Should the Fed record dollars as equity or as liabilities?

[rpwi]

Ok, the fundamental issue is that you just don't understand that the very existence of a central-bank is for the purpose of managing moneysupply so not showing moneysupply on the B/S is out of the question,

No. The Fed doesn't 'manage' the money supply. They manage their asset base and they manage the methods and the rate at which they create and destroy money...but that is just the fringe end of the money supply. And of course they regulate and bailout the banking industry. They're not bossing around where the dollars in my wallet go though. Once they spend dollars...they are largely out-of-sight in a financial and regulatory sense.

when it buys, it injects new money into the system, now the asset they buy must go on Assets side & therefore the money paid is accounted as Liabilities because it's been created out of nothing & therefore considered a "loan" from the community for reducing their purchasing-power

It is not loan...because the community didn't create it, would receive no legal benefits in bankruptcy, and receives no interest on it and can not convert it for anything. It is base money...not a loan. Loans are always payable in something that is not the loan...what are fed bank deposit liabilities payable in?

when it buys assets with new money to increase moneysupply, Assets go on the Assets side & the new money HAS TO go on the Liabilities side; it's just simple to understand if one looks at it objectively but I suppose it gets difficult when one believes in all kinds of conspiracies

You used the term buy and not finance. This undermines your argument. In accrual accounting purchases are ALWAYS asset swaps. There are no liabilities to account for. Very easy to fix this using my accounting. The money has to be first recorded as an asset and as a credit to earnings. THEN can the new asset be swapped for t-bills.

Again, there's no question of recording moneysupply separately because the very purpose of central-bank is to manage moneysupply so moneysupply must be shown on the B/S

The balance sheet is for determining profit...and doesn't really have any other purpose. Certainly the MB should be tracked and recorded...but not as a balance-sheet item. In the same way a bird-watcher tracks and records birds. Not on a B/S because it doesn't determine profit to himself.

Comparing a central-bank's B/S with any other corporations is like comparing apples & oranges; they have completely different goals & purposes

A B/S always has the same purpose. Plus there is little conceptual difference between a central bank and a not-for profit counterfeiter that hands over profits to the government.

you have bought into the conspiracy theories too much

Can you name one conspiracy theory I have espoused? (not that is a bad thing...I just haven't done so in this thread)

& therefore you feel troubled by the fact that the new money is recorded as Liability & that's all there is too this whole drama while I choose to look at the issue more objectively so there's a fundamental disconnect between our worldviews, which seems irreconcilable so no point in carrying on with this

I'm the advocate for accrual accounting. An accounting method for financial transactions that is VERY status-quo and widely accepted manner. You apparently are in opposition of accrual accounting...so if anybody is the conspiracy nut...it is you.

P S It's irrelevant what you or Ron Paul or anyone has in mind, if US defaults on ANY debt then that will scare the debt-holders & the markets, as it will be seen as more fiscal instability & heightened risk of more defaults then debt-dumping, inflation & budget-crisis & debt-crisis will only be aggravated; you may disagree that's fine because future is uncertain & markets react in different ways at different times but there's little doubt that the debt-holders aren't going to be very happy about it & a debt-default of any kind could have serious consequences on the US economy

No... I can create a 10 zillion dollar loan to myself...balanced by a 10 zillion dollar credit. Does the economy care? No. Why on earth should the economy care if a government loan to itself disappears? It is not logical in the least. Furthermore the terminology 'default' is not exact. Government is in charge of both ends. Congress could pass a bill directing the Fed to donate it's t-bills to treasury department. Same thing.

 

[Exiled_LFOD]

Sample Counterfeiter BS

Assets
$1,000,000 - Petty cash (counterfeit money)
$100,000 - Equipment (printing press)
$60,000 - Inventory (ink & paper)
($61,000) - Accumulated Depreciation (depreciation on equipment $1000, $60,000 of inventory consumed making money)
---------
$1,099,000 Total Assets

Liabilities
$160,000 Owner Equity Loan
--------
$160,000 Total Liabilities

$939,000 Net Worth

The counterfeiter example is only a good example if the question is.... Where did the capital to acquire assets come from? If you have cash in your pocket does not police demand to know where the cash came from? Does not the IRS or other government agencies ask the same? Are not banks obligated to report large cash transactions? How do we know the $1,000,000 in petty cash is legit or lawfully acquired?

We say the fed creates money out of thin air but a counterfeiter has more class than the fed. The fed is more like a vampire that only sucks enough blood at a time in order to keep it's pray (taxpayers) alive, but too weak to resist or escape. If the fed actually accounted for a source of funds like every other business it would look like this.

Assets
$1,000,000 - Assets
---------
$1,000,000 Total Assets

Liabilities
$1,000,000 - Source of Capital (investors, loan, etc.)
--------
$1,000,000 Total Liabilities

$0 Net Worth

Isn't the whole purpose of business to invest capital where it has an opportunity to profit? If the fed was not above the law and had to play by the same rules as everyone else:

Assets
$1,000,000 - Treasury Securities
---------
$1,000,000 Total Assets

Liabilities
$1,000,000 - Bank Reserve Accounts (funds in escrow)
$1,000,000 - Source of Capital (investor, loan, etc.)
--------
$2,000,000 Total Liabilities

($1,000,000) Net Worth

Do you normally invest in companies with negative equity? What are your criteria for such an investment? Since YOU are the source of funds... how is the return on your investment? Since YOU are the investor... did you attend the last shareholder meeting?

 

[osan]

Liabilities or assets for WHOM? For us they are pure liability. For the Fed, they are pure asset because they are essentially promissory notes whose interest goes to the Fed no matter who holds them or for how long they hold them. This is because no matter how long someone holds on to an FRN, it must inevitably circulate in order to have any meaning in terms of "value". If it is circulating, it is doing its job of perpetuating the debt cycle TO THE FED.

The real question in all of this is what, exactly, is the collateral to which the Fed is entitled if the debt is called and those holding it are unable to pay? The truly mind cracking aspect of this is WHAT, exactly comprises the interest: more FRNs. Sure, so long as the music is still playing and we all keep dancing around the phalanx of empty chairs. But what about when the music stops and everyone scrambles for a seat? Who is going to be left holding the bag and what, precisely, will the demanded compensation consist of? I assure you it will NOT be FRNs. It will be something REAL - something tangible or something intangible but eminently useful such as political clout.

It must be clear to anyone with eyes, a nominally functioning brain, and a desire to see what is out there that we have been painted into a very tight corner.

Again I repeat my question: what collateral will be offered up to the Fed when the music stops and the loans most people erroneously regard as "money" are called in? The truth here, my friends, is that they have us by the balls and have had us that way for many decades now, apparently waiting for us to be sufficiently weakened culturally, intellectually, attitudinally, and economically that when the music stops we will likely be able to do nothing more than stand, slack-jawed, shock-laden, and with our dicks in the dirt. IMO, that is the ONLY thing keeping them from throwing the lever to the gallows on which we all currently stand.

 

[Travlyr]

Liabilities or assets for WHOM? For us they are pure liability. For the Fed, they are pure asset because they are essentially promissory notes whose interest goes to the Fed no matter who holds them or for how long they hold them. This is because no matter how long someone holds on to an FRN, it must inevitably circulate in order to have any meaning in terms of "value". If it is circulating, it is doing its job of perpetuating the debt cycle TO THE FED.

The real question in all of this is what, exactly, is the collateral to which the Fed is entitled if the debt is called and those holding it are unable to pay? The truly mind cracking aspect of this is WHAT, exactly comprises the interest: more FRNs. Sure, so long as the music is still playing and we all keep dancing around the phalanx of empty chairs. But what about when the music stops and everyone scrambles for a seat? Who is going to be left holding the bag and what, precisely, will the demanded compensation consist of? I assure you it will NOT be FRNs. It will be something REAL - something tangible or something intangible but eminently useful such as political clout.

It must be clear to anyone with eyes, a nominally functioning brain, and a desire to see what is out there that we have been painted into a very tight corner.

Again I repeat my question: what collateral will be offered up to the Fed when the music stops and the loans most people erroneously regard as "money" are called in? The truth here, my friends, is that they have us by the balls and have had us that way for many decades now, apparently waiting for us to be sufficiently weakened culturally, intellectually, attitudinally, and economically that when the music stops we will likely be able to do nothing more than stand, slack-jawed, shock-laden, and with our dicks in the dirt. IMO, that is the ONLY thing keeping them from throwing the lever to the gallows on which we all currently stand.

Deeds, cars, boats, water rights, gold, silver, and any other collateral that they possible claim. A huge transfer of wealth.

 

[osan]

Deeds, cars, boats, water rights, gold, silver, and any other collateral that they possible claim. A huge transfer of wealth.

Those will comprise the material threat against all debtors. "OK, we don't want your house any more than you want to lose it... tell you what: sign here and will will call it even. Good?" Most people would be so relieved that they would sign in half a heartbeat, not knowing and not caring that they have voluntarily waived their rights in toto. This is what I suspect will be the essence of the Great Harvest if, and more likely when it comes. These jokers are not going to wait forever and it seems likely that this immense shearing of the public will come within a comparatively short time, may I please be proven wrong.

The immediate threat is gladly traded in preference to the latent one, the one nobody sees for the terror in their hearts as the specter of losing everything looms large in their eyes. To my way of thinking, the relief stands to be very short-lived as once enough of the rights have been harvested, those in power will then hold no bars nor spare any mercy to us. I can well imagine the passage of laws and the adoption of policies that will lead to real and abject slavery for many and a truly shitty life for the rest of the mundanes. At the top of the list of things to do with those who have signed: removal of all firearms and other action-at-distance type weapons. I would imagine this to be done very quietly and politely... at first. As the proportion of armed citizens shrinks well past a threshold, I would anticipate an gain in the vigor with which the deal in question will be sold and beyond a point the deal will no longer be offered. Why ask politely when you can keep your dogs well trained by feeding them several hundreds of thousands or even millions of stubborn "trouble makers"? This situation could be used to advantage in so many ways, the creative mind literally reels as the seemingly endless and broad boulevard of possibilities.

I don't know if this is going to come to pass, but if it does I cannot say that I will be surprised in the smallest measure. Just my twisted little brain flying the friendly blue skies.