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2-22-2013 Economic Collapse: The Fed Just Went Bankrupt ... Game Over


James Turk Warns The Federal Reserve Is Already Insolvent

“... the Federal Reserve is already insolvent.” Turk also stated, “Because of the intense leverage that the Federal Reserve employs, this means the mark-down on its $2.844 trillion of securities is, in reality, a staggering $57 billion loss.” Here is what Turk had to say in this extraordinary interview:

... The Fed owns $2.844 billion of long-term debt securities. It also has $253 billion of other assets for which is does not disclose a detailed breakdown, but there is probably not much liquidity to them. But let's focus just on the securities.

The price of these securities have declined about 2.5% since their high prices and low yields were reached in June. But let's use a smaller percent price drop because the Fed has been purchasing long-term debt for a while, meaning that some of their paper has higher yields. This is also a conservative approach to take.

So instead of a 2.5% decline, let's assume the average price of the long-term paper owned by the Fed has declined by just 2% since June. Because of the intense leverage that the Federal Reserve employs, this means the mark-down on its $2.844 trillion of securities is, in reality, a staggering $57 billion loss, which is actually greater than the Federal Reserve's $55 billion equity. Because the loss on the Federal Reserve’s securities is already greater than its equity, this means that the Fed is already technically insolvent.

What's more, I am making the assumption that the Fed will not suffer any losses on the toxic mortgage securities it still holds, and that its other assets are recorded at a fair market value. Both of these generous assumptions would mean that the Fed is probably in worse financial shape than I am indicating.



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As soon as the word gets out, assassinations will begin.

The only thing keeping these people alive is the financial hold they have on us. My heart weeps.

I love it!! All Of you rock! good to see

I will pile on well after everyone else has made the tackle.

The Fed is printing 85 billion a month to buy bonds and mbs under
qe whatever and 57 billion in write downs means the fed is bankrupt??????

I mean seriously???

You are not gonna find a whole lot of love for the Fed here but it appears this 57 billion write down= bankruptcies argument holds no water here at least.

I Think the FED is gonna take a bigger bath than 2.5% whenever it unwinds...maybe it won't unwind look at Japan! Who is gonna take out the dollar or the FED for the love of Pete? I used to think the Swiss had it figured out, but their CB balance sheet is the size of their GDP now. All fiats are in a race to the bottom...buy gold !

Lucky for the Bernank,

the Fed writes the accounting rules. I am sure they will come up with something.

Ĵīɣȩ Ɖåđşŏń

"Fully half the quotations found on the internet are either mis-attributed, or outright fabrications." - Abraham Lincoln

This is what Mises said

about the subject in 2010.

"However, if the central bank were to actually become insolvent, it would be quite scandalous. The government would probably have to "seize it," lest the public realize that the whole scheme was a giant, legalized counterfeiting operation."

"In my opinion, this is the bankers' main concern at the moment. They surely don't like thousands of economists blogging away on the possibility of the Fed going bankrupt, because that gets more and more people thinking through the logic of our crazy banking system."



The Fed can't go insolvent.... it can only make us insolvent.

Since when did the worry

Since when did the worry about being solvent??

dont quit yer day job youre

dont quit yer day job youre not a rocket scientist

$55 billion in equity?

$55 billion in equity?

That's a bad joke...that's like saying Apple and Google are more powerful than the Federal Reserve.

General Motors anyone? What was that, over a hundred billion $, right?

If the US government keeps 9 sets of books, the Fed keeps at least 18.

Why did China just say the dollar will remain the world's leading currency for decades to come?

How many foreign banks did the Fed bailout after the market collapsed in 2008?

How many countries are now DEPENDENT upon the dollar?

The LAST thing China, and EU wants is a dollar collapse....because if the dollar collapses, the dollars we owe them will become practically worthless if they lose over 75% of their value.

The game is over, for those who wish to see the Almighty US Dollar destroyed.

Never be afraid to ask simple questions.

it's a bank

doesn't matter if it the nations bank or a local bank, by fractional design they are all insolvent. A bank may be cash-flow insolvent but balance-sheet solvent if it holds illiquid assets, particularly against short term debt that it cannot immediately realize if called upon to do so. What you are describing is a bank that can have negative net assets showing on its balance sheet but still be cash-flow solvent if ongoing revenue is able to meet debt obligations, and thus avoid default: for instance, if it holds long term debt.

"Before we can ever ask how things might go wrong; we must first explain how they could ever go right"


How does the Fed go bankrupt?

Aren't there more trees?

they don't even need trees.

they don't even need trees.

Magician's trick

Plenty of computer digits for The Bernank to conjure into existence to keep the monetary illusion intact.


doesn't matter. As long as the dollar is the reserve currency we will keep printing it. And as long as we have military superiority countries will keep buying dollars. If some country tries to replace the petro dollar, we will bomb them. Thats it.

ecorob's picture

Unfortunately, Ron IS the man...

you are spot on right!

Especially the part about military superiority bombing everyone else into submission.

Sad, but true.

The questions remain; How do we fix it? Can it be fixed?

its 'cos I owe ya, my young friend...
Rockin' the FREE world in Tennessee since 1957!
9/11 Truth.

The solution is End the Fed.

The solution is End the Fed.

There is no Left or Right -- there is only freedom or tyranny. Everything else is an illusion, an obfuscation to keep you confused and silent as the world burns around you." - Philip Brennan

"Invest only in things that you can stand in front of and pr

aka legalize competing

aka legalize competing currencies?