Friday, December 19, 2008

Fed's foreign currency position rises $14 billion in latest week to $642 billion

Over a three month period the Fed's foreign currency holdings have gone from virtually zero to over $600 billion. Foreign currencies now comprise the largest single asset holding on the Fed's balance sheet. This accumulation has gone on virtually unnoticed. No one in the media or in Congress has asked about this.

The accumulation of foreign currencies have been negative for the dollar. These currency holdings also represent loans--in the same magnitude--to foreign central banks that are being used to fund foreign institutions. Neither the Fed nor the Federal Government has any oversight on these loans. Who are they going to? What collateral is being pledged? We know nothing.

It is highly likely that some of this money has gone to foreign automakers like BMW, Daimler, Volkswagon, Nissan, Toyota, Honda, Hyundai, Kia, etc. And for sure a big chunk of this money has gone to foreign banks and financial institutions.

As the debate rages on in America as to whether or not we should help our own businesses, the Fed is quietly lending money to foreign companies in amounts greater than what has already been spent through TARP.

It is an outrage!

The American electorate, and especially American workers who have recently lost their jobs, should be up in arms about this. Instead, we see near-universal-opposition to the token loans (with huge strings attached) that are being given to companies like GM and Chrysler.

Unless we wise up and complain about the right things, we will continue to see policy that is counterproductive and fashioned, by design, to make Americans poorer vis-a-vis the rest of the world.


googleheim said...

what if some of this money goes to german banks, which by the way are usually a composite new bank comprised of two old Nazi era banks that shed the old names ..., use the money to subsidize a factory in Austria Russia or Germany itself to send industrial goods to Iran which are then produced into military weapons that are pointed at US GI´s in Iraq or Israel ?

Strong dollar now will help everyone.

GM and Ford already have factories elsewhere, so a strong dollar will not hurt them export when the factories are already in Asia and S america

googleheim said...

There was a pipeline built recently in Florida with pipes from Turkey´s Borusan for a southern pipeline energy company.

They probably got the gig as an exchange for allowing Turkish forces to go after Kurdish positions on the Turkish border.

Now, Borusan´s same department has opened up an office in Tehran.

What do the Armenian lobbyists and greek lobbyists thinking about this ?

Southern business as usual ?

do sanctions against Iran really exist ?

majestyx said...

Since you continue to espouse the notion that the old theories of economics no longer apply (i.e. the Austrain School), perhaps the following article will make it a little clearer for you:

Of course, you will likely not understand it or will simply choose to ignore it, since, based on your blog entries and radio shows, you apparently think other countries still believe in the US dollar and that a bankrupt government can go on spending forever. Simple question: where will the money come from when our creditors stop lending to us?

Since you mentioned that this has happened over the past 3 months, what has magically happened since the fall of Lehman Brothers? The dollar STRENGTHENED. Still don't see the connection? No wonder you are no longer on Fox (not that they have any more clue than you) and are relegated to internet radio.

As you well know, a huge deleveraging occurred due to the haphazard way Treasury handled Bear Stearns (broken up and sold), Lehman (allowed to fail), and later AIG (an insurance company? oh that's right, China had a huge stake in it), then the handling of the whole financial system. The carry trade started to unwind. All big board transactions are settled in US dollars so there was a rush FOR dollars to close out short positions.

As evidenced since the beginning of December, the dollar is back on the decline. But what's this? Gold has had an EIGHTH STRAIGHT YEAR OF GAINS which, compared to every other investment, shows that there STILL is a place for gold in this day and age as PRESERVATION OF WEALTH. Hmm, how did that happen? Because gold has been money for 5000+ years, has no counter-party risk, and has never been worth ZERO, unlike certain talk show people's reputations.

So go on and call people like Ron Paul, Jim Rogers and Peter Schiff idiots. We're still waiting for you to show your mental might.