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Tuesday, April 5, 2016

ECB explains why it can't go bankrupt. Can someone at the Fed please explains this to idiots here?

Interesting stuff's been coming out of Bloomberg of all places. Very much "in-paradigm" columns. (A breath of fresh air after years of that moron, Caroline Baum.)

Central banks can't go bankrupt

Here's the footnote:

"Central banks are protected from insolvency due to their ability to create money and can therefore operate with negative equity."

By the way, this applies to sovereign, currency issuing governments, too, but don't expect the idiots in the mainstream (economics, media, Wall Street, corporate, policy or otherwise) to understand or admit this.

I don't know what the Fed would do in a negative equity situation simply because Congress might get on their case about not remitting profits. The ECB doesn't have that problem. It is truly independent from the idiots in Brussels.

Read the article here.
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1 comment:

  1. Matt FrankoApril 5, 2016 at 12:41 PM

    I dont know Mike they are now buying corporate bonds with a positive yield vs. the govt bonds which have gone negative...

    So I'd assume this is some low level assertion out of the ECB wrt "negative equity" and the leadership still wants a positive carry in order to fund their operations...

    Same with the Fed but we dont have the negative rates... we have very low govt bond rates but our Fed has like $1T of MBS so they are pretty much guaranteed a positive carry as long as they maintain some inventory of MBS in their factors...

    We just have to get the rates moving up and then I think we will get things going in earnest... EZ will probably be able to glom on to a US recovery thru increased exports fomented by the higher US rates... then the ECB will start to raise...

    I'm thinking US first... UK second... EZ third... then maybe BOJ too....

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