The sort of thing which, if you or I tried it, would land us in jail – from MSNBC:
Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.
The significant shift was tucked quietly into the Fed’s weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6…
What seems to have happened is that the Federal Reserve, holding perhaps trillions in worthless assets, has decided that if anything looks bad on the Fed’s balance sheet, it actually applies to the Treasury’s balance sheet. In other words, if you go to Vegas and start losing money, just pass the losses over to the guy sitting next to you, and you come out looking good.
Of course, that other guy might not be able to pay, but that doesn’t matter…what matters is that for a little while longer, everyone around the table can pretend there is no problem, and thus continue on as if nothing is wrong.
Our peril, though, remains the same – too much debt chasing too little wealth. We’re in a pickle and there is no way out unless we very swiftly balance our budget. Of course, that would tend to make banks and other financial institutions go bankrupt as they are only kept afloat by bags of free money provided by the Federal Reserve. And so, that option isn’t really considered – there’s no upside to banksters and bureaucrats in a balanced budget. Heck, might as well make an economy which is geared towards the small and mid-sized producer of tangible goods! Where does something like Goldman Sachs fit in to such an economy? Not even worth considering…
They are juggling desperately, our Ruling Class. How long can they keep it up? I don’t know – but they can’t keep it up forever.
HAT TIP: Mish’s
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