Could the U.S. central bank go broke?

You're not considering the impact if such a situation arose. If the Fed had to start printing in order to fulfil its obligations, the dollar becomes more and more worthless. A spiral develops, in the end the fed is just printing toilet paper.

 

"Right now the Fed is worried about deflation..."

Why? I assume you live in the States, are you seeing price decreases when you go shopping? Do you buy petrol (gas) for your vehicle? Do you buy food to eat? Where is this deflation?

 

What would you estimate the leverage the dollar has against our gold holdings? 10x1? 50x1? 1000x1?

 

I read somewhere that US gold reserves especially in Fort Knox have not been audited for decades and no-one is even sure if there still is any gold there.

I don't know the truth of this.

 

Actually, I'm not sure what your question means since dollars are not redeemable in gold.

 

I am aware that if they printed off so many dollars that hyper inflation could occur, like Germany in the 1920's. The fact is we are nowhere near that and the Fed wouldn't let that happen. In Germany the hyper inflation was caused by the ridiculous war repariations that were demanded by the Allies. You are talking about DAILY inflation rates that are in the double digits. Currently the US YEARLY (measured by CPI) is 1.5%. Obviously we are very far from hyperinflation and much closer to deflation. The CPI was NEGATIVE 2% in 2009, thats deflation.

The Feds balance sheet is currently about $1 Trillion dollars, the GDP of the US is $14 Trillion. The Fed desperately wants inflation.

5yr

 

All over the place. Food prices haven't risen substantially to the consumer. The price of every consumer good has been slashed as stores/dealerships offer significant discounts. The cost of Christmas gifts for my family was the lowest its been in years, 40% and greater discounts at almost every store. Cars are cheaper and financing them is almost free.

5yr

 

I'm sure the Fed wants inflation. But do the people want to pay more for for stuff? Do they want their currency to be worth less?

Btw, +1.5% on the CPI isn't deflation.

Do you even believe the official numbers?

 

I haven't been to the US for a few years now, but that's not what I've heard from people I know who live in NY. They tell me food has gone up, restaurant prices have gone up, entertainment such as tickets to the cinema and theatre admission prices have shot up.

What about gas, up or down?

 

So I am arguing with you based on what you have heard? And I am sure when you hear this you aren't using leading questions, like "what prices are going up?"

You also won't believe the only data we have to look at (see link below.)

Personally I spend less than 1% of my income on gas (average in the US is 6.7%), so a relatively big increase won’t affect people as much as it they make it out. It’s really just a populist idea. The US pays much less per gallon than other industrial economies and they manage to get by.

A CPI of 1.5% is relatively low and like I have said, deflation is a bigger risk to our economy.

http://www.usinflationcalculator.co...and-annual-percent-changes-from-1913-to-2008/