“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.
Not everyone agrees with you.
Former Atlanta Fed President William Ford says, technically, yes, the Fed can go bankrupt. He argues that the Fed’s balance sheet is highly leveraged as a result of quantitative easing expanding its balance sheet.
The result is that the Federal Reserve is thinly capitalized despite its having just transferred a record $80 billion in profit to the US Treasury.
I’ll leave it at that, no sense arguing about it any further.
Well, much of this is far above my pay grade, but what strikes me about all this international currencies circus is that there is nothing involved of established value... and SDRs have been re-defined and revalued often.
I cannot get over the suspicion that the Fed wants to drive the US into insolvency via debt so that the IMF can step in with authority to declare that our Constitutional form of government is not a workable financial solution - that global socialism is the only resolution.
Of course gold does not have an established value either, but the Arabs think it is permanently reliable... historically hard to argue with. I wonder what Q means by answering the question Q: Do we have the gold? with: Yes. Gold shall destroy FED. Q Raises questions... like why we told Germany it would take 8 years for them to recover all their gold stored in Fort Knox.
...above my pay grade...