I don't know how often it's updated, but the wickedly friendly FRED charting facility that the St. Louis Fed puts out has the following chart available:
The Fed was already allowing the commercial banking sector to debase the currency by explosive creation of monetary equivalents (esp. via the USDJPY carry trade), but this chart shows the amount to which credit is being extended using essentially worthless collateral. Or maybe not worthless; who knows how many of the subprime mortgages will really blow up in the long run, but certainly not the AAA-rated cash-reserve-equivalent collateral that should be used. Right now the Fed has no choice if it's going to fulfill its second mandate of protecting employment. Right now we're so close to Scylla that aiming the prow at Charibdis (sp?) doesn't seem like that bad of an option, but once we're in the jaws of the latter foe, this chart'll help show just how much white-phosphorus we've added down in the boilder room.
3 comments:
So we are screwed then? Yes?
And whose employment exactly is the Fed planning on protecting? It certainly isn't the manufacturing sector, so who then? The "financial services" sector? Oh boy, that will help a lot of us.
Of course you're assuming bonds will even be valued after this meltdown completes. I also have a conservative retirement plan, but my hedge has been money in Canada rather than gold. I'm sure the rest of my high yield bonds are probably all this worthless paper that was backed by supposedly secure mortgage securities so at least you have your gold.
Until they succeed at squeezing gold from seawater via electrolysis anyway.
The short answer is everyone's. It's a Sisyphean mandate that I personally believe would be better left to the politicos, since they're the ones who make most policy.
Employment will wax and wane across a ton of industries for lots of reasons: Texas, for example, is "stealing" jobs from Michigan because it's a more business-friendly state -- the Fed has nothing to do with that and shouldn't. But then, I don't have Russ's fictitious robot army to hand with which to correct things. :o)
Yep, and that's why I know a plant being shut down in Wichita Falls, because the Feds are protecting the public from monopolies, even if it means hundreds of people have to be laid off to keep Corning from owning the place.
Go go feds! What else can't they screw up?
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