All these years, the con was maintained by the Fed that it was solid because it has on its balance sheet over $800 billion of US treasuries i.e. its notes "were so-called backed by these treasuries". It could sell its treasuries in the repo market for cash and thereby control the money flows in the economy and vice versa.
In their subconscious mind, Americans and stupid foreign central banks and their executives (brain-washed by the Chicago School of Economics) somehow believe in the infallibility of the Fed.
Now it has been exposed that the Fed’s "assets" comprise of junk bonds and toxic wastes.
The Emperor has no clothes!
Paul Volcker, former Chairman of the Federal Reserve may have given the ultimate epitaph: "The bright new financial system – for all its talented participants, for all its rich rewards – has failed the test of the market place."
And it is any wonder that Professor Nouriel Roubini declared:
"The process of socialising the private losses from this crisis has already moved many liabilities of the private sector onto the books of the sovereign. At some point a sovereign bank may crack, in which case the ability of the government to credibly commit to act as a backstop for the financial system – including deposit guarantees – could come unglued."
In my opinion, the Fed has already become "unglued". Whatever guarantees given to secure the indebtedness of CitiGroup and others to prevent a run on these banks are useless.
It is bankrupt!
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