I've looked on usdebtclock.org/ and have witnessed that the Federal Reserve's monetary reserve is lowering. I saw it lowering first yesterday. Is this because they're going to raise interest rates, hand out more loans for those who cannot repay them back, and cause a first...a full-blown currency crisis? Plus, I've seen credit derivatives lowering very fast for about 2 months I suppose.
The Fed does not want to increase or decrease reserves permanently, so it usually engages in transactions reversed within several days. Look at the reserves over weeks or months to see if there is an up or down trend...
This former Assistant Treasury Secretary in the Reagan Administration believes it is. Is he wrong? "Washingtons power ultimately rests on the dollar as world reserve currency. "This privilege, attained at Bretton Woods following World War 2, allows the US to pay its bills by issuing debt. The world currency role also gives the US the power to cut countries out of the international payments system and to impose sanctions. "As impelled as the Fed is to protect the large banks that sit on the board of directors of the NY Fed, the Fed has to protect the dollar. "That the Fed believed that it could not buy the bonds outright but needed to disguise its purchase by laundering it through Belgium (see link) suggests that the Fed is concerned that the world is losing confidence in the dollar. "If the world loses confidence in the dollar, the cost of living in the US would rise sharply as the dollar drops in value. Economic hardship and poverty would worsen. "Political instability would rise. "If the dollar lost substantial value, the dollar would lose its reserve currency status. Washington would not be able to issue new debt or new dollars in order to pay its bills." http://www.globalresearch.ca/the-us-dollars-fragile-reserve-currency-status-the-great-deceiver-the-federal-reserve/5382184
That is called monetization of national debt. Basically the central bank prints free money for the government to borrow. Actually what happens is the central bank buys government debt at a higher price than the rest of the market would be willing to pay. This dilutes the value of the currency because the increase in reserve assets held by the central bank does not truly match up to the increase in units of currency issued by the bank. Essentially liabilities (the bank notes issued are classified as a liability from the bank's perspective) increase more than assets (the reserve assets that the bank purchased with the newly issued bank notes). Let's not forget, one party's assets are another party's liabilities. Government debt is a liability from the point of view of the Treasury, but is considered an asset from the point of view of the central bank, and by extension anyone holding those bank notes. All this financial operation can be a little difficult to understand for many of those not familiar with the terminology. Many people have no idea what money and currency actually represent. In the very old days, many different private banks issued their own bank notes to the public, backed by gold. Now in most countries the central bank has a monopoly on bank notes and the notes are backed by the bank's reserve assets, at least theoretically. (The notes also derive worth from the fact the government collects taxes)
What do you mean by this? Give some context. Do you mean in terms of trading activity, or notional value?
I don't think it's so much about losing confidence as it is where else can people and governments park their cash? Maybe someday China or India or the Euro, etc. will be perceived as safe havens and pay a little interest, but until that day, investment in the US will continue. And certainly the public owned portion of the debt bonds is not going to leave the US. But there is going to be change so it's just a matter of when that change arrives and how the US deals with this change...
