The Fed's Ponzi Scheme-- quietly pumping up world dollar reserves

[TexasLawyer]

A really fascinating article from Wall Street Examiner. I didn't realize that this was happening. It's yet another partial explanation for the sinking dollar and rising commodity rates.

Abolish The Fed Ponzi Scheme
by Arthur Radley, Sunday April 10 2005

The Federal Reserve's off-balance-sheet 'custody' holdings for foreign official accounts are up $214 billion, or 18.2%, over 52 weeks, to almost $1.4 trillion. ----- $1.4 trillion is 67% larger than the Fed's own balance sheet. Although it's not counted in the US money supply, it represents foreign exchange reserves that are part of other countries' money supplies. And this is so-called 'high-powered money,' which gets pyramided through the 'money multiplier' effect of fractional reserve banking into far larger sums of commercial and retail credit.

In a globalized world where much international trade and 70% of forex reserves are dollar-denominated, perhaps we should consider the 'worldwide dollar supply' rather than just the domestic US monetary base. The combined growth rate for the Fed's own $833 billion balance sheet, plus the $1.4 trillion of 'high-powered money' it holds in custody for foreign central banks, has been almost 12% over the past year.

Why are global oil, steel and copper prices exploding? Because the irresponsible Bubble blowers at the Greenspan Fed are pumping the global dollar monetary base at 12% annually to keep their teetering Ponzi scheme going. Probably the only reason that manufactured goods prices are not already rising at the same 12% is an overhang of production capacity, in so many industries including automobiles.
The Economist was publishing articles 4 or 5 years ago about global overcapacity in auto production. It took time, but the entirely predictable train wreck is underway, and naturally is taking out the weakest players.

When it comes to commodity-oriented industries that have suffered from underinvestment, the combination of runaway fiat credit plus supply shortages produces horrors such as the past year's runup in energy prices. With the Fed's custody account expanding at an 18% annual rate -- and Leeson's (Greenspan) banksters elbowing in to Fannie and Freddie's mortgage turf -- I see no sign that efforts to maintain the US-sponsored global Ponzi Bubble have diminished.

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http://wallstreetexaminer.com/index.php?itemid=664

[napi21]

1. Geesh, I must be stupid, but can you explain all that in some way

I can understand what in the world they're talking about?

[Nikki Stone 1]

2. I'll second the request for an explanation

Though I get the idea that the Fed is increasing the worldwide dollar supply enough to drastically decrease the value of the dollar. Of course it is 1:30 in the morning on the West Coast, so I could be really wrong.