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Its source of funds comes from issuing cash
Saturday, May 02, 2009
Sometimes it's funny to read how economists describe what the Federal Reserve is doing in their ongoing quest to save the world from the effects of global deleveraging which they both enabled and condoned. This story by an anonymous economist at The Economist blazes a new trail in describing the massive increase in the Fed's balance sheet - how it's a good thing.
That should make you all feel better - the Fed's turning a profit.THE Federal Reserve does not set out to make bumper profits. But its 2008 annual accounts, released on April 23rd, would turn many a hedge-fund manager green with envy.
Like Wall Street’s finest, the Fed makes money on a spread. Its main source of funds comes from issuing cash, since currency in circulation is, in effect, an interest-free loan by the public to the central bank. The interest it earns on its loans and securities is almost pure profit, or “seigniorage,” most of which it remits to the Treasury. Last year the central bank reported a whopping $43 billion in operating income.
The fact that it buys Treasuries with money it borrows from the Treasury Department shouldn't minimize the importance of the central bank's bottom line, nor should the idea that a good portion of the central bank's $1.4 trillion increase in assets has been purchased with money created "out of thin air". Read more...
This week, a U.S. District Court judge remanded a lawsuit against Mr. Mozilo, filed by Florida Attorney General Bill McCollum, back to Broward County Circuit Court. While the action is a procedural move, it increases the possibility that Mr. Mozilo, at one time the head of the nation's largest mortgage lender, could appear in court in the state of Florida. The state alleges that Mr. Mozilo engaged in 
Not dwelling too much about the nature of the chart above, where numbers above and below 50 indicate expansion and contraction, respectively, you could easily convince yourself that conditions got better last month, not worse.
What 
Since last summer, we must have made about ten trips to Ashland, Medford, Eugene, Salem, Florence, and Grants Pass before finally making the last three journeys to Bend, the most recent one resulting in making a one-year commitment.
The trade group's first quarter report on gold has some rather interesting statistics related to the quickly changing supply and demand situation.
The rate of decline appears to be slowing - only ten of the twenty cities reported a record annual plunge in prices! Poor Detroit fell off the chart here registering only 74.7 in February.
The payments are part of the $787 billion package of spending and tax cuts enacted in February to help boost the economy. They will go to people who receive Social Security, Supplemental Security Income, railroad retirement or veteran's disability benefits.
Following the fourth quarter's 6.3 percent pace of contraction, the U.S. economy shrank at a seasonally adjusted annualized rate of 6.1 percent last quarter, surpassing the consensus estimate of minus 5.0 percent. This was the worst back-to-back performance in 60 years.
"Everyone knows that when the economy contracts, pushpin sales expand," said Paul Michelson, a pushpin analyst for Wells Fargo. "
There has been little movement in either the price of oil or gold since year-end, however, that could surely change in the weeks ahead.
Sadly, after placing in the top ten during the three prior contests, last time around your humble scribe fell to 70th place out of about 90 guesses. Note that if I ever 
Has anyone really stopped to think about this whole "less bad" logic that has been sweeping the country after a number of economic indicators shifted from a near-vertical rate of decent to something less steep in the last month or so?
Founded in 1969 by Angelo Mozilo and David Loeb, Countrywide Financial Corp. had been the largest U.S. mortgage lender before Bank of America acquired it last July for $2.5 billion, after rising defaults and an inability to tap capital markets drove Countrywide near collapse.
Now, that was a bit creepy...
Interestingly, mainstream financial media outlets such as Reuters and Bloomberg now routinely report changes in GLD inventory in their gold reports and also compare their stockpile to official country holdings around the world, something that I've been doing for years. In fact, I remember being disappointed early last year about not being mentioned in an article in the Wall Street Journal after a reporter called to follow up on one of my articles about the GLD inventory passing China's official holdings of 600 tonnes.
It is a scary image to be sure and stock market bears are no doubt salivating along with the large fish to the right, prompting the rhetorical question, "Do fish have saliva glands?"
The two double-digit negative numbers for 2009 GDP growth in Latvia and Iceland are particularly troublesome. What are the odds of similar numbers showing up for Japan, Germany, and elsewhere? The double-digit unemployment numbers are bothersome as well.
