[JasonC]

The Fed's balance sheet is 10% smaller today than it was in April. All the short term loans they made at the peak of the crisis are being repaid to them. The amounts exceed their treasury purchases by a factor of about 3, and their total purchases of treasuries agencies and mortgages by a smaller margin. Short loans repaid since April come to $700 billion, long term securities purchased to a little under $500 billion. The money supply is not growing, and prices are down year over year.

Of all the net new bonds issued by the treasury in the past 2 years, meanwhile, 65% were taken by domestic private sector investors, and 11% by China. The Fed, no net change.

The Fed ran down its treasury positions in 2008 to fund loans to the banks, and has run it back up to the former position size as those are repaid. The only big net new item on its sheet is a big slug of mortgage bonds, plus its remaining loans to the banking system, about half the size those were at its April sheet-size peak.

All of this is readily found with a few minutes of investigation, it is printed weekly on the web and in the back of the print edition of Barrons. But journalists mongering doom lie for a living.

[milwguy]

http://www.treas.gov/tic/mfh.txt

Here is list and holdings of US treasuries over last 12 months. China and Japan increased holdings by ttl $300 billion, with China accounting for 200 bil of that.

If China reverses course, and starts reducing holdings, Fed monetizing is only alternative as their is not enough $ to soak up that amount of debt.

Fed balance sheet is now full of worthless mortgages the banks unloaded on them. Fed is lending money to banks with the understanding the banks buy treasuries with the cash. Easy way for banks to borrow money for 0% and ‘lend’ it to the gov’t at 3-4% in 5,7,10, 30 years. Totally corrupt, and putting us right on the same path as Japan with lost decades because Fed, Gov’t are not forcing banks to own up to the fact they have balance sheets that are still a diasaster.

China recognizes this and is ‘slowly’ exiting the game, buying SHORT term treasuries, reducing holdings, and buying hard assets whenever possible.

This will not end well, and will end sooner than most people believe possible. Fraud is fraud, whether it is the Fed, the Treasury, or banks.

[milwguy]

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Ludwig Von Mises