Federal Reserve Balance Sheet Could Rise to 4 Trillion Dollars (Very Soon)

Discussion in 'Economics' started by ByLoSellHi, Aug 25, 2009.

  1. The Federal Reserve is going have to keep buying more and more and shittier and shittier assets in order to keep as many banks as possible capitalized, even by the lenient standards allowed by Congress.

    This is why they suspended M2M Accounting, why the Federal Reserve is refusing to disclose specific recipients of TALF, TARP & BARF aid, etc.

    We have zombie banks, growing in number with their bad loan %s growing by the day.

    This is also a big reason why deflation has set in and will continue; repairing the banks' balance sheets is not a one time event - it's an ongoing crisis management situation that is sucking all the Federal Reserve & Treasury monies away from any true stimulus.


    Goldman’s Hatzius Says Fed Balance Sheet Could Hit $4 Trillion
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    By Thomas R. Keene and Liz Capo McCormick

    Aug. 25 (Bloomberg) --
    Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc., said the Federal Reserve could double the size of the central bank’s balance sheet again if needed to support economic growth.

    A rise in the balance sheet to $4 trillion is a “possibility,” Hatzius said in an interview on Bloomberg Radio in New York. “It is going to depend on not just what inflation does, but also on whether the economy does move back to a slower growth pace.”

    Fed Chairman Ben S. Bernanke has cut the main U.S. interest rate to almost zero and more than doubled total assets on the central bank’s balance sheet to unclog credit markets and help meet banks’ demand for cash. Fed officials have started to phase out such programs, deciding this month to let a $300 billion program to purchase long-term Treasuries expire in October.

    The size of the Federal Reserve’s balance sheet has increased to $2.02 trillion as the central bank purchased assets aimed at lowering interest rates, as of the week ended Aug. 12.

    The Fed must now guide the world’s largest economy back to growth and reduce unemployment approaching 10 percent while shrinking the balance sheet to prevent a surge in inflation, Hatzius said.

    “Rates need to stay low,” he said. The Fed “could become more aggressive in purchasing assets. They have not gotten a lot of bang for the buck on that policy so far.”

    U.S. unemployment will surge to 10 percent this year and the budget deficit will widen to $1.5 trillion next year, reflecting a “deeper recession” than previously expected, the White House said today.

    To contact the reporters on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net.
    Last Updated: August 25, 2009 10:36 EDT
  2. the1


    Why is someone from GS reporting this? Aren't GS and the Fed essentially one and the same?
  3. A: Yes they are.

    GS sets policy FED implements said policy.
  4. they act like the good guy while the others are the poor boys who'r eating all the sh*t, when from the begining that was the main and single point, to OWN as much as they can

    it kinda gives it some sense, some "scheme" :D , perspective

    ppl would not like how it sounds "hey i've just made this all up to get all i can from ya" :D lol


    ps : what the "federal" reserve is meant to be anyways

  5. GS properly forecasted this rally as bogus (not-backed with fundamentals), and sold some months ago.

    Now they want prices to drop, so they may buy cheap again.

    No big problem, I'm waiting for the very same thing.