Yes, the comment regarding Fed and Gold made no sense to me, perhaps what Q actually meant will be clarified.
Bretton Woods took place in 1944. In 1913, the reserve currency was the British Pound Sterling. UK maintained it’s peg to gold as WWI began. In Nov. 1914 the dollar began the process for conversion to the dollar being the reserve currency - they competed side by side for a while.
In 1939 @ beginning of WWII, UK suspended conversion of Pound to gold, leading to the eventual reform in 1944 known as Bretton Woods. Pegged Dollar to Gold @ $35/oz. and other currencies to the dollar. Nixon had to stop the ability of other countries to take payments in gold @ $35/oz. and sell it in the open market @ $40/oz.
I personally think we are beginning the transfer from the dollar as reserve currency, most likely to SDRs under the International Monetary Fund, if the Financial Gurus get their way.
Most descriptions I have read, consider the Fed to be a corporation. It also has financials such as The Balance Sheet of Assets, Liabilities, Net Assets.
If the liabilities exceed the Assets, I’d call that bankrupt regardless of whether it is a unique bank or monetary authority.
In Lewis v. United States,[77] the United States Court of Appeals for the Ninth Circuit stated that: “The Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations.”
Below is the balance sheet as of 6 July 2011 (in billions of dollars):
Note: The Fed balance sheet shown in this article has assets, liabilities and net equity that do not add to the balance. The Fed balance sheet is missing the item “Reserve Balances with Federal Reserve Banks” which would make the figures balance.
ASSETS:
Gold Stock
11.04
Special Drawing Rights Certificate Acct.
5.20
Treasury Currency Outstanding (Coin)
43.98
Securities Held Outright
2647.94
U.S. Treasury Securities
1623.78
Bills
18.42
Notes and Bonds, nominal
1530.79
Notes and Bonds, inflation-indexed
65.52
Inflation Compensation
9.04
Federal Agency Debt Securities
115.30
Mortgage-Backed Securities
908.85
Repurchase Agreements
0
Loans
12.74
Primary Credit
12
Secondary Credit
0
Seasonal Credit
53
Credit Extended to AIG Inc.
0
Term Asset-Backed Securities Loan Facility
12.67
Other Credit Extended
0
Commercial Paper Funding Facility LLC
0
Net portfolio holdings of Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC
60.32
Preferred Interest in AIG Life-Insurance Subsidiaries
0
Net Holdings of TALF LLC
0.75
Float
-1.05
Central Bank Liquidity Swaps
0
Other Assets
133.56
Total Assets
2914.51
LIABILITIES:
Currency in Circulation
1031.30
Reverse repurchase agreements
68.09
Deposits
91.12
Term Deposits
0
U.S. Treasury, general account
76.56
U.S. Treasury, supplementary financing account
5
Foreign official
0.17
Service Related
2.53
Other Deposits
6.85
Funds from AIG, held as agent
0
Other Liabilities
73.06
Total liabilities
1263.73
CAPITAL (AKA Net Equity)
Capital Paid In
26.71
Surplus
25.91
Other Capital
4.16
Total Capital
“I personally think we are beginning the transfer from the dollar as reserve currency, most likely to SDRs under the International Monetary Fund, if the Financial Gurus get their way.”
Keynes had advocated something like SDRs during Bretton Woods but was ignored, he called his the “Bancor”. It was a basket of currencies.
His view was probably the right one. By using the dollar as the world’s reserve currency we made ourselves vulnerable to the ‘Triffin Dilemma’, a vice that would force us to decide between our postwar foreign policy or defending the dollar.
The problem began showing up as early as Eisenhower. Kennedy chose devaluation and the end of silver currency was his doing. It only got worse under Johnson with the two-tiered gold market, and Nixon finally scrapped Bretton Woods altogether, setting us up for the high inflation of the 1970s.
“Most descriptions I have read, consider the Fed to be a corporation. It also has financials such as The Balance Sheet of Assets, Liabilities, Net Assets.”
It’s not a corporation in the normal sense. It’s more like a mandatory association that banks must belong to, with significant government participation. It’s not a bank in the normal sense. It’s the lender of last resort to what we think of as banks. It collects interest on its bond holdings, but anything over basic expenses goes to the Treasury. It’s role is to adjust and influence the amount of credit available in the banking system.
“If the liabilities exceed the Assets, I’d call that bankrupt regardless of whether it is a unique bank or monetary authority.”
You can’t look at the Fed’s balance sheet like you would a private corporation. It cannot go bankrupt, because it can create dollars at will to exchange for debt. It’s holdings are for the purpose of adjusting the quantity of hot money in the banking system. To increase the money supply it purchases bonds in exchange for cash it creates- that is the definition of ‘monetizing the debt’. To shrink the money supply to halt inflation it will sell bonds into the banking system, which sops up hot money in exchange for bonds.
Trying to analyze its balance sheet like you would a private corporation will just mislead you.