the Treasuries become an asset and the money they created to buy them becomes a liability. The Fed can't unilaterally add to their assets without also adding to their liabilities. Regular banks are limited in the same way.


I don't think that true, there's only a corresponding liability if the money created is notes or, if its electron money, if it ends up in bank reserves, according to my understanding.


The way the Fed creates money is basically by using a "magic" checkbook, that they can only use to buy things. Money is never created by actually printing it. Printed money is actually purchased by the Fed from the Treasury for the cost of the ink, paper, etc, and then exchanged for digital money on deposit with the Fed, upon request by the banks, at the face value of the FRNs.

Well, that could be the case until the Fed runs out of money and then there's double printing going on with electrons being created to pay for paper.

[Rajiv]

Yes the 7% is what leads mostly to high powered money (http://en.wikipedia.org/wiki/High-powered_money).

However to visualize the societal effects of Fiat money, we have to think of the entire Banking System (Shadow Banking and all) as a black box that produces money, and charges compound interest for the use of that money. When debts are paid off or written off, the money supply contracts.

Some of those debts are Government debt (over and above the 7%), while others are debts incurred by the producers and consumers in the economy.

National Debt is the Governmental part of the overall debt. The overall debt carries on it compound interest at a rate much higher than the Fed rate. As long as the overall debt continues to rise, and continues to carry upon it compound interest, at some point the ability of the society to service that debt ceases, and either a debt jubilee results, or else there is a catastrophic societal reset (sometimes in the form of a violent revolution)

Because of the ability of the Banking sytem to leverage, and the ability for it to charge compund interest, I consider that system to be a Ponzi Scheme -- As the Icelanders discovered and used (http://www.vanityfair.com/politics/features/2009/04/iceland200904) (abused!)

[$#*]

What, no gratuitous economic slams or psycho dog "educational experience" attempts?! :eek: ;)
Please leave alone the poor creature for now. We can do an entertainment session at the end of the thread.

Seriously though, my basic point was that an expansion of monetary base goes directly along with an expansion of the Fed's balance sheet and ignoring one means ignoring the other - not a wise thing to do.
I agree, and we should get in more detail later when we have a better understanding of what the FED actually is and what the FED actually does.




Other than the recent change that allowed the Fed to pay interest on reserves, its correct that the Fed pays no interest on their liabilities.
Its also true that printing cash via a Fed order to the Treasury is one thing they will do to offset asset growth. Currency in circulation has been growing at an annual rate of over 9% recently.
I agree. The FED doesn't pay interest on coin&currency liabilities, and basically the coin&currency liabilities will never be claimed (no withdrawals ever). IMHO I believe this one very important element of the central bank deception.

Also keep in mind that the Fed controls required reserve percentages too, so they could raise them and lock up some of the existing reserves as well as raise the interest paid on excess reserves to also lock up some existing reserves. I'm not saying that they will, just that its one option.
I agree, so less risk of "withdrawal" for the coin&currency. These are basically never to be claimed liabilities. The wet dream of every banker.


In the liabilities column is also "Other liabilities and capital (17)" which is defined in note 17 as follows:
"17. Includes the liabilities of Commercial Paper Funding Facility LLC, the LLCs funded through the Money Market Investor Funding Facility, Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs."
It's "only" about $54 billion as of last week but has been a lot higher.
Read "Maiden Lane" as AIG and Bear Stearns.

Another current liability is what the Fed owes the Treasury from the Supplemental Financing Program (the money used to send $600+ billion to the ECB, SNB, etc. at the height of the dollar crunch). It's "only" about $200 billion now, and has been as high as about $660 billion.

The Fed also can go off balance sheet too, like they have with some of the Securities Lending Open Market operations.

Good points, but for the beginning let's first make things clear with respect to the fundamental issues, and after that will go line by line through liabilities in order to start making the H 4.1 readable for the normal person.

Generally yes, and another way to state that is competitive devaluation which is part of a "normal" economic cycle.

http://www.nowandfutures.com/images/economic_cycle.png


Those who don't participate much end up being less competitive in the various export markets since their products have higher prices.
Great little chart bart! Thanks! I believe we are in a stage of competitive/hostile devaluation between the Coalition of the Zirping (dollar plus free floating currencies with flexible dollar links provided by Fed's currency swaps)

But let's go back to the first element of deception we have identified. I believe that saying "all money is loaned into existence" (at 2:00 in the Chapter 8 of the Crash Course clip) is not entirely correct.

The Fed does not create coin&currency (or electronic equivalents of pure cash) by lending money into existence, but by retiring/canceling US government debt. If the Fed was simply a government institution that would be obvious. Since they are not-for-profit "independent" private bank the deception works for most people.

Now let's suppose that Ron Paul becomes President and for 30 years paulistas are running the government but they can't end the Fed. So let's suppose that:
-for the next 30 years the government has a constant surplus
-the surplus is used to retire US debt and decrease the public debt burden of americans
-all treasuries are held by US citizens/taxpayers
- after 30 years of paulista regime there is no surviving treasury in existence (all US government debt has been retired)

So in the process of repaying debt, the Treasury buys back treasury paper using dollars coin&currency obtained from taxes paid by taxpayers. Is that equivalent to printing? Does that magically creates dollars? I believe the answer is no.

Why no dollars are magically created when the Treasury retires/pays US government debt, but when the Fed does cancels it, dollars are magically brought into existence?

The second interesting question is: if there are no more surviving treasuries (all government debt is paid) then what kind of debt must the Fed cancel in order to print dollars into existence?

What did the mischievous clique from Philadelphia, under the treasonous guidance of Benjamin Franklin, do with the Pennsylvania pound (http://en.wikipedia.org/wiki/Pennsylvania_pound)?

[Sharky]

I don't think that true, there's only a corresponding liability if the money created is notes or, if its electron money, if it ends up in bank reserves, according to my understanding.

The Fed can't create its own assets without also creating liabilities. Your statement is partly correct, in that money created by the Fed is by definition the same as bank reserves. But notes aren't created that way. The Fed never buys Treasuries with notes, for example.

You can see the related accounts in the H.4.1 report. "Liabilities / Deposits / Depository institutions" goes up whenever someone deposits a check that was used to buy Treasuries, while "Assets / U.S. Treasury Securities / Notes and bonds" goes up. Similarly, when banks request FRNs, the amount they have on deposit with the Fed goes down, and "Liabilities / Federal Reserve Notes" goes up.

http://www.federalreserve.gov/releases/h41/current/h41.htm

EDIT: another way to think about the Fed is that they are really just a bank (a special bank, granted, but a bank nonetheless). When a regular bank loans someone money, what they do is to create a note that becomes an asset, and then fund the loan by creating new digital money by just adding some digits to the borrower's account. The newly-created money is a liability to the bank, which offsets the asset that is the note. The bank is basically buying the note and using it as collateral to create new money. The Fed works the same way. They buy assets (things like Treasury securities) in exchange for newly-created digital money, which becomes a liability. Banks too, like the Fed, can't create assets without also creating liabilities -- if they did, they would also be creating their own profits.

[$#*]

The Fed can't create its own assets without also creating liabilities. Your statement is partly correct, in that money created by the Fed is by definition the same as bank reserves. But notes aren't created that way. The Fed never buys Treasuries with notes, for example.
I think marvenger is quite on the spot here, and the differences are only semantic. Electronic money created by the Fed invariably gets captured by the system as bank reserves, therefore it is considered by definition bank reserves. The Fed doesn't buy treasuries with a wad of dollar bills, but since physical dollar and e-dollar are fungible it doesn't matter very much. I believe you both are correct here and essentially are saying the same thing in different words. The ratio e-dollar/(e-dollar + physical-dollar) gives the ratio of bank_reserves/total_money_created.


EDIT: another way to think about the Fed is that they are really just a bank (a special bank, granted, but a bank nonetheless).
Another way to see things is to look at the Fed and Treasury as a single entity which acts as a reversible debt pump equilibrating the ratio between public-debt and private-debt. The Fed returns all profits to the treasury, acting like a non-profit bank (Wall Street's Grameen Bank :D for the bankers). Actually the role of the Fed is to optimize the wealth extraction from the American society, in order to allow private banks (Fed's shareholders) to acquire all existing stored real wealth in US by force feeding people with a mix of private and public debt.

When the taxpayer chokes with unpayable private debt, and the lending system is clogged, (severe deflation) the Fed-treasury contraption reverses the flow, to unclog the system, transferring private-debt into its bastard twin: public-debt. The profits of banks and other financial FIRE entities is preserved and lending starts again. The wealth pumped from public to private sector used to unclogged the system is recouped from taxes on future earnings of the people.

Since the poor (impoverished with debt) are paying a higher tax rate then the rich (who extract wealth by lending to the poor), if you remember Sir Warren's secretary, then the Fed-Treasury debt pump, makes sure there is no level playing field: it's always a win-win game for the rich and a lose-lose game for the poor. This is the true genius of the scam, it's the perfect trap and is very well hidden through deception.

[bart]

I think marvenger is quite on the spot here, and the differences are only semantic. Electronic money created by the Fed invariably gets captured by the system as bank reserves, therefore it is considered by definition bank reserves. The Fed doesn't buy treasuries with a wad of dollar bills, but since physical dollar and e-dollar are fungible it doesn't matter very much. I believe you both are correct here and essentially are saying the same thing in different words. The ratio e-dollar/(e-dollar + physical-dollar) gives the ratio of bank_reserves/total_money_created.

Mostly true, although you may have inadvertently misled with the reserves comment. One of the Fed liabilities is currency for example, and created assets can be offset by those too - as well as any other of the liabilities shown on the weekly H.4.1 report.

There are things that are off balance sheet too, like portions of the Securities Lending operation... or at least I haven't been able to find them yet.




The Fed returns all profits to the treasury, acting like a non-profit bank (Wall Street's Grameen Bank :D for the bankers).

They do officially keep 6% if memory serves - it's part of the original Federal Reserve Act.


This is the true genius of the scam, it's the perfect trap and is very well hidden through deception.

Indeed.

"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."
-- John Maynard Keynes, in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920). (this is in the context of speaking about the ability to control money supply)

[$#*]

Indeed.

"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."
-- John Maynard Keynes, in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920). (this is in the context of speaking about the ability to control money supply)
Great quote bart.
I would like only to add the fact that contrary to common perception the fractional reserve banking is not responsible for the increase of money supply by creating money out of thin air, but actually creates money scarcity by accumulating money in reserves, helping banks in the process of cornering money and impose their monopoly over money lending.

In a system with no banks (acting as a monopoly of money lending), there is just direct lending between individuals (without any reserve requirements) and according to common perception that would generate an infinite money expansion (as for 0% reserve requirement), which actually does not happen, because the equilibrium is reached through the rate risk premium.

My point is that, fractional reserve banking with fiat money, although is currently used to perpetrate an act of parasitism on societies, can be as easily used to help societies, and help people get access to cheap credit, if a few essential and simple changes are implemented. And it works. Grameen Bank is such an example and the banking in colonies before the Currency Act was another story of success.

The best kept secret is that by getting rid of the Fed and with a few simple modification of the banking and tax laws, the current banking scam can be terminated for good and in an instant (actually it may take a few months or even a couple of years until the system is purged). There is not even the need to return to the gold standard to get rid of the parasite. It is that simple.

But, enough with the long introduction and let's start in earnest with the Fed's balance sheet.

So what are the Fed's liabilities and where can we find them on an H4.1? And what is the meaning in simple terms of each of those entries?

[Sharky]

Here's a link to one of my favorite Fed-related documents: their Annual Report. I like it because it dispels so many myths, in one fell swoop:

http://www.federalreserve.gov/boarddocs/rptcongress/annual07/sec6/c3.htm

It includes a clear, fully-audited financial statement (2007), showing assets and liabilities. Rebates back to the Treasury are also clearly shown (98.6% of net interest income in 2007).

[jtabeb]

Rebates back to the Treasury are also clearly shown (98.6% of net interest income in 2007).

So really the Fed is a national bank? (It just appears to be a central bank?)

The flow of net interest seems to suggest that, or am I wrong?

[thedanimal]

I had posted this in the 4, 3, 2 1...Inflation thread but didn't receive any responses. Perhaps this is the thread for this kind of question.

In a recent article entitled Bernanke, Kohn Pledge Fed to Withdraw Credit When Crisis Ends (http://www.bloomberg.com/apps/news?pid=20601087&sid=aAHINzVhyplM&refer=home), one passage in particular caught my eye:

Kohn said the Fed and Treasury are seeking “other tools” from Congress to help mop up excess cash. One possibility is that the Fed issue its own securities, or “Fed bills,” or the Treasury could issue special bills, and put the cash on deposit at the Fed.

“It is important to get either of those tools exempt from the debt ceiling so that the Fed could have the power to absorb all the reserves it wanted to,” Kohn said in response to a question.

I was hoping someone could help me unpack this a bit. It seems clear that they're anticipating the need to fight inflation and I'm curious as to what people think about the aforementioned possibility of the Fed issuing securities, and what all of it has to do with the debt ceiling.

Thanks for any help and guidance you can provide.

[bart]

Great quote bart.
I would like only to add the fact that contrary to common perception the fractional reserve banking is not responsible for the increase of money supply by creating money out of thin air, but actually creates money scarcity by accumulating money in reserves, helping banks in the process of cornering money and impose their monopoly over money lending.

In a system with no banks (acting as a monopoly of money lending), there is just direct lending between individuals (without any reserve requirements) and according to common perception that would generate an infinite money expansion (as for 0% reserve requirement), which actually does not happen, because the equilibrium is reached through the rate risk premium.

My point is that, fractional reserve banking with fiat money, although is currently used to perpetrate an act of parasitism on societies, can be as easily used to help societies, and help people get access to cheap credit, if a few essential and simple changes are implemented. And it works. Grameen Bank is such an example and the banking in colonies before the Currency Act was another story of success.

The best kept secret is that by getting rid of the Fed and with a few simple modification of the banking and tax laws, the current banking scam can be terminated for good and in an instant (actually it may take a few months or even a couple of years until the system is purged). There is not even the need to return to the gold standard to get rid of the parasite. It is that simple.

Although I do agree that fractional reserve banking is not innately evil, I do believe that unless and until some reliable social mechanism is developed to keep the small amount of financial slime & scum in line, it will be used in a negative way especially in both an inflation and a power/control freak sense.

It's the same thing in the long running fiat vs. gold standard area - the standard is not and never has been the real problem. Its the slime and scum that use it for power/control freak or eeeevil purposes.

[bart]

I had posted this in the 4, 3, 2 1...Inflation thread but didn't receive any responses. Perhaps this is the thread for this kind of question.

In a recent article entitled Bernanke, Kohn Pledge Fed to Withdraw Credit When Crisis Ends (http://www.bloomberg.com/apps/news?pid=20601087&sid=aAHINzVhyplM&refer=home), one passage in particular caught my eye:

Kohn said the Fed and Treasury are seeking “other tools” from Congress to help mop up excess cash. One possibility is that the Fed issue its own securities, or “Fed bills,” or the Treasury could issue special bills, and put the cash on deposit at the Fed.

“It is important to get either of those tools exempt from the debt ceiling so that the Fed could have the power to absorb all the reserves it wanted to,” Kohn said in response to a question.

I was hoping someone could help me unpack this a bit. It seems clear that they're anticipating the need to fight inflation and I'm curious as to what people think about the aforementioned possibility of the Fed issuing securities, and what all of it has to do with the debt ceiling.

Thanks for any help and guidance you can provide.

The key is the section about making any new bills exempt from the debt ceiling, and my read is that its partially a red herring and also a definite attempted power grab.

If the Fed or Treasury issues new bills with the real intent of sopping up "excess liquidity" during an inflation, the debt ceiling will already be under intense pressure... as it will be in the near future with all the spending outlined under the huge new budget.
In my opinion, the Fed & Treasury already have enough power to sop up any excess liquidity that they truly want to... although those powers may not act as fast as they want or expect them to.

I also note that the Treasury already has that power, and even used it in the SFP (Supplemental Financing Program) to both help fund the about $700 billion of swaps that the Fed did with the ECB etc. last year during the dollar crunch, and supposedly to offset & sterilize other Fed actions.


And besides, the total government piece of GDP is already at almost 50% of GDP - in direct opposition to what the huge majority think or believe.


http://www.nowandfutures.com/images/govt_expenditures_to_gdp.png

[Sharky]

So really the Fed is a national bank? (It just appears to be a central bank?)

The flow of net interest seems to suggest that, or am I wrong?

I'm not sure I understand what you mean by a national bank. As the term is normally used, that would be a "regular" (non-state) bank. The Fed is definitely a central bank. The difference is that a central bank can create banking reserves, where a national bank cannot. The Fed has a bottomless checkbook with which they can buy Treasury securities in the open market. When National banks buy Treasuries, they have to use their own capital, and the process does not inject any new money into the economy.

[thedanimal]

Bart, thanks for your thoughts.

[$#*]

Although I do agree that fractional reserve banking is not innately evil, I do believe that unless and until some reliable social mechanism is developed to keep the small amount of financial slime & scum in line, it will be used in a negative way especially in both an inflation and a power/control freak sense.
I agree. And what solution do you see to this problem?It has to be simple and fool proof.
I see it as a mix of regulation and taxation.
Since money lending is not directly productive, the wealth accumulation through money lending must not be far more profitable (obscenely far more profitable) by comparison with the real/productive economic activity.

Because in normal conditions (not in the current, corrupted, smoke and mirror FIRE environment) the sum of bank reserves represents the total wealth stored in money available in a society. The first simple measure would be to limit (through punitive taxation ) the proportion of banking gross revenue from lending (achieved through assets-liabilities interest rate differential). Let's say that all gross revenues above 20% of total bank reserves would be taxed at 80%.

The second is is the old tried and tested method of interest to principal taxation method, promoted by King Edward. All interest revenue above a certain maximum level (I think it was 10% in Edwardian times) should be taxed punitively (hmmm I guess there were no credit cards in England after the introduction of this law :)).

I think it is that simple, and it has been done successfully before (of course we don't need to use the Inquisition in modern times, just brand the new concept of financial terrorism and led the FBI and the Department of Homeland Security to take care of the issue :D).

And with that the banking scam ends immediately. No need for any other changes
It's the same thing in the long running fiat vs. gold standard area - the standard is not and never has been the real problem. Its the slime and scum that use it for power/control freak or eeeevil purposes.
Yup, and the focus should not towards fighting a fiat money or the gold standard, but neutering the parasitic scum. Once we get rid of the parasitic infection, the exact type of system adopted can be decided with realative ease.

[bart]

I agree. And what solution do you see to this problem?It has to be simple and fool proof.
I see it as a mix of regulation and taxation.
Since money lending is not directly productive, the wealth accumulation through money lending must not be far more profitable (obscenely far more profitable) by comparison with the real/productive economic activity.

And with that the banking scam ends immediately. No need for any other changes

...

Yup, and the focus should not towards fighting a fiat money or the gold standard, but neutering the parasitic scum. Once we get rid of the parasitic infection, the exact type of system adopted can be decided with relative ease.


True, as far as it goes... but what has not been addressed is the clever and insidious nature of the slime and scum, combined with the "bread & circuses" side of the uneducated, unaware sheople component.
In other words, lots of things will work on the short term... but nothing so far has worked on the long term.

Bottom line, I'm currently holding back my opinions and suggestions and thoughts - it's way too soon.

[MLM]

I've been pondering this a bit today. Why would a bank (the Fed) with assets and liabilities supposedly "balanced" need to issue "Fed bills" in order to sop up liabilities (i.e. cash). The only answer, of course, is that they have concluded they will be unable to sell the assets they hold for the same amount as the cash they paid for them. And presumably by a wide enough margin they can't fudge it.

[aaron]

I've been pondering this a bit today. Why would a bank (the Fed) with assets and liabilities supposedly "balanced" need to issue "Fed bills" in order to sop up liabilities (i.e. cash). The only answer, of course, is that they have concluded they will be unable to sell the assets they hold for the same amount as the cash they paid for them. And presumably by a wide enough margin they can't fudge it.

So the Fed will only get 10% on the dollar for the Treasuries, just like the Chinese will? It sure feels like a house of cards.

[MLM]

I don't think Treasuries are the issue. It's all the assets the Fed has brought onto its balance sheet via the alphabet soup programs (TALF, etc.), and in particular all the mortgage back securities they've been buying.

[bart]

So what are the Fed's liabilities and where can we find them on an H4.1? And what is the meaning in simple terms of each of those entries?

The current weekly H.4.1 is at http://www.federalreserve.gov/releases/h41/current/ and yearly full balance sheet data is at the Fed's "Reports to Congress" section at http://www.federalreserve.gov/boarddocs/rptcongress/

I'll only be covering H.4.1 since it shows most of the picture and is also very timely. Only section 1 (Factors Affecting Reserve Balances of Depository Institutions - the second part headlined Liabilities) and section 9 (Consolidated Statement of Condition of All Federal Reserve Banks, liabilities) are applicable too.



From Section 1, Factors Affecting Reserve Balances of Depository Institutions
Liabilities (or the other side of Reserve Bank Credit)

(all numbers in millions)

Currency in circulation (15) 899,198
Reverse repurchase agreements (16) 69,486 Foreign official and international accounts 69,486
Dealers 0
Treasury cash holdings 311
Deposits with F.R. Banks, other than reserve balances 269,837 U.S. Treasury, general account 47,129
U.S. Treasury, supplementary financing account 199,934
Foreign official 1,110
Service-related 4,430
Required clearing balances 4,430
Adjustments to compensate for float 0
Other 17,235
Other liabilities and capital (17) 55,474

Total factors, other than reserve balances,
absorbing reserve funds 1,294,307

Reserve balances with Federal Reserve Banks 806,441

Total .................................................. ....... 2,100,748


(15) Estimated.
(16) Cash value of agreements, which are collateralized by U.S. Treasury securities.
(17) Includes the liabilities of Commercial Paper Funding Facility LLC, the LLCs funded through the Money Market
Investor Funding Facility, Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC to entities other
than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio
holdings of these LLCs. Refer to table 4 through table 8 and the note on consolidation accompanying table 10.


As you can see, there are only 4 main items with significant balances:


Currency (actual FRNs and coins, self explanatory)
Reverse repurchase agreements (a repurchase agreement is a fancy name for a loan, but since these are "reverse" they're actually Fed borrowings from banks -- whose purpose is either sterilization or an effort to subtract liquidity from the system)
Deposits with the Fed (from the US Treasury - either paying bills or the remaining balance from the SFP [the Supplemental Financing Program where the Fed borrowed from the Treasury to finance the swaps with the ECB, SNB etc.], from foreign central banks, and the final one which is related to the Fed's check clearing functions and FedWire). Note that reverse repos can be with the Fed's primary dealers or with foreign CBs, or both.
Required reserves themselves

Treasury cash is literally cash waiting to be distributed to banks.
Other liabilities and capital is pretty much what you'd think - a catch all for miscellaneous stuff as shown in note 17, and of course capital (more or less, stockholder's equity).







__________________________________________________ ___


Here's Section 9 and as you can see, it's fairly similar to section 1 so I won't bother covering it.
The totals don't match due to different consolidations, and that they're different reports that cover different areas, as shown by their titles.


Consolidated Statement of Condition of All Federal Reserve Banks

Liabilities
Federal Reserve notes, net of F.R. Bank holdings 864,517
Reverse repurchase agreements (13) 67,906
Deposits 1,089,916 Depository institutions 837,463
U.S. Treasury, general account 37,754
U.S. Treasury, supplementary financing account 199,934
Foreign official 846
Other 13,919
Deferred availability cash items 3,268
Other liabilities and accrued dividends (14) 9,268
Total liabilities 2,034,874
Capital accounts
Capital paid in 22,560
Surplus 21,156
Other capital accounts 1,824
Total capital 45,540
Total .................................................. ....... 2,080,414


(13) Cash value of agreements, which are collateralized by U.S. Treasury securities.

(14) Includes the liabilities of Commercial Paper Funding Facility LLC, the LLCs funded through the Money Market
Investor Funding Facility, Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC to entities other
than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio
holdings of these LLCs. Refer to table 4 through table 8 and the note on consolidation accompanying table 10.

[$#*]

Thanks bart for the answer. I'm curious what kind of interest is the Fed paying on its liabilities.
I pays no interest on currency in circulation.
It pays the new IOR on reserves (currently at about 0.22%)
What are the interest rates it pays on reverse repurchase agreements?
Does the Fed pays any interest to the Treasury?

What is the total of Fed's liabilities at this moment?

[bart]

Thanks bart for the answer. I'm curious what kind of interest is the Fed paying on its liabilities.
I pays no interest on currency in circulation.

You're most welcome... and party on... ;)
True, but there is depreciation in the sense that it continually has to print new currency to replace old bills & coins.

It pays the new IOR on reserves (currently at about 0.22%)
What are the interest rates it pays on reverse repurchase agreements?

It varies greatly but recently ranges from .1% to about .7%

Does the Fed pays any interest to the Treasury?

Yes. It pays all "profits", excluding the 6% it pays as dividends to its member banks and any amounts it adds to its surplus, back to the Treasury. In 2007, it paid about $35 billion back and added about $3 billion to surplus.
All this data is available in their yearly reports to Congress - here's 2007's: http://www.federalreserve.gov/boarddocs/rptcongress/annual07/sec2/c3.htm


What is the total of Fed's liabilities at this moment?

About $2 trillion.

[$#*]

What are the interest rates it pays on reverse repurchase agreements?

It varies greatly but recently ranges from .1% to about .7%
So are there reverse repos loans taken by the Fed from the interbank lending market ? If that is so, what relation is in between the interest Fed to pay on these liabilities and the effective funds rate?

Does the Fed pays any interest to the Treasury?

Yes. It pays all "profits", excluding the 6% it pays as dividends to its member banks and any amounts it adds to its surplus, back to the Treasury. In 2007, it paid about $35 billion back and added about $3 billion to surplus.
All this data is available in their yearly reports to Congress - here's 2007's: http://www.federalreserve.gov/boarddocs/rptcongress/annual07/sec2/c3.htm


So the interest the Fed pays on bank reserves comes from the money there were supposed to return to the Treasury. Not saying it's a lot of money at the moment or that was the main reason for introducing the IOR, but still...just another small gift

What is the total of Fed's liabilities at this moment?

About $2 trillion.

So the total amount of FED liabilities can be found at the end of "Section 9. Consolidated Statement of Condition of All Federal Reserve Banks" under "Total Liabilities" (just above the "Capital accounts" line)

If I'm am correct, that means currently the Fed has some $45 billion in capital (Fed's reserve) , $2044 bil in liabilities and $2090 bil in assets. Or the reserve the Fed operates is about 2.2% , or they have a leverage of 45:1 ... almost like Goldman Sachs.

Of course if we exclude the Currency and the deposits made by depository institutions and the treasury, since they are not real liabilities ( well.. some of the treasury's accounts are actually liabilities) then suddenly the Fed seems far more solid .

[bart]

So are there reverse repos loans taken by the Fed from the interbank lending market ? If that is so, what relation is in between the interest Fed to pay on these liabilities and the effective funds rate?

There's not enough published detail to say where the money comes from, but a semi educated guess would be mostly from the primary dealers.

Generally, the rates are right around the Fed Funds rate and sometimes a bit lower - especially if the Fed is loaning.



So the interest the Fed pays on bank reserves comes from the money there were supposed to return to the Treasury. Not saying it's a lot of money at the moment or that was the main reason for introducing the IOR, but still...just another small gift

Yep - another taxpayer hit.
Cool that you mentioned it, I wouldn't have thought to highlight it.

By my rough calculations, the IOR has paid out $248 million to date.


So the total amount of FED liabilities can be found at the end of "Section 9. Consolidated Statement of Condition of All Federal Reserve Banks" under "Total Liabilities" (just above the "Capital accounts" line)

If I'm am correct, that means currently the Fed has some $45 billion in capital (Fed's reserve) , $2044 bil in liabilities and $2090 bil in assets. Or the reserve the Fed operates is about 2.2% , or they have a leverage of 45:1 ... almost like Goldman Sachs.

Yep - you got it... and Goldman is back to around 13:1 these days, at least on a Tier 1 basis.

One other thing that is a wild variable - the true value of the MBSs and other instruments on the asset side.



Of course if we exclude the Currency and the deposits made by depository institutions and the treasury, since they are not real liabilities ( well.. some of the treasury's accounts are actually liabilities) then suddenly the Fed seems far more solid .

This is one of the areas where central bank accounting gets very unusual. Under those rules, currency and deposits really are Fed liabilities. Currency is an asset for regular banks and us regular folk, so it has to be a liability for someone... and they are called Federal Reserves Notes after all.

[$#*]

There's not enough published detail to say where the money comes from, but a semi educated guess would be mostly from the primary dealers.
But there is nothing to force the Fed to get those loans only from primary dealers.

Generally, the rates are right around the Fed Funds rate and sometimes a bit lower - especially if the Fed is loaning. Wouldn't that mean that the Fed had already a tool for getting liquidity out of the system by using reverse repos? Then why exactly they were so obsessed with having the ability to pay interest on reserves? Is there anything (any regulation) preventing the Fed of offering an IOR above the FFR?;)

Yep - another taxpayer hit.
Cool that you mentioned it, I wouldn't have thought to highlight it.

By my rough calculations, the IOR has paid out $248 million to date.
Compared to the bailout dole, the money they paid so far on IOR is peanuts, still it is just more control for the Fed paid by the taxpayer. They could have paid the IOR from the Fed dividends ... but again this is a minor fraud compared to the larger scam.

Yep - you got it... and Goldman is back to around 13:1 these days, at least on a Tier 1 basis.

One other thing that is a wild variable - the true value of the MBSs and other instruments on the asset side.
Thanks for pointing it. Is the Fed using true mark to market rules to assess the assets? Who is going to check it? The SEC?



This is one of the areas where central bank accounting gets very unusual. Under those rules, currency and deposits really are Fed liabilities. Currency is an asset for regular banks and us regular folk, so it has to be a liability for someone... and they are called Federal Reserves Notes after all.

Yup. :) Before the FDR confiscation one could redeem a dollar on the equivalent amount of gold. Now in the current system if I go to a federal reserve bank I can redeem my dollar for what ? Other foreign fiat currencies? That's why I'm not very convinced that coin& currency is a real liability, and putting it in the liabilities section is just a book keeping convention.

So what about the assets side?

[Sharky]

That's why I'm not very convinced that coin& currency is a real liability, and putting it in the liabilities section is just a book keeping convention.

Currency is a "real" liability, as a side-effect of the way money is created, and the way currency is introduced into circulation.

When the Fed buys a T-Bill from the public, the Bill becomes an asset, and the money that was created to buy the Bill becomes a liability when the Fed's check is deposited into a member bank. Similarly, if the Fed sells a T-Bill, the asset goes away and the money received from the sale is deducted from the balance of a member bank, thereby reducing the Fed's liabilities; the money is destroyed.

Currency is introduced into circulation when a member bank makes a request for cash. Money that the bank has on deposit with the Fed, which is the same money that is a liability of the Fed, is exchanged for the cash. So the Fed exchanges one liability for another, and the bank receives cash.

Before the FDR confiscation one could redeem a dollar on the equivalent amount of gold. Now in the current system if I go to a federal reserve bank I can redeem my dollar for what ? Other foreign fiat currencies?

When the Fed wants to, they can swap their liabilities for Treasury securities and other assets. In that sense, an FRN represents part of the money that the Fed created when it bought Treasuries from the public. FRNs are distinctly different from credit money in that way, since credit money is created by commercial banks, not by the Fed.

[bart]

But there is nothing to force the Fed to get those loans only from primary dealers.

True but the primary dealers are the Fed's main and "normal" path into the markets.


Wouldn't that mean that the Fed had already a tool for getting liquidity out of the system by using reverse repos? Then why exactly they were so obsessed with having the ability to pay interest on reserves? Is there anything (any regulation) preventing the Fed of offering an IOR above the FFR?;)

Yes, reverse repos have been a Fed tool since dirt.

IOR is more a tool to put a floor under Fed Funds where repos and reverse repos are liquidity and money construction/destruction related.
I'm unaware of anything that legally prevents an IOR above Fed Funds but I don't know of any reason they'd use it that way, given the existence of other tools like Securities Lending.

Compared to the bailout dole, the money they paid so far on IOR is peanuts, still it is just more control for the Fed paid by the taxpayer. They could have paid the IOR from the Fed dividends ... but again this is a minor fraud compared to the larger scam.

True, and basically they do pay it from dividends and Treasury profits.
I was just trying to put it out there in case you or others asked.


Thanks for pointing it. Is the Fed using true mark to market rules to assess the assets? Who is going to check it? The SEC?

In theory - yes... but in practice, who knows. Since the Fed has stated they will only buy the highest rated instruments and since there's still trading going on in them, they're probably pretty close to fair value... plus a best guess 10-20% premium that the Fed pays, trying to affect overall market confidence.




Yup. :) Before the FDR confiscation one could redeem a dollar on the equivalent amount of gold. Now in the current system if I go to a federal reserve bank I can redeem my dollar for what ? Other foreign fiat currencies? That's why I'm not very convinced that coin& currency is a real liability, and putting it in the liabilities section is just a book keeping convention.

That's of course true, and it is indeed an accounting convention too. It's what makes interpreting the Fed's balance sheet and flows so "special", since many of the basic assumptions are a "confidence game".

[bart]

So what about the assets side?


Here's section 1, more or less the asset side of "Factors Affecting Reserve Balances of Depository Institutions"


Reserve Bank credit 2,048,651 Securities held outright 773,497 U.S. Treasury securities (1) 486,219 Bills (2) 18,423
Notes and bonds, nominal (2) 424,359
Notes and bonds, inflation-indexed (2) 39,378
Inflation compensation (3) 4,060
Federal agency debt securities (2) 50,853
Mortgage-backed securities (4) 236,424
Repurchase agreements (5) 0
Term auction credit 467,278 Other loans 135,292
Primary credit 59,735
Secondary credit 0
Seasonal credit 3
Primary dealer and other broker-dealer credit (6) 19,488
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility 6,650
Credit extended to American International Group, Inc. (7) 44,712
Term Asset-Backed Securities Loan Facility 4,703
Other credit extensions 0
Net portfolio holdings of Commercial Paper Funding Facility LLC (8) 244,297
Net portfolio holdings of LLCs funded through the Money Market Investor Funding Facility (9) 0
Net portfolio holdings of Maiden Lane LLC (10) 26,295
Net portfolio holdings of Maiden Lane II LLC (11) 18,458
Net portfolio holdings of Maiden Lane III LLC (12) 27,647
Float -2,287
Central bank liquidity swaps (13) 309,828
Other Federal Reserve assets (14) 48,346
Gold stock 11,041
Special drawing rights certificate account 2,200
Treasury currency outstanding (15) 38,856

Total factors supplying reserve funds 2,100,748




... and the voluminous notes & references to other portions of H.4.1:

1. Includes securities lent to dealers under the overnight and term securities lending facilities; refer
to table 1A.
2. Face value of the securities.
3. Compensation that adjusts for the effect of inflation on the original face value of inflation-indexed
securities.
4. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value of the securities, which is
the remaining principal balance of the underlying mortgages.
5. Cash value of agreements.
6. Includes credit extended through the Primary Dealer Credit Facility and credit extended to certain
other broker-dealers.
7. Excludes credit extended to consolidated LLCs.
8. Refer to table 7 and the note on consolidation accompanying table 10.
9. Refer to table 8 and the note on consolidation accompanying table 10.
10. Refer to table 4 and the note on consolidation accompanying table 10.
11. Refer to table 5 and the note on consolidation accompanying table 10.
12. Refer to table 6 and the note on consolidation accompanying table 10.
13. Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when
the foreign currency is returned to the foreign central bank. This exchange rate equals the market exchange
rate used when the foreign currency was acquired from the foreign central bank.
14. Includes other assets denominated in foreign currencies, which are revalued daily at market exchange rates.







The first section "Securities held outright" (bills through MBSs) are also known as the System Open Market Account - basically the piggy bank of the Fed, at least before all the new facilities were invented last year.
"Term auction credit" is the TAF facility
Under "Other loans", the first three lines of primary, secondary and seasonal credit are the three parts of the discount window operations.
"Primary dealer and other broker-dealer credit" is the PDCF facility
The "Asset-Backed Commercial Paper Money Market..." is the biggest tongue twister and alphabet soup facility and is basically the facility backing up Money Market funds.
"Credit extended to American International Group" are the amounts loaned before the various AIG LLCs were established, which are covered further down.
The "Term Asset-Backed Securities Loan Facility" is the new TALF facility which is supposed to lend up to $1 trillion and is so far doing almost nothing.
The next four are basically new facilities, but structured as LLCs. The first is the "Commercial Paper Funding Facility" or CPFF, which has supported liquidity in the comm'l paper markets. The other three are all about AIG.
"Central bank liquidity swaps" are exactly what they say - the dollars lent to the ECB, SNB etc. during the dollar crunch last year, and is winding down from an almost $700 billion peak.
"Other Federal Reserve assets" is basically the balance of the Treasury's Exchange Stabilization Fund (ESF) which is used for currency interventions & support and also to back up money market funds.
"Gold stock" is the remaining gold transferred to the Fed from the Treasury in the '30s & forward, valued at about $42.22 per ounce, and theoretically exists in various vaults like Fort Knox and the NY Fed. As an aside, the "Gold Cerftificate Account" in the actual balance sheet (Section 9) is the offsetting entry.
The "Special drawing rights certificate account" is another oldie, and is the initial amount that the Fed sent to the IMF when the SDR was invented in the late '60s and early '70s.
"Treasury currency outstanding" is currency just moving into & out of the banking system.


Fire away if you have any questions.

It used to be a much simpler statement before all the new facilities and Agency & MBS & AIG crud... and has always been quite odd since its not exactly intuitive from an accounting perspective.



__________________________________________________ _____________________


Here's section 9, the asset side of the balance sheet and again its similar to section 1 so I won't go into detail due to strong similarities.

Assets
Gold certificate account 11,037
Special drawing rights certificate account 2,200
Coin 1,837
Securities, repurchase agreements, term auction credit, and other loans 1,382,945 Securities held outright 782,583
U.S. Treasury securities (1) 492,330
Bills (2) 18,423
Notes and bonds, nominal (2) 430,454
Notes and bonds, inflation-indexed (2) 39,378
Inflation compensation (3) 4,076
Federal agency debt securities (2) 53,616
Mortgage-backed securities (4) 236,637
Repurchase agreements (5) 0
Term auction credit 467,278
Other loans 133,084
Net portfolio holdings of Commercial Paper Funding Facility LLC (6) 249,731
Net portfolio holdings of LLCs funded through the Money Market Investor Funding Facility (7) 0
Net portfolio holdings of Maiden Lane LLC (8) 26,336
Net portfolio holdings of Maiden Lane II LLC (9) 18,516
Net portfolio holdings of Maiden Lane III LLC (10) 27,661
Items in process of collection (475) 485
Bank premises 2,183
Central bank liquidity swaps (11) 308,792
Other assets (12) 48,692

Total assets (475) 2,080,415

[cbeatty]

Bart:

On 3/25/09 you identified M0, the monetary base (coin and currency in circulation, including bank vault cash, and reserves with the FED) as 1.68 trillion of the total 2.04 trillion balance sheet.

1. If not a research problem, what was the total coin and currency, including bank vault cash?

It was pointed out in an earlier post on 3-25-09 by Marvenger that the FED hasn't borrowed from the FED in a long time.

2. Do you know when the last time, if ever, the Treasury borrowed directly from the FED?

3. Does it take approval from Congress for the FED to borrow directly from the Treasury?

Miscellaneous:

4. Is it not a fallacy that ..... "all money is loaned into existence." (talking about the US here)

5. Also, is it not a fallacy that .... "new money has to be loaned into existence to cover the interest of all outstanding loans."

6. Last, are reserves considered to be a FED liability? If so, what are the offsetting assets?

Incidious for the loan to pay interest on reserves, or so it seems to me .....

cbeatty

[bart]

Bart:

On 3/25/09 you identified M0, the monetary base (coin and currency in circulation, including bank vault cash, and reserves with the FED) as 1.68 trillion of the total 2.04 trillion balance sheet.

1. If not a research problem, what was the total coin and currency, including bank vault cash?

Currency in circulation was about $898 billion on 3/25, and that includes bank vault cash.


It was pointed out in an earlier post on 3-25-09 by Marvenger that the FED hasn't borrowed from the FED in a long time.

I'm lost here - whatchu mean Willis? ;)


2. Do you know when the last time, if ever, the Treasury borrowed directly from the FED?

I'm unaware of a time that it has ever happened, but it may be semantics.
Fed purchases of Treasury instruments are always done either from the open market or from the primary dealers, and that happens every week lately.

The ESF balance is one of those grey areas since the ESF is actually a department of the Treasury.


3. Does it take approval from Congress for the FED to borrow directly from the Treasury?

No, assuming the conditions above where the borrowing is effectively direct.


Miscellaneous:

4. Is it not a fallacy that ..... "all money is loaned into existence." (talking about the US here)

This one is highly semantic. My personal opinion is that it is a fallacy, but the percentage loaned into existence is quite high.



5. Also, is it not a fallacy that .... "new money has to be loaned into existence to cover the interest of all outstanding loans."

Another tough one and also semantically charged, and yes, I believe its a fallacy or at least quite incomplete... although again, it gets more true every year in the US.


6. Last, are reserves considered to be a FED liability? If so, what are the offsetting assets?

Yes - reserves are a Fed liability.
There is no direct offset on the asset side, but the System Open Market Account balance (TBills, TBonds., TNotes, Agency debt, MBSs) is closest - especially for the required reserves portion ($40-60 billion recently).


Insidious for the loan to pay interest on reserves, or so it seems to me .....

I'd also add strange, odd, silly, stupid... but such are the ways of folk who believe in extreme government or institutional control of interest rates, etc.







Glad to see you here, cb - may DR and its scum & slime rot in h*ll.

[$#*]

Currency is a "real" liability, as a side-effect of the way money is created, and the way currency is introduced into circulation.
Good you raised this issue. There are some fine details of the scam that deserve to be examined regarding the aspect of cash as liabilities. First when the Fed magically brings dollar into existence it buys treasuries with some pieces of printed paper :FRN's (or paper dollars). And here the scam is so mindbogglingly simple our mind is repelled.
One of the main factors of concealing the scam is to propagate the idea that somehow the Fed is independent of the Treasury Department (when in fact the Fed is the tapeworm introduced inside the Treasury department).
The Fed is not allowed to buy T-bils directly from the Treasury in order to create money. They have to buy them from the open markets. Few people ask themselves why exactly there is that rule. The answer is simple: because the scam is perpetrated by introducing a small debt loop (the Fed) inside the larger public debt loop of the US government (the Treasury). And let's see how the scheme works...

When the Fed buys a T-Bill from the public, the Bill becomes an asset, and the money that was created to buy the Bill becomes a liability when the Fed's check is deposited into a member bank.
That is the theory we are served with. But if we look carefuly into the explanation there is an interesting circular inconsistency (again the mind is repelled at the simplicity of the scam). If the Fed buys a T-bil from J6P using a primary dealer bank (PD) as an intermediate, let's say J6P receives $1000 in dollar bills (he can stuff his mattress with) and the Fed gets a $1000 asset on it's balance sheet. So let's recap ....
J6P has a $1000 T-bil he brought from Treasury Direct with a wad of cash. He sells that T-bil to the Fed and gets back his $1000 of cash, and that wad of FRN's (paper dollar) was created by the Fed by giving in exchange for a T-bil some printed paper.....:)
So what was first? The chicken or the egg???:)
This whole part of bait and switch was slowly engineered and created between the FDR gold confiscation and the unhooking of the dollar from the gold standard in 1971. For that the banksters needed to push the US into a humongous deficit such as the one created by the Korean War, the trade imbalance with Japan and the Vietnam War.

When that T-bil matures the Fed get's paid by the Treasury $1000. The treasury pays that money by selling another T-bil (let's not discuss interest right now) to J6P which buys that new T-bill with the $1000 he got by selling the first T-bill to the Fed :)

Sounds a little bit absurd, but this is the reality :) And people actually believe the whole scam is a legit banking operation needed to maintain the stability of the dollar and control inflation:D when in fact is just a debt trap scam.

Similarly, if the Fed sells a T-Bill, the asset goes away and the money received from the sale is deducted from the balance of a member bank, thereby reducing the Fed's liabilities; the money is destroyed.
Not really. This part of the official theory is also slightly distorted. If the Fed sells a T bill to a bank, then the asset goes away but the cash remains as a ...liability.( and is transformed in profit for the Fed: a small part goes as dividend for member banks, a larger part goes as indirect dole to the primary dealer as low interest loans, and a tiny fraction may even return to the Treasury, extinguishing a few dollars of public debt).
If I am JPM and have a $1bil account with the Fed (deposit aka liability for the Fed) and I use that account to buy $1 bil treasuries from the Fed (instead of going the open market), the Fed's liabilities shrink with $1bil and correspondingly it's assets shrink with $1 bil. It is as simple as that. No real money is destroyed.

If JPM buys $1 bil in treasuries directly from the Treasury Department (instead of buying it from the Fed) no money is destroyed. Imagine if the Fed was acting as an intermediary of the transaction between the Treasury and JPM. ... But the Fed is not allowed to buy treasuries directly from the Treasury Department because the scam would be too obvious :)


Currency is introduced into circulation when a member bank makes a request for cash. Money that the bank has on deposit with the Fed, which is the same money that is a liability of the Fed, is exchanged for the cash.

So the Fed exchanges one liability (a bank deposit) for another (coin and currency is also a Fed liability), and the bank receives cash. Let's recap again on a tiny section of the balance sheet:
Liabilities:
$1 bil deposit of Bank A
$1 bil cash (freshly printed and used to buy $1bil treasuries)
Assets:
$1 bil securities bought with the deposit of bank A
$1 bil treasuries bought in order to create/print the cash
_______________________________________
Net total $0 (great balance sheet :))

After bank A withdraws it's $1 bil deposit demanding $1 bil cash, this section of the balance sheet looks like this:
Liabilities:
$0 deposit of bank A
$0 cash (all was given to bank A)
Assets:
$10 mil securities bought with the deposit of bank A
$10 mil treasuries bought in order to create/print the cash
__________________________________________
Net total $20 mil (WTF??!!! :eek:)

If the monopoly of money creation was not unconstitutionally granted to the Fed, and it was just the Treasury monetizing $1 bil in T-bils the total public debt would have decreased with $1 bil.. And the scam can continue indefinitely only as long as long as government expenses are consistently greater then tax revenues i.e. the public debt keeps increasing. Without that the whole scam scheme collapses....

http://upload.wikimedia.org/wikipedia/commons/1/17/Estimated_ownership_of_treasury_securities_by_year .gif


When the Fed wants to, they can swap their liabilities for Treasury securities and other assets. In that sense, an FRN represents part of the money that the Fed created when it bought Treasuries from the public. FRNs are distinctly different from credit money in that way, since credit money is created by commercial banks, not by the Fed.
Exactly. Not all money is debt, contrary to what we are told and led to believe. FRN's are not credit money. But the fraudulent system which has the Fed at the core, creates an artificial scarcity of debt free money and favours the increase of the share of bank debt money, which normally insures the continuous increase of the parasitic banking plutocracy that controls the country. Basically the Fed's sole is to make sure the banking parasite is always well fed anf the average americans are always kept in a perfect debt trap, always squeezed between their private debt (heloc, credit card, mortgage payments) and their share of public debt (taxes). As long as the Fed exists there will be no escape from the banking scam.

And here are another 2 interesting aspects of the FED, that do not make sense to the casual observer.
Bart what are exactly the "Notes held by F.R. Banks not subject to collateralization" in Section 11?
Why the "Gold certificate account" in the same section is reported with a price of gold of some $40/oz?

[bart]

And here are another 2 interesting aspects of the FED, that do not make sense to the casual observer.
Bart what are exactly the "Notes held by F.R. Banks not subject to collateralization" in Section 11?
Why the "Gold certificate account" in the same section is reported with a price of gold of some $40/oz?

Those notes are to the best of my knowledge just the internal stock of the Fed, ready for distribution as needed - either as the notes themselves wear out or as a response to a sudden demand for cash.

That non market based $42.22 per ounce valuation of their gold is just convention, at least officially. It's based on the price at which gold was theoretically officially redeemable... but that price was established after the gold window was closed in 1971, and was also a nod to the original SDR being redeemable in gold (at 1 SDR = approx .02857 ounce... which would make an SDR worth about $24 today).

[cbeatty]

Other than the recent change that allowed the Fed to pay interest on reserves, its correct that the Fed pays no interest on their liabilities.
Its also true that printing cash via a Fed order to the Treasury is one thing they will do to offset asset growth. Currency in circulation has been growing at an annual rate of over 9% recently.

Exactly what does this mean?

How does printing cash offset asset growth?

[cbeatty]

Another current liability is what the Fed owes the Treasury from the Supplemental Financing Program (the money used to send $600+ billion to the ECB, SNB, etc. at the height of the dollar crunch). It's "only" about $200 billion now, and has been as high as about $660 billion.


Why does the FED owe the Treasury for this?

[cbeatty]

The Fed also can go off balance sheet too, like they have with some of the Securities Lending Open Market operations.


How do they go off balance sheet?

Is this allowed under their charter?

Where and how is this accounted for?

How do you know this?

Are we having fun yet?

[bart]

Exactly what does this mean?

How does printing cash offset asset growth?

Cash/currency is the 2nd largest liability of the Fed (right after the total System Open Market Account balance) so when assets grow, one of the things the Fed can do to offset it is to print cash.

[bart]

Why does the FED owe the Treasury for this?

Because they borrowed the money directly from the Treasury on a short term emergency basis.

[bart]

How do they go off balance sheet?

One step at a time, just like Enron or anyone else.
I could also have called it off income statement or off cash flow statement or even lack of transparency,


Is this allowed under their charter?

Yes, under 13(3) if no other place.



Where and how is this accounted for?
How do you know this?

See section 1A at http://www.federalreserve.gov/releases/h41/current/ - it contains memo items that have not always been there.

I know it because I saw it the last time I leaped tall buildings in a single bound?



Are we having fun yet?

Do I have to answer?

[$#*]

Those notes are to the best of my knowledge just the internal stock of the Fed, ready for distribution as needed - either as the notes themselves wear out or as a response to a sudden demand for cash.
Are you absolutely sure about that? Are those just unborn yet dollars stored to replace dead dollars?
Is there any place where the Fed offers an explanation of what exactly this category means? (this is a real question not a rhetorical one)

That non market based $42.22 per ounce valuation of their gold is just convention, at least officially. It's based on the price at which gold was theoretically officially redeemable... but that price was established after the gold window was closed in 1971, and was also a nod to the original SDR being redeemable in gold (at 1 SDR = approx .02857 ounce... which would make an SDR worth about $24 today).
And the non official reason for pricing it at $42.22/oz is ?:)

[cbeatty]

Cash/currency is the 2nd largest liability of the Fed (right after the total System Open Market Account balance) so when assets grow, one of the things the Fed can do to offset it is to print cash.

Seems like a round about way to the FED prints money to buy assets. Why use a word like offset; does nothing than obfuscate.

Oh yea, and thanks for the welcome in a previous response.

[cbeatty]

Because they borrowed the money directly from the Treasury on a short term emergency basis.

I thought if ever there was any borrowing between the two, it was a one way street with the Treasury always borrowing from the FED, typically, as you earlier described, through primary dealers.

[bart]

Are you absolutely sure about that? Are those just unborn yet dollars stored to replace dead dollars?
Is there any place where the Fed offers an explanation of what exactly this category means? (this is a real question not a rhetorical one)

No, I'm not 100% certain and its due to not knowing the definition and not having researched it fully. I do know that the Fed has well over $100 billion of cash sitting around unissued on a "just in case" basis, and its covered in the various yearly Congressional reports.

And the non official reason for pricing it at $42.22/oz is ?:)

It's a cleverly hatched plot to prey on what little sanity we have remaining? :)

[bart]

Seems like a round about way to the FED prints money to buy assets. Why use a word like offset; does nothing than obfuscate.

It made you ask, so it served its purpose.
And more seriously, offset is what accountants do with T accounts & similar.


Oh yea, and thanks for the welcome in a previous response.

*hug* ;)

[bart]

I thought if ever there was any borrowing between the two, it was a one way street with the Treasury always borrowing from the FED, typically, as you earlier described, through primary dealers.

So shoot me... I wasn't considering 13(3) emergency based operations, under which the Fed can do damn near anything if enough governors vote yes. I'm trying to keep my answers simple too, and without lots of exceptions and qualifiers - the Fed itself has enough of those.
To be perfectly clear and fully anal as requested, when the full implications of the Federal Reserve Act Section 13(3) as amended are taken into account, none of my answers (and none of your assumptions) on this entire thread are correct.

And I never said that the Treasury always borrowed from the Fed - the Fed does sell Treasuries like it did last year to the tune of $300+ billion, although technically the Fed just failed to roll them over.

[$#*]

Originally Posted by $#* http://www.itulip.com/forums/images/buttons/viewpost.gif (http://www.itulip.com/forums/showthread.php?p=90856#post90856)
And the non official reason for pricing it at $42.22/oz is ?:)
It's a cleverly hatched plot to prey on what little sanity we have remaining? :)
Ha ha ha! You cracked me open with this one http://www.itulip.com/forums/picture.php?albumid=7&pictureid=29 http://www.itulip.com/forums/images/icons/icon14.gif It is very possible ... or they just want to drive the goldbugs mad ....

Originally Posted by $#* http://www.itulip.com/forums/images/buttons/viewpost.gif (http://www.itulip.com/forums/showthread.php?p=90856#post90856)
Are you absolutely sure about that? Are those just unborn yet dollars stored to replace dead dollars?
Is there any place where the Fed offers an explanation of what exactly this category means? (this is a real question not a rhetorical one)
No, I'm not 100% certain and its due to not knowing the definition and not having researched it fully. I do know that the Fed has well over $100 billion of cash sitting around unissued on a "just in case" basis, and its covered in the various yearly Congressional reports.

OK, the reason I've asked is that I was told once that part of these outstanding FRN's held by FR Banks that are "not subject to collateralization" represent in fact the last traces of interest free money existing in the system and that indeed are used somehow as off balance reserves for emergencies etc. That guy told me that by looking at the ratio collateralized and non collateralized FRN's one can pretty much figure what the fed is doing and in which direction the markets are going. I couldn't figure out how this works and why and I was wondering if it's true and you knew something about that.


That ties too into the gold price question. I was told that the valuation of the gold stock to $42/oz is left there also because it represents interest free money. At current spot price the gold certificates would be worth about $200 bil or so. Which would represent about 20% of the collateralized FRN's.

[bart]

OK, the reason I've asked is that I was told once that part of these outstanding FRN's held by FR Banks that are "not subject to collateralization" represent in fact the last traces of interest free money existing in the system and that indeed are used somehow as off balance reserves for emergencies etc. That guy told me that by looking at the ratio collateralized and non collateralized FRN's one can pretty much figure what the fed is doing and in which direction the markets are going. I couldn't figure out how this works and why and I was wondering if it's true and you knew something about that.

I'd heard the same thing about it a couple years ago and made a mental note to check it, and then never got around to it... and here it is.
And I now know why I didn't do it then - I had to manually extract the data from individual weekly files, which changed format over 10 times since 1996, and was a PITA to extract... but I didn't have anything else to do while catching up on podcasts & videos.


http://www.nowandfutures.com/images/frn_collateralized_vs_spx.png




That ties too into the gold price question. I was told that the valuation of the gold stock to $42/oz is left there also because it represents interest free money. At current spot price the gold certificates would be worth about $200 bil or so. Which would represent about 20% of the collateralized FRN's.

I don't give much credence to the interest free money view, since banksters aren't exactly fond of gold on the whole.

I look at it mostly with two views, and with the assumption that at least some of it is really there - it is a good emergency reserve, and they'd catch hell if they admitted they didn't have any. I vaguely recall a survey a few years ago that showed over 1/2 of the American public still believed that the dollar had a gold backing.

[$#*]

I'd heard the same thing about it a couple years ago and made a mental note to check it, and then never got around to it... and here it is.
And I now know why I didn't do it then - I had to manually extract the data from individual weekly files, which changed format over 10 times since 1996, and was a PITA to extract... but I didn't have anything else to do while catching up on podcasts & videos.


http://www.nowandfutures.com/images/frn_collateralized_vs_spx.png


Wow bart!!! I don't know how can I thank you. Great chart.... So there may be a kernel of truth in that ;)

I was wondering though if the same correlation can be extended to the ratio of FRN's not subject to collateralization to total currency in circulation ?:) (please, pretty please :))





I don't give much credence to the interest free money view, since banksters aren't exactly fond of gold on the whole.

I look at it mostly with two views, and with the assumption that at least some of it is really there - it is a good emergency reserve, and they'd catch hell if they admitted they didn't have any. I vaguely recall a survey a few years ago that showed over 1/2 of the American public still believed that the dollar had a gold backing.

I think you are right here.

[bart]

Wow bart!!! I don't know how can I thank you. Great chart.... So there may be a kernel of truth in that ;)


Indeed - lots of behind the scenes data sets from the Fed can be very useful... they can build strong portfolios at least 12 ways. ;)


I was wondering though if the same correlation can be extended to the ratio of FRN's not subject to collateralization to total currency in circulation ?:) (please, pretty please :))

The simple answer is yes, since the correlation between currency in circulation and total FRNs w/o collateralization is over .95.

[$#*]

Indeed - lots of behind the scenes data sets from the Fed can be very useful... they can build strong portfolios at least 12 ways. ;)
Yup. Once one understands how the scam works the rest is fairly simple :cool: Thanks again for the chart. Do you have similar data for Dow ( I know Dow may not be the best indicator but still this subject is fascinating)




The simple answer is yes, since the correlation between currency in circulation and total FRNs w/o collateralization is over .95.

Cool. Thanks!

[ThePythonicCow]

Something smells here, with this Fed thingie.

I'm getting the same reaction I used to get when I saw an overly complex piece of computer software addressing what should have had an easy solution. Usually, I could shrink the code by a factor of several to one. On a good day, I could entirely remove the code -- an unnecessary digression into obscurity.

Let me begin at the beginning. Money is a tradeable medium of exchange. It is a more conveniently exchanged intermediary representation of more worth while entities such as food, shelter, labor, factories, ships, tax revenues, desirable mates, fine suits and cheap jeans.

For money to work, it must not be able to be counterfeited with unlimited success, or else the successful counterfeiter owns the universe. So we tie the quantity of money to some more constrained entity, such as bird feathers, gold, or (ostensibly) American debt.

The complexities and gyrations of this thread, which seem to require someone of Bart's talent to understand, suggest to me that the quantity of American Dollars is not really tied to the quantity of American Debt. I suspect that's just a smoke screen.

I suspect Dollars are tied to Power. The most powerful (which may be synonymous with the most corrupt :rolleyes:) seem to have their ways to generate more Dollars in their in baskets. Power is bought and sold daily in the halls of Congress, for more Dollars. Big institutions use their Power to obtain the licenses to more Toll Booths on the American and World economies, to extract more Dollars.

Any currency, except perhaps one of constant volume in a steady state economy (only seen in small isolated examples) has one of several problems:


It can't grow as fast as the economy in growth times, causing the classic deflationary panics seen in America in the 1800's.
It grows too fast in growing economic times, causing ordinary overall inflation.
It grows way too fast in shrinking economic times, causing hyperinflation.

I suppose in theory, some foolish economy could choose a currency that shrinks, but no such examples of that come to my mind, so I will ignore that possibility.

We changed from a classic gold standard to the Federal Reserve system ostensibly to solve Problem 1, above. I think it is fair to say that that objective has been met ;), at least following World War II.

Once a currency has bloated too far, it encourages excessive misallocations of the honest resources of production. Or, said the other way around, a "just right size" currency can perhaps facilitate an economy nicely balanced by the Invisible Hand of Adam Smith.

Currently, that invisible hand looks like the fat pudgy hand of Barney Frank. I really don't want to know where that hand has been. The worlds financial currency, an elaborate scheme of Dollars and other currencies, is looking rather strange these days.

The two most obvious misallocations of productive capacity over the last decade(s) that I observe are:


Americans consume, Chinese produce (oversimplifying here).
Declining prices of tradeable commodities, increasing prices of services, real estate and financial assets.

My dark side suspects there are some more misallocations, involving defense, drugs, CIA, world wide conspiracies, international bribery, ...

America adapted a currency that is not sufficiently transparent in its underpinnings (witness the difficulty that even wise and patient Bart has in explaining it to us) and that is not sufficiently constrained in its growth. The bloat, corruption and misallocation are the inevitable consequence. Thanks to our dominance coming out of World War II, that currency is the reserve currency of the worlds economy.

Once the corruption and misallocation are substantially downsized, we will be on our way to a healthy recovery. I have no idea how and when that can occur. We may have to travel through the Valley of the Shadow of Death (Bunyan's "Pilgrim's Progress") to get there. Sometimes I feel like a mouse caged with a rabid bull elephant. Perhaps I am small enough that he won't notice me, and lucky enough that he won't step on me. But it seems prudent to stay alert and quick on my feet.

But, like with that complicated piece of computer software I mentioned above, I really doubt whether understanding the intricate details of the current "logic" of the Fed's Texas Two Step dance with the Treasury to "create" money will matter substantially to my well being. A few, such as EJ or Bart, might be able to see through the obfuscating details enough to warn the rest of us when and where the next Elephantine Foot Step will fall.

Sometimes, I would just remove the code and determine to live life without it, convinced I would be better off never knowing. Does the Fed have a "Delete" button?

[ThePythonicCow]

It is not just, or even primarily, the excess flexibility of our world currency that has led to the most obvious misallocations of human productive capacity that I listed above.

The essential cause of this misallocation is that we've managed to create a world economy that divorces productive capacity from economic consumption. This is why in Jesse's Café Américain latest article at http://jessescrossroadscafe.blogspot.com/2009/04/g7-industrial-production-crashing.html, he states:
Countries must begin to encourage consumption in their own economies.The world economy has become like a shark that must keep swimming to breath. The lowly paid Chinese factory worker is out of work if the overly paid "financial services" employee in America quits consuming.

We have no long term stable and just way to keep the consumers consuming, without corrupting the system. The basic justice of an honest days pay for an honest days work, at the international economic level, is missing. No choice of currency, in such a world economy, could have saved us from these problems.

We will have to trim our global economy sails, including and particularly involving energy, before we can right this ship. Regardless of whether or not we have a Global Warming or Cooling problem, regardless of whether or not we have a Peak Oil problem, we still and in any event lack the necessary economic, political or ethical framework to substain an enormous world-wide imbalance of resource production and consumption for a prolonged time in a healthy fashion that is not terribly abusive to some of earth's peoples.

[aaron]

Try going through Chris Martenson's "The Crash Course (http://www.chrismartenson.com/crashcourse)"



That video tied everything together perfectly. It was the most frightening movie I have ever seen (except maybe the Exorcist at age 7). Thanks.

[$#*]

Let me begin at the beginning. Money is a tradeable medium of exchange. It is a more conveniently exchanged intermediary representation of more worth while entities such as food, shelter, labor, factories, ships, tax revenues, desirable mates, fine suits and cheap jeans.
I think this definition is a little bit oversimplified. Money is anything that is used for exchanging or storing the fruits of our labor. Gold coins, stones, paper banknotes, grains of salt, it doesn't mater. If two parties involved in a non barter trade agree that a monetary transaction is worth doing, then we have goods/services traded for what ever type and quantity of a medium of exchange they like. It is that simple.

In theory Money can be anything to which the convention of 'moneyness' can be collectively applied/attached by a group of people. In real life, there is the element of enforcing by the state of the concept of 'moneyness' and this enforcement is invariably done in order to promote the interests of an oligarchy. A state enforces the concept of moneyness on a society by:
-instituting a monopoly type of medium for paying taxes (Jesus threw the money changers out of the Temple, because, in the biblical times, only silver half shekels, which had no portrait of king or emperor, were accepted for paying religious dues and a small group of money changers had basically cornered the market of those coins)
-instituting a monopoly for settling debt and enforcing debt claims
-preventing the use/exchange/circulation of other types of money
-enforcing the mandatory exchange for a certain type of money.


For money to work, it must not be able to be counterfeited with unlimited success, or else the successful counterfeiter owns the universe. So we tie the quantity of money to some more constrained entity, such as bird feathers, gold, or (ostensibly) American debt.
That is the requirement for having a constant well defined storage value, but that can be distorted too by the state.


The complexities and gyrations of this thread, which seem to require someone of Bart's talent to understand, suggest to me that the quantity of American Dollars is not really tied to the quantity of American Debt. I suspect that's just a smoke screen.
I don't speak for bart, but I think the dollar doesn't have to be tied to the the quantity of American Debt. The Fed is at the core of the corrupt/fraudulent system which maximizes the debt (interest bearing) component of the dollar. It does that, because the interest bearing debt money represents a hidden and fraudulent private tax. The Fed is the ultimate criminal enabler of the scam, by creating an artificial scarcity of debt/interest free money at the first stage of money creation. It this primordial scarcity the rest of all the private fraudulent banking tax is build upon.

I'm not against lending money with interest. I'm against a fraudulent imposition of unjustified high interest/usury (resulting in obscene banking profits) by creating an artificial money scarcity combined with a government enforced monopoly. This creates a parasitic banking oligarchy which is bleeding us dry

I suspect Dollars are tied to Power. The most powerful (which may be synonymous with the most corrupt :rolleyes:) seem to have their ways to generate more Dollars in their in baskets. Power is bought and sold daily in the halls of Congress, for more Dollars. Big institutions use their Power to obtain the licenses to more Toll Booths on the American and World economies, to extract more Dollars.
The dollars are themselves the source of parasitic and oligarchic power. Without interest bearing money, forced on all of us by the Fed, there would be no human farming in disguise. The whole system revolves around the monopoly of creating money, the ability of creating an artificial scarcity of debt free money and the ability of transfering taxpayer's money to the same parasitic oligarchy (bailouts are just the most direct "in your face" method, but the Fed has done a stealth transfer to tax money to the banks since its inception). In short the fraud we are all subjected to depends on the very existence of the Fed.

I suppose in theory, some foolish economy could choose a currency that shrinks, but no such examples of that come to my mind, so I will ignore that possibility.
It is quite simple to manage an elastic currency (especially a fiat one). It can be done and it has been successfully done in the past. But, it is also extremely easy for a financial/state oligarchy to mismanage a currency (especially a fiat one) in order to obtain huge parasitic profits. The problem is not with the money, or with fractional reserve banking. The problem is with the incapacity of the majority to prevent the infection of the society with a banking/oligarchic parasite. I believe that is the real issue.

[ThePythonicCow]

I can't quite figure out, Symbols, whether you replied to my minimus opus by way of elaboration or dissent.

Your reply seems formatted like a grand rebuttal, but when I read it, I basically nod in agreement.

So thanks for backup :).

Or if you were disagreeing :mad:, I guess you'll have to be more disagreeable, so I get the point. Whack me upside the head with a bigger frying pan or something.

Either way - thanks for the reply.

[$#*]

I can't quite figure out, Symbols, whether you replied to my minimus opus by way of elaboration or dissent.

Your reply seems formatted like a grand rebuttal, but when I read it, I basically nod in agreement.

So thanks for backup :).

Or if you were disagreeing :mad:, I guess you'll have to be more disagreeable, so I get the point. Whack me upside the head with a bigger frying pan or something.

Either way - thanks for the reply.
It was a complete backup with additional details and clarifications in order to leave no doubt. So you are welcome. I'm ready to back you any time on this subject.

[$#*]

Before we go deeper into the Fed's asset side, here is an interesting article:
http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/

IMHO the author makes two omissions which potentially may derail his conclusions, but otherwise the article is great. The two issues he neglects in his analysis are:
a) the role of debt/stored-surplus, ratio for determining the money multiplier equilibrium
b) the role of secondary recycling of bank credit money in government issued debt which creates additional reserve money.

Taking these two issues into account and reading again this article can make very clear what a consumer economy really is.

[bart]

Yup. Once one understands how the scam works the rest is fairly simple :cool: Thanks again for the chart. Do you have similar data for Dow ( I know Dow may not be the best indicator but still this subject is fascinating)



http://www.nowandfutures.com/images/frn_collateralized_vs_dow.png





By the way Sharky - cool recap of the picture. It really is quite a morass and mess to understand, and not just due to all the complexity and lies, etc.

Although I'm far from truly understanding it all, any attempt to understand the relative insanity of it all does require semi-regular visits to one's favorite escape vehicle, whether single malt or beer etc, - "in vino, veritas".

[bart]

Before we go deeper into the Fed's asset side
...



What other areas would you like covered (translation: for which you want to exercise your masochism ;) )?

[$#*]

Bart, thanks a lot for the Dow chart!

What other areas would you like covered (translation: for which you want to exercise your masochism ;) )?

I was interested to take assets one by one and link them with the liabilities we have already discussed, but in order to discuss that I believe we should clear out of the way the difference between the Money Multiplier and the Multiplier Constant . I believe there is a lot of confusion on this issue when I hear things like: "OMG the MULT is below 1 for every dollar pumped into banks the amount of lending decreases!"

With the risk of repeating myself to boredom ... when it comes there are some things so simple our mind is repeled.

So let's go back to the classic fractional reserve banking tables.
Let's suppose we have a bank with:
Reserve ratio =10%
Interest paid on deposits (liabilities)= 1%
Interest received on loans = 20%

One person has $100 dollars in excess wealth (I mean real excess wealth ) and becomes depositor D1 .

This is what happens:
<style> <!-- BODY,DIV,TABLE,THEAD,TBODY,TFOOT,TR,TH,TD,P { font-family:"Liberation Sans"; font-size:x-small } --> </style> <table style="width: 677px; height: 430px;" rules="none" border="0" cellspacing="0" cols="11" frame="void"> <colgroup><col width="69"><col width="77"><col width="71"><col width="92"><col width="71"><col width="63"><col width="107"><col width="105"><col width="67"><col width="80"><col width="163"></colgroup> <tbody> <tr> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ffffff" height="32" valign="top" width="69">Lending Cycle</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="77">Depositor</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="71">Deposit (liability)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="92">Reserve kept by the bank</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="71">Borrower</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="63">Loan (asset)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="107">Profit @ 20% rate diff.</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="105">Total deposits (liabilities)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="67">Total reserves</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="80">Total loans (assets)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="163">Total bank profit 1 year @20% rate differential</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">1</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D1</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="100" sdnum="4105;" align="center" bgcolor="#ccccff">100</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10" sdnum="4105;" align="center" bgcolor="#ccccff">10</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B1</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="90" sdnum="4105;" align="center" bgcolor="#ccccff">90</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="17.9" sdnum="4105;" align="center" bgcolor="#ccccff">17.9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="100" sdnum="4105;" align="center" bgcolor="#e6e6ff">100</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10" sdnum="4105;" align="center" bgcolor="#e6e6ff">10</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="90" sdnum="4105;" align="center" bgcolor="#e6e6ff">90</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="17.9" sdnum="4105;" align="center" bgcolor="#e6e6ff">17.9</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">2</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D2</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="90" sdnum="4105;" align="center" bgcolor="#ccccff">90</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="9" sdnum="4105;" align="center" bgcolor="#ccccff">9</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B2</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="81" sdnum="4105;" align="center" bgcolor="#ccccff">81</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="16.11" sdnum="4105;" align="center" bgcolor="#ccccff">16.11</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="190" sdnum="4105;" align="center" bgcolor="#e6e6ff">190</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="19" sdnum="4105;" align="center" bgcolor="#e6e6ff">19</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="171" sdnum="4105;" align="center" bgcolor="#e6e6ff">171</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="34.01" sdnum="4105;" align="center" bgcolor="#e6e6ff">34.01</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="3" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">3</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D3</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="81" sdnum="4105;" align="center" bgcolor="#ccccff">81</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="8.1" sdnum="4105;" align="center" bgcolor="#ccccff">8.1</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B3</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="72.9" sdnum="4105;" align="center" bgcolor="#ccccff">72.9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="14.499" sdnum="4105;" align="center" bgcolor="#ccccff">14.5</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="271" sdnum="4105;" align="center" bgcolor="#e6e6ff">271</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="27.1" sdnum="4105;" align="center" bgcolor="#e6e6ff">27.1</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="243.9" sdnum="4105;" align="center" bgcolor="#e6e6ff">243.9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="48.509" sdnum="4105;" align="center" bgcolor="#e6e6ff">48.51</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="4" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">4</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D4</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="72.9" sdnum="4105;" align="center" bgcolor="#ccccff">72.9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="7.29" sdnum="4105;" align="center" bgcolor="#ccccff">7.29</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B4</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="65.61" sdnum="4105;" align="center" bgcolor="#ccccff">65.61</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="13.0491" sdnum="4105;" align="center" bgcolor="#ccccff">13.05</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="343.9" sdnum="4105;" align="center" bgcolor="#e6e6ff">343.9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="34.39" sdnum="4105;" align="center" bgcolor="#e6e6ff">34.39</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="309.51" sdnum="4105;" align="center" bgcolor="#e6e6ff">309.51</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="61.5581" sdnum="4105;" align="center" bgcolor="#e6e6ff">61.56</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="5" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">5</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D5</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="65.61" sdnum="4105;" align="center" bgcolor="#ccccff">65.61</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="6.561" sdnum="4105;" align="center" bgcolor="#ccccff">6.56</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B5</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="59.049" sdnum="4105;" align="center" bgcolor="#ccccff">59.05</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="11.74419" sdnum="4105;" align="center" bgcolor="#ccccff">11.74</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="409.51" sdnum="4105;" align="center" bgcolor="#e6e6ff">409.51</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="40.951" sdnum="4105;" align="center" bgcolor="#e6e6ff">40.95</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="368.559" sdnum="4105;" align="center" bgcolor="#e6e6ff">368.56</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="73.30229" sdnum="4105;" align="center" bgcolor="#e6e6ff">73.3</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="6" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">6</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D6</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="59.049" sdnum="4105;" align="center" bgcolor="#ccccff">59.05</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="5.9049" sdnum="4105;" align="center" bgcolor="#ccccff">5.9</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B6</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="53.1441" sdnum="4105;" align="center" bgcolor="#ccccff">53.14</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10.569771" sdnum="4105;" align="center" bgcolor="#ccccff">10.57</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="468.559" sdnum="4105;" align="center" bgcolor="#e6e6ff">468.56</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="46.8559" sdnum="4105;" align="center" bgcolor="#e6e6ff">46.86</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="421.7031" sdnum="4105;" align="center" bgcolor="#e6e6ff">421.7</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="83.872061" sdnum="4105;" align="center" bgcolor="#e6e6ff">83.87</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="7" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">7</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D7</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="53.1441" sdnum="4105;" align="center" bgcolor="#ccccff">53.14</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="5.31441" sdnum="4105;" align="center" bgcolor="#ccccff">5.31</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B7</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="47.82969" sdnum="4105;" align="center" bgcolor="#ccccff">47.83</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="9.5127939" sdnum="4105;" align="center" bgcolor="#ccccff">9.51</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="521.7031" sdnum="4105;" align="center" bgcolor="#e6e6ff">521.7</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="52.17031" sdnum="4105;" align="center" bgcolor="#e6e6ff">52.17</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="469.53279" sdnum="4105;" align="center" bgcolor="#e6e6ff">469.53</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="93.3848549" sdnum="4105;" align="center" bgcolor="#e6e6ff">93.38</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="8" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">8</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D8</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="47.82969" sdnum="4105;" align="center" bgcolor="#ccccff">47.83</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="4.782969" sdnum="4105;" align="center" bgcolor="#ccccff">4.78</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B8</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="43.046721" sdnum="4105;" align="center" bgcolor="#ccccff">43.05</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="8.56151451" sdnum="4105;" align="center" bgcolor="#ccccff">8.56</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="569.53279" sdnum="4105;" align="center" bgcolor="#e6e6ff">569.53</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="56.953279" sdnum="4105;" align="center" bgcolor="#e6e6ff">56.95</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="512.579511" sdnum="4105;" align="center" bgcolor="#e6e6ff">512.58</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="101.94636941" sdnum="4105;" align="center" bgcolor="#e6e6ff">101.95</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="9" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">9</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="43.046721" sdnum="4105;" align="center" bgcolor="#ccccff">43.05</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="4.3046721" sdnum="4105;" align="center" bgcolor="#ccccff">4.3</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="38.7420489" sdnum="4105;" align="center" bgcolor="#ccccff">38.74</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="7.705363059" sdnum="4105;" align="center" bgcolor="#ccccff">7.71</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="612.579511" sdnum="4105;" align="center" bgcolor="#e6e6ff">612.58</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="61.2579511" sdnum="4105;" align="center" bgcolor="#e6e6ff">61.26</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="551.3215599" sdnum="4105;" align="center" bgcolor="#e6e6ff">551.32</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="109.651732469" sdnum="4105;" align="center" bgcolor="#e6e6ff">109.65</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">10</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D10</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="38.7420489" sdnum="4105;" align="center" bgcolor="#ccccff">38.74</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="3.87420489" sdnum="4105;" align="center" bgcolor="#ccccff">3.87</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B10</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="34.86784401" sdnum="4105;" align="center" bgcolor="#ccccff">34.87</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="6.9348267531" sdnum="4105;" align="center" bgcolor="#ccccff">6.93</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="651.3215599" sdnum="4105;" align="center" bgcolor="#e6e6ff">651.32</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="65.13215599" sdnum="4105;" align="center" bgcolor="#e6e6ff">65.13</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="586.18940391" sdnum="4105;" align="center" bgcolor="#e6e6ff">586.19</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="116.5865592221" sdnum="4105;" align="center" bgcolor="#e6e6ff">116.59</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="11" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">11</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D11</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="34.86784401" sdnum="4105;" align="center" bgcolor="#ccccff">34.87</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="3.486784401" sdnum="4105;" align="center" bgcolor="#ccccff">3.49</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B11</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="31.381059609" sdnum="4105;" align="center" bgcolor="#ccccff">31.38</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="6.24134407779" sdnum="4105;" align="center" bgcolor="#ccccff">6.24</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="686.18940391" sdnum="4105;" align="center" bgcolor="#e6e6ff">686.19</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="68.618940391" sdnum="4105;" align="center" bgcolor="#e6e6ff">68.62</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="617.570463519" sdnum="4105;" align="center" bgcolor="#e6e6ff">617.57</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="122.82790329989" sdnum="4105;" align="center" bgcolor="#e6e6ff">122.83</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="12" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">12</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D12</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="31.381059609" sdnum="4105;" align="center" bgcolor="#ccccff">31.38</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="3.1381059609" sdnum="4105;" align="center" bgcolor="#ccccff">3.14</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B12</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="28.2429536481" sdnum="4105;" align="center" bgcolor="#ccccff">28.24</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="5.617209670011" sdnum="4105;" align="center" bgcolor="#ccccff">5.62</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="717.570463519" sdnum="4105;" align="center" bgcolor="#e6e6ff">717.57</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="71.7570463519" sdnum="4105;" align="center" bgcolor="#e6e6ff">71.76</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="645.8134171671" sdnum="4105;" align="center" bgcolor="#e6e6ff">645.81</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="128.445112969901" sdnum="4105;" align="center" bgcolor="#e6e6ff">128.45</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="13" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">13</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D13</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="28.2429536481" sdnum="4105;" align="center" bgcolor="#ccccff">28.24</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.82429536481" sdnum="4105;" align="center" bgcolor="#ccccff">2.82</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B13</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="25.41865828329" sdnum="4105;" align="center" bgcolor="#ccccff">25.42</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="5.0554887030099" sdnum="4105;" align="center" bgcolor="#ccccff">5.06</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="745.8134171671" sdnum="4105;" align="center" bgcolor="#e6e6ff">745.81</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="74.58134171671" sdnum="4105;" align="center" bgcolor="#e6e6ff">74.58</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="671.23207545039" sdnum="4105;" align="center" bgcolor="#e6e6ff">671.23</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="133.500601672911" sdnum="4105;" align="center" bgcolor="#e6e6ff">133.5</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="14" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">14</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D14</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="25.41865828329" sdnum="4105;" align="center" bgcolor="#ccccff">25.42</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.541865828329" sdnum="4105;" align="center" bgcolor="#ccccff">2.54</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B14</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="22.876792454961" sdnum="4105;" align="center" bgcolor="#ccccff">22.88</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="4.54993983270891" sdnum="4105;" align="center" bgcolor="#ccccff">4.55</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="771.23207545039" sdnum="4105;" align="center" bgcolor="#e6e6ff">771.23</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="77.123207545039" sdnum="4105;" align="center" bgcolor="#e6e6ff">77.12</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="694.108867905351" sdnum="4105;" align="center" bgcolor="#e6e6ff">694.11</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="138.05054150562" sdnum="4105;" align="center" bgcolor="#e6e6ff">138.05</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="15" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">15</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D15</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="22.876792454961" sdnum="4105;" align="center" bgcolor="#ccccff">22.88</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.2876792454961" sdnum="4105;" align="center" bgcolor="#ccccff">2.29</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B15</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="20.5891132094649" sdnum="4105;" align="center" bgcolor="#ccccff">20.59</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="4.09494584943802" sdnum="4105;" align="center" bgcolor="#ccccff">4.09</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="794.108867905351" sdnum="4105;" align="center" bgcolor="#e6e6ff">794.11</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="79.4108867905351" sdnum="4105;" align="center" bgcolor="#e6e6ff">79.41</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="714.697981114816" sdnum="4105;" align="center" bgcolor="#e6e6ff">714.7</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="142.145487355058" sdnum="4105;" align="center" bgcolor="#e6e6ff">142.15</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="16" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">16</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D16</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="20.5891132094649" sdnum="4105;" align="center" bgcolor="#ccccff">20.59</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.05891132094649" sdnum="4105;" align="center" bgcolor="#ccccff">2.06</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B16</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="18.5302018885184" sdnum="4105;" align="center" bgcolor="#ccccff">18.53</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="3.68545126449422" sdnum="4105;" align="center" bgcolor="#ccccff">3.69</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="814.697981114816" sdnum="4105;" align="center" bgcolor="#e6e6ff">814.7</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="81.4697981114816" sdnum="4105;" align="center" bgcolor="#e6e6ff">81.47</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="733.228183003335" sdnum="4105;" align="center" bgcolor="#e6e6ff">733.23</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="145.830938619552" sdnum="4105;" align="center" bgcolor="#e6e6ff">145.83</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="17" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">17</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D17</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="18.5302018885184" sdnum="4105;" align="center" bgcolor="#ccccff">18.53</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.85302018885184" sdnum="4105;" align="center" bgcolor="#ccccff">1.85</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B17</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="16.6771816996666" sdnum="4105;" align="center" bgcolor="#ccccff">16.68</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="3.3169061380448" sdnum="4105;" align="center" bgcolor="#ccccff">3.32</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="833.228183003335" sdnum="4105;" align="center" bgcolor="#e6e6ff">833.23</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="83.3228183003335" sdnum="4105;" align="center" bgcolor="#e6e6ff">83.32</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="749.905364703001" sdnum="4105;" align="center" bgcolor="#e6e6ff">749.91</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="149.147844757597" sdnum="4105;" align="center" bgcolor="#e6e6ff">149.15</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="18" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">18</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D18</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="16.6771816996666" sdnum="4105;" align="center" bgcolor="#ccccff">16.68</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.66771816996666" sdnum="4105;" align="center" bgcolor="#ccccff">1.67</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B18</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="15.0094635296999" sdnum="4105;" align="center" bgcolor="#ccccff">15.01</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.98521552424032" sdnum="4105;" align="center" bgcolor="#ccccff">2.99</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="849.905364703001" sdnum="4105;" align="center" bgcolor="#e6e6ff">849.91</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="84.9905364703001" sdnum="4105;" align="center" bgcolor="#e6e6ff">84.99</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="764.914828232701" sdnum="4105;" align="center" bgcolor="#e6e6ff">764.91</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="152.133060281837" sdnum="4105;" align="center" bgcolor="#e6e6ff">152.13</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="19" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">19</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D19</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="15.0094635296999" sdnum="4105;" align="center" bgcolor="#ccccff">15.01</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.50094635296999" sdnum="4105;" align="center" bgcolor="#ccccff">1.5</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B19</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="13.5085171767299" sdnum="4105;" align="center" bgcolor="#ccccff">13.51</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.68669397181629" sdnum="4105;" align="center" bgcolor="#ccccff">2.69</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="864.914828232701" sdnum="4105;" align="center" bgcolor="#e6e6ff">864.91</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="86.4914828232701" sdnum="4105;" align="center" bgcolor="#e6e6ff">86.49</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="778.423345409431" sdnum="4105;" align="center" bgcolor="#e6e6ff">778.42</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="154.819754253654" sdnum="4105;" align="center" bgcolor="#e6e6ff">154.82</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="20" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">20</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D20</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="13.5085171767299" sdnum="4105;" align="center" bgcolor="#ccccff">13.51</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.35085171767299" sdnum="4105;" align="center" bgcolor="#ccccff">1.35</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B20</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="12.1576654590569" sdnum="4105;" align="center" bgcolor="#ccccff">12.16</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.41802457463466" sdnum="4105;" align="center" bgcolor="#ccccff">2.42</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="878.423345409431" sdnum="4105;" align="center" bgcolor="#e6e6ff">878.42</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="87.8423345409431" sdnum="4105;" align="center" bgcolor="#e6e6ff">87.84</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="790.581010868488" sdnum="4105;" align="center" bgcolor="#e6e6ff">790.58</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="157.237778828288" sdnum="4105;" align="center" bgcolor="#e6e6ff">157.24</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="21" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">21</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D21</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="12.1576654590569" sdnum="4105;" align="center" bgcolor="#ccccff">12.16</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.21576654590569" sdnum="4105;" align="center" bgcolor="#ccccff">1.22</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B21</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10.9418989131512" sdnum="4105;" align="center" bgcolor="#ccccff">10.94</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2.17622211717119" sdnum="4105;" align="center" bgcolor="#ccccff">2.18</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="890.581010868488" sdnum="4105;" align="center" bgcolor="#e6e6ff">890.58</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="89.0581010868488" sdnum="4105;" align="center" bgcolor="#e6e6ff">89.06</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="801.522909781639" sdnum="4105;" align="center" bgcolor="#e6e6ff">801.52</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="159.414000945459" sdnum="4105;" align="center" bgcolor="#e6e6ff">159.41</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="22" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">22</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D22</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10.9418989131512" sdnum="4105;" align="center" bgcolor="#ccccff">10.94</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.09418989131512" sdnum="4105;" align="center" bgcolor="#ccccff">1.09</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B22</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="9.84770902183612" sdnum="4105;" align="center" bgcolor="#ccccff">9.85</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.95859990545407" sdnum="4105;" align="center" bgcolor="#ccccff">1.96</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="901.522909781639" sdnum="4105;" align="center" bgcolor="#e6e6ff">901.52</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="90.152290978164" sdnum="4105;" align="center" bgcolor="#e6e6ff">90.15</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="811.370618803475" sdnum="4105;" align="center" bgcolor="#e6e6ff">811.37</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="161.372600850913" sdnum="4105;" align="center" bgcolor="#e6e6ff">161.37</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="23" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">23</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D23</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="9.84770902183612" sdnum="4105;" align="center" bgcolor="#ccccff">9.85</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="0.984770902183612" sdnum="4105;" align="center" bgcolor="#ccccff">0.98</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B23</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="8.86293811965251" sdnum="4105;" align="center" bgcolor="#ccccff">8.86</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1.76273991490867" sdnum="4105;" align="center" bgcolor="#ccccff">1.76</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="911.370618803475" sdnum="4105;" align="center" bgcolor="#e6e6ff">911.37</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="91.1370618803476" sdnum="4105;" align="center" bgcolor="#e6e6ff">91.14</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="820.233556923128" sdnum="4105;" align="center" bgcolor="#e6e6ff">820.23</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="163.135340765822" sdnum="4105;" align="center" bgcolor="#e6e6ff">163.14</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ffffff" height="17">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#e6e6ff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#e6e6ff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#e6e6ff">-----</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#e6e6ff">-----</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="262" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">262</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D262</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="0.0001" sdnum="4105;0;0.0000" align="center" bgcolor="#ccccff">0.0001</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="0.00001" sdnum="4105;0;0.0000" align="center" bgcolor="#ccccff">0.0000</td> <td style="border: 1px solid rgb(0, 0, 0);" sdnum="4105;0;0.0000" align="center" bgcolor="#ccccff">B262</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="0.00009" sdnum="4105;0;0.0000" align="center" bgcolor="#ccccff">0.0001</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="0.00001" sdnum="4105;0;0.0000" align="center" bgcolor="#ccccff">0.0000</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1000" sdnum="4105;" align="center" bgcolor="#e6e6ff">1000</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="100" sdnum="4105;" align="center" bgcolor="#e6e6ff">100</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="900" sdnum="4105;" align="center" bgcolor="#e6e6ff">900</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="179" sdnum="4105;" align="center" bgcolor="#e6e6ff">179</td> </tr> </tbody> </table>

Few interesting things here should be discussed about this specific example:
a)A $100 deposit of excess real wealth (central bank money) theoretically generates $1000 in total deposits (bank credit money) and $900 in new loans. For fractional reserve banking the math is:
Liabilities = Assets + Reserves
(which is different from the normal balance sheet equation)
b) If the number of lending cycles is high enough, the excess real wealth introduced in the system (as deposit in our case, or as equity), becomes captured entirely as bank reserves. And that is normal since the profitability of a bank, in normal times, beats even human trafficking or drug dealing. An 179% profit, as in our example, beats the hell out of any other productive activity that creates something actually useful for society.
c) Fractional reserve banking can extract banking profits from a society, which are greater then the total surplus real wealth created in that society (and as a result we have the well known charts with the exponential increase in private and public debt)
d) For every dollar of surplus real wealth introduced in a fractional reserve system with a reserve ratio R (10% in the example above) the bank produces 1/R total bank deposits and (1-R)/R total assets/loans. That is the rule and there are no exceptions.
The Multiplier Constant MC=1/R describes how much bank credit money is created for every dollar of real wealth net surplus in the society deposited with a bank (or introduced directly as bank reserves) and it is determined only by the reserve ratio R. But remember that MC has nothing to do with the money multiplier. The only correlation between the two is MULT < MC


Let's take the example above and twist it a little bit to see what the money multiplier is.
Like in the previous case we have depositor D1 starts the whole cycle of fractional reserve banking, the bank keeps $10 and lends $90 to borrower B1 who uses the loan to buy goods and services from D2 who deposits the $90, the bank keeps $9 in reserve, and lends $81 to B1 who uses the money to pay individual D3, but... let's say that D3: -had a business loss of $81 and he uses the money to pay for his loss
-puts $81 money into the mattress or buys gold and silver
-pays a $81 debt
-invests $81 in a foreign country (capital flight/outflow)

The process steps after only 2 lending cycles:

<style> <!-- BODY,DIV,TABLE,THEAD,TBODY,TFOOT,TR,TH,TD,P { font-family:"Liberation Sans"; font-size:x-small } --> </style> <table style="width: 819px; height: 60px;" rules="none" border="0" cellspacing="0" cols="11" frame="void"> <colgroup><col width="69"><col width="77"><col width="71"><col width="92"><col width="71"><col width="63"><col width="107"><col width="105"><col width="67"><col width="80"><col width="163"></colgroup> <tbody> <tr> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ffffff" height="32" valign="top" width="69">Lending Cycle</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="77">Depositor</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="71">Deposit (liability)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="92">Reserve kept by the bank</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="71">Borrower</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="63">Loan (asset)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#ccccff" valign="top" width="107">Profit @ 20% rate diff.</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="105">Total deposits (liabilities)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="67">Total reserves</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="80">Total loans (assets)</td> <td style="border: 1px solid rgb(0, 0, 0);" align="left" bgcolor="#e6e6ff" valign="top" width="163">Total bank profit 1 year @20% rate differential</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="1" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">1</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D1</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="100" sdnum="4105;" align="center" bgcolor="#ccccff">100</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10" sdnum="4105;" align="center" bgcolor="#ccccff">10</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B1</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="90" sdnum="4105;" align="center" bgcolor="#ccccff">90</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="17.9" sdnum="4105;" align="center" bgcolor="#ccccff">17.9</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="100" sdnum="4105;" align="center" bgcolor="#e6e6ff">100</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="10" sdnum="4105;" align="center" bgcolor="#e6e6ff">10</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="90" sdnum="4105;" align="center" bgcolor="#e6e6ff">90</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="17.9" sdnum="4105;" align="center" bgcolor="#e6e6ff">17.9</td> </tr> <tr> <td style="border: 1px solid rgb(0, 0, 0);" sdval="2" sdnum="4105;" align="center" bgcolor="#ffffff" height="17">2</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">D2</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="90" sdnum="4105;" align="center" bgcolor="#ccccff">90</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="9" sdnum="4105;" align="center" bgcolor="#ccccff">9</td> <td style="border: 1px solid rgb(0, 0, 0);" align="center" bgcolor="#ccccff">B2</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="81" sdnum="4105;" align="center" bgcolor="#ccccff">81</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="16.11" sdnum="4105;" align="center" bgcolor="#ccccff">16.11</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="190" sdnum="4105;" align="center" bgcolor="#e6e6ff">190</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="19" sdnum="4105;" align="center" bgcolor="#e6e6ff">19</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="171" sdnum="4105;" align="center" bgcolor="#e6e6ff">171</td> <td style="border: 1px solid rgb(0, 0, 0);" sdval="34.01" sdnum="4105;" align="center" bgcolor="#e6e6ff">34.01</td> </tr> </tbody> </table>
A $100 dollar initial deposit creates in this case only a total of $190 bank deposits, and in this situation we can say MULT = 1.9 ( andthe total bank reserve created is only $19 dollars).
And what is the MC ? Well, that is still 1/R=10 , the difference being that the multiplier constant applies only to the total net real wealth surplus introduced in the banking system. In this particular case the total net wealth is $100-$81=$19 ... and the fractional reserve banking did it's mathematical duty ... it created $190 (19*10) in bank deposits and captured all the real net wealth surplus of $19 in the of bank reserves.

The sums of total deposits and loans is the same as the one created by putting only $19 as an initial deposit and go through a gazilion banking cycles.

So what is the scoop with the money multiplier why is it different from the multiplier constant ? Well, the problem is that both numbers are tied to different things.
The multiplier constant is applied to the total net surplus real wealth while the money multiplier applies to the apparent wealth introduced in the system.

In this example one can calculate the percent of real net surplus wealth as being MULT/MC =MULT*R = 19% ( $19 net real wealth for $100 of apparent wealth pumped in the system as initial deposit). In theory one should be able to assess it as the M1/Required reserves ... but the numbers provided by the Fed are not always reliable.

In these times when the official MULT (http://research.stlouisfed.org/fred2/series/MULT) hovers around 0.9 and the average reserve ratio is somewhere in between 2-6% (depending how much of the shadow banking system is taken into account) it means that out of $1749.163 bil of St Louis Adjusted Monetary Base (BASE (http://research.stlouisfed.org/fred2/series/BASE)) only $31-100 bil represents real net surplus wealth. The rest is money forced pumped in the system with the help of the Fed and Treasury.

It's really difficult to determine the real value of reserves existing in the FED system especially these days when al numbers are so fudged but if we substract from the total bank reserves (TOTRESNS (http://research.stlouisfed.org/fred2/series/TOTRESNS)) the excess reserves (EXCRESNS (http://research.stlouisfed.org/fred2/series/EXCRESNS)) we get about $53 bil dollars (in March 2009). This would correspond to an average reserve ratio of 3.39%

Remember these $53 bil dollars represents only the excess net real wealth stored in dollars.

The last interesting aspect refers to the bank profitability. Fractional reserve banking can (and is in the current fraudulent system under FED's patronage) extract more profits than the excess real net wealth stored in dollars accumulated by the society.

If we play a little bit with our model, one can assume that the Fed's effective funds rate is about equal to the average rate of all bank liabilities (that is not exactly true but it is a good approximation).
So let's assume for the bank in the example above the interest paid on liabilities is FFR and the average lending interest is FFR + LD ( LD=average lending differential)

The bank profit (P) for $1 real net wealth deposited with the bank with a certain reserve ratio R is:
P= [(1-R)/R]*(FFR+LD)-FFR/R <=>
P=(1-R)*RD -R*FFR

Considering that all surplus net wealth is extracted by a bank (actually a little more than that) and that the real net surplus wealth is created only by the real/productive economy (which hasn't gone up since the advent of free trade and outsourcing) it results that at a low FFR the economy simply could not absorbed all the bank credit available and banks started to compete by lowering the rate differential (offering competitive rates), and were forced to make up profits by lowering the actual reserve ratios (they had to leverage).

The true problem is that a low FFR doesn't help the real economy (by offering affordable credit) as long as the banks can increase their profit by increasing the leverage. As long as the surplus created in the real economy is smaller than the profit extracted by banks from the society things will continue to go worse and worse.
http://www.nytimes.com/2009/04/12/opinion/12zencey.html?_r=2&partner=rss&emc=rss&pagewanted=all

The problem isn’t simply greed, isn’t simply ignorance, isn’t a failure of regulatory diligence, but a systemic flaw in how our economy finances itself. As long as growth in claims on wealth outstrips the economy’s capacity to increase its wealth, market capitalism creates a niche for entrepreneurs who are all too willing to invent instruments of debt that will someday be repudiated. There will always be a Bernard Madoff or a subprime mortgage repackager willing to set us up for catastrophe. To stop them, we must balance claims on future wealth with the economy’s power to produce that wealth. How can that be done?

My question bart is what instruments has the Fed available to reign in the total profit extracted by the banks from the productive section of the society? Can we make sense of that from the assets and liabilities? What role can the IOR play in limiting bank profits and why do they need to put a floor under the FFR?
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[$#*]

By the way, according to the latest data MULT is 0.862

http://research.stlouisfed.org/fred2/data/MULT.txt


2009-01-28 0.884
2009-02-11 1.010
2009-02-25 0.956
2009-03-11 1.000
2009-03-25 0.902
2009-04-08 0.913
2009-04-22 0.862
</pre>

[Sharky]

By the way Sharky - cool recap of the picture. It really is quite a morass and mess to understand, and not just due to all the complexity and lies, etc.

Happy to help. Still lots of confusion in this thread about how things work, though. Interesting to observe.

[bart]

I was interested to take assets one by one and link them with the liabilities we have already discussed, but in order to discuss that I believe we should clear out of the way the difference between the Money Multiplier and the Multiplier Constant . I believe there is a lot of confusion on this issue when I hear things like: "OMG the MULT is below 1 for every dollar pumped into banks the amount of lending decreases!"

With the risk of repeating myself to boredom ... when it comes there are some things so simple our mind is repeled.

So let's go back to the classic fractional reserve banking tables.
Let's suppose we have a bank with:
Reserve ratio =10%
Interest paid on deposits (liabilities)= 1%
Interest received on loans = 20%

One person has $100 dollars in excess wealth (I mean real excess wealth ) and becomes depositor D1 .



My apologies symbols, I'm very remiss in answering this. It's not only a complex area full of traps and false data, but takes a while to collect my thoughts to even start to give an answer. And I do have a lot of things on my plate, so an answer kept getting delayed.


First - no question about MULT and multiplier and what most think. Just because its below one doesn't mean much... as proven by a simple observation. While people are spending less, the money is moving around the economy and world far more than once per year... even without taking any of the outrageous daily trading like on the dollar, which is measured in trillions per day.

Velocity is an abstract concept that simply tries to relatively track how fast money is moving through a given economy or economies. It moves much faster during a hyperinflation than an inflation, and of course is relatively slow during disinflation or deflation. When its moving very fast like in a hyperinflation, it acts like there is more actual money in the economy than there is - and vice versa during a deflation... and its also a positive feedback phenomenon and is subject to rapid changes depending on "expectations".

The fractional reserve multiplier acts similarly, but as you correctly observe its based on different things. But... they can both be at least approximately measured and both are related to actual velocity.
There are at least a dozen ways to measure them and as I've noted earlier, there is no decent agreement amongst economists on what the best ways are... and now you know why I have so many (sometimes "spaghetti") charts that attempt to measure it.



One can of course try to chart the credit multiplier and velocity separately but I prefer one chart that tries to combine them, and also shows an average - see below.

To your example though... I only vaguely or minimally agree with your illustration of money being multiplied, mostluy due to the extremely high value in the last column that includes "20% differential". I think its way too high and severely biases the output, even though the basic concept is correct.

Also, looking at actual stats of how much credit there is in the US economy per Z1 & similar stats against how much "non credit" money exists (M3 is one way to measure it), the actual real world credit multiplier is only in the rough 5:1 or 6:1 range. Fractional reserve does multiply, just not as much as a math model shows.

I don't mean to take away from your general analysis either since banks, especially the mega ones, on average do make gigantic profits.



The true problem is that a low FFR doesn't help the real economy (by offering affordable credit) as long as the banks can increase their profit by increasing the leverage. As long as the surplus created in the real economy is smaller than the profit extracted by banks from the society things will continue to go worse and worse.
http://www.nytimes.com/2009/04/12/opinion/12zencey.html?_r=2&partner=rss&emc=rss&pagewanted=all


Generally true, and its exacerbated when the FFR and related rates are way below the actual rate of inflation. There's quite a bit of "pushing on a string" these days, not unlike in 2002 or the 1930s or even the mid 1970s.




My question bart is what instruments has the Fed available to reign in the total profit extracted by the banks from the productive section of the society? Can we make sense of that from the assets and liabilities? What role can the IOR play in limiting bank profits and why do they need to put a floor under the FFR?
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Rough questions sinec they partuially require that I try to predict what a basically nutty organization will try and do... but WTH...

The primary tool they have for reigning in profits is simply the reserve ratio - require the banks to have more reserves and bingo, they can't leverage as much. And that wouldn't be very noticeable in the assets & liability area... but we'd hear about it in a hurry from various bloggers as well as Bloomberg... and the howling & whining from the banks themselves. And don't forget who owns the Fed - the banks themselves.

The IOR could with little difficulty be raised high enough to drastically change the risk/reward ratio in the models that vsrious banks use, and thereby decrease their capital... but again I wouldn't hold my breath, don't forget who owns the Fed.

There's something that still bothers me about IOR in the sense that there seems to be another purpose, but I haven't resolved it yet. Overall, the IOR purpose right now still seems to be setting & keeping a stable lower limit on rates like the FFR, and stability within a banking system that is insolvent (don't forget the Level II and Level III asset are still there are hugely over valued) isn't a bad idea.

There's also the leverage cap that is currently being discussed, but that's more in the SEC area - the folk who allowed banks to exceed 10:1 leverage in the first place and even had special exclusions for the mega banks & investment banks that allowed them to go well over 30:1.



Here's my most recent stab at velocity:

http://www.nowandfutures.com/images/velocity_preferred_short.png



http://www.nowandfutures.com/images/velocity_preferred.png

[cjppjc]

reading this thread. I need a magnifying glass.:eek: