Washington “Fixes” a Problem


Isn't it time that the people of this country take back their currency?

Inquiring minds are even shocked at the transparent self-imposed idiocy of government. Today’s example is the way the Federal Reserve has ‘fixed’ a problem…don’t actually implement changes to alleviate the stress, just change the accounting method so you can kick the can down the road:

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.

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world’s most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.

“Could the Fed go broke? The answer to this question was ‘Yes,’ but is now ‘No,'” said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. “An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital.”

Doesn’t that make everything so much better, children?

By allowing the Fed to have an unlimited checkbook is all that was needed:

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

This enhances transparency by providing clearer, more frequent, snapshots of the central bank’s finances, analysts say. The bonus: the number can now turn negative without affecting the central bank’s underlying financial condition.

“Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible,” said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

So, doesn’t this actually hurt the strength of this country since people will think the underlying, or ‘real’ problem, has been fixed?

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