Wednesday, December 10, 2008
Largest Fed holding? Foreign currencies!
While the public, lawmakers and the know-nothing media rail against the government's intervention to protect the U.S. economy, there has been zero mention of the massive buying of foreign currencies by the Fed. (Read: massive selling of the dollar.)
Foreign currency holdings of the Fed have gone from virtually zero three months ago, to above $600 billion and are now the single biggest asset on the Fed's balance sheet.
Foreign currencies are non-convertible, so all the Fed has is a piece of paper. In constrast, most of the U.S. bank regulated assets that the Fed lent against to help domestic institutions are cash flow positive.
There should be huge public outcry over this, but there isn't.