by Summary:
What immediately caught the attention of financial analysts is that the gaping Q3 loss of over billion, dwarfed the Fed's .1 billion in capital, leaving the US central bank with a negative net worth, which would suggest insolvency for any ordinary company, but since the Fed gets to print its own money, it is of course anything but an ordinary company as Bloomberg quips. Commenting on the Fed's paper losses, former Fed Governor Kevin Warsh told Bloomberg that "a central bank with a negative net worth matters not in theory. But in practice, it runs the risk of chipping away at Fed credibility, its most powerful asset.’’ ...a negative net worth is sure to raise eyebrows especially after Janet Yellen said in December 2015 that "capital is something that I believe enhances the
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Mike Norman considers the following as important: FED, negative equity
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What immediately caught the attention of financial analysts is that the gaping Q3 loss of over billion, dwarfed the Fed's .1 billion in capital, leaving the US central bank with a negative net worth, which would suggest insolvency for any ordinary company, but since the Fed gets to print its own money, it is of course anything but an ordinary company as Bloomberg quips. Commenting on the Fed's paper losses, former Fed Governor Kevin Warsh told Bloomberg that "a central bank with a negative net worth matters not in theory. But in practice, it runs the risk of chipping away at Fed credibility, its most powerful asset.’’ ...a negative net worth is sure to raise eyebrows especially after Janet Yellen said in December 2015 that "capital is something that I believe enhances the
Topics:
Mike Norman considers the following as important: FED, negative equity
This could be interesting, too:
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Mike Norman writes My new podcast episode is out
Mike Norman writes My new podcast episode is out.
What immediately caught the attention of financial analysts is that the gaping Q3 loss of over $66 billion, dwarfed the Fed's $39.1 billion in capital, leaving the US central bank with a negative net worth, which would suggest insolvency for any ordinary company, but since the Fed gets to print its own money, it is of course anything but an ordinary company as Bloomberg quips.
Commenting on the Fed's paper losses, former Fed Governor Kevin Warsh told Bloomberg that "a central bank with a negative net worth matters not in theory. But in practice, it runs the risk of chipping away at Fed credibility, its most powerful asset.’’
...a negative net worth is sure to raise eyebrows especially after Janet Yellen said in December 2015 that "capital is something that I believe enhances the credibility and confidence in the central bank."…This is also a reason central banks still hold gold, which Keynes called "the barbarous relic." Makes no sense in a modern monetary system for currency sovereigns, but whatever — perception is reality.
While a central bank can operate with negative net worth, such a condition could have political consequences, Tobias Adrian, financial markets chief at the IMF said. “An institution with negative equity is not confidence-instilling,’’ he told a Washington conference on Nov. 15. "The perception might be quite destabilizing at some point."