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I could hardly believe my eyes.  Steve Baker MP had this comment (Baker thanks several experts for help with this article at the foot) in ConservativeHome this morning.  he says the Federal Reserve is almost insolvent:

This capital to asset ratio means that a loss on its assets of 2.5% would be enough to make the Fed, by any normal standard, insolvent – unable to pay its debts. So how plausible might such a loss be?

Very plausible, argues Baker:

Turning from default risk (credit risk), let us consider interest rate risk. Most of the Fed’s assets are bonds with fixed interest coupons. If interest rates rise by even a smidgeon, the value of the Fed’s assets will fall by more than 2.5%.

No wonder the Audit the Fed bill causes fear among the central bankers!  So when you hear fearmongering about Ron Paul’s principled position on the central bank (a position that was held by both Presidents Andrew Jackson (on the $20) and Thomas Jefferson (on the $2) by the way!) just remember part of Steve Baker’s conclusion:

This explains why the Fed and the Bank of England are both keeping interest rates at near zero levels. They both fear the revelation to the public of the truth: that the bank bailout and QE has not worked, that the commercial banks refuse to lend to each other out of solvency concerns and that this systemic toxicity has now infected the central banks.



About Elwood Sanders

Elwood "Sandy" Sanders is a Hanover attorney who is an Appellate Procedure Consultant for Lantagne Legal Printing and has written ten scholarly legal articles. Sandy was also Virginia's first Appellate Defender and also helped bring curling in VA! (None of these titles imply any endorsement of Sanders’ views)

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Tom White Says:

Nothing is more conservative than a republican wanting to get their majority back. And nothing is more liberal than a republican WITH a majority.

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