Central Bank Cartoon – “Same Game” with different sexual organs?

Central Bank Cartoon – “Same Game” with different sexual organs? 


Ben Bernanke – Zombie Money Printing Statement

Ben Bernanke – Zombie Money Printing Statement


Click to Zombie-Enlarge


Click to Zombie-Enlarge

Historical Fed Rate Graph – 1925 – 2012

Historical Fed Rate Graph – 1925 – 2012

===== Current Update – 2013 – May  – 0.25% =====

===== Current Update – 2012 – October  – 0.25% =====

Federal funds rate

n the United States, the federal funds rate is the interest rate at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on anuncollateralized basis. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. The federal funds rate is an important benchmark in financial markets.[1][2]

The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

The federal funds target rate is determined by a meeting of the members of the Federal Open Market Committee which normally occurs eight times a year about seven weeks apart. The committee may also hold additional meetings and implement target rate changes outside of its normal schedule.

The Federal Reserve uses open market operations to influence the supply of money in the U.S. economy[3] to make the federal funds effective rate follow the federal funds target rate. The target value is known as the neutral federal funds rate.[4] At this rate, growth rate of real GDP is stable in relation to Long Run Aggregate Supply at the expected inflation rate.


U.S. banks and thrift institutions are obligated by law to maintain certain levels of reserves, either as reserves with the Fed or as vault cash. The level of these reserves is determined by the outstanding assets and liabilities of each depository institution, as well as by the Fed itself, but is typically 10%[5] of the total value of the bank’s demand accounts (depending on bank size). In the range of $9.3 million to $43.9 million, for transaction deposits (checking accountsNOWs, and other deposits that can be used to make payments) the reserve requirement in 2007-2008 was 3 percent of the end-of-the-day daily average amount held over a two-week period. Transaction deposits over $43.9 million held at the same depository institution carried a 10 percent reserve requirement.

For example, assume a particular U.S. depository institution, in the normal course of business, issues a loan. This dispenses money and decreases the ratio of bank reserves to money loaned. If its reserve ratio drops below the legally required minimum, it must add to its reserves to remain compliant with Federal Reserve regulations. The bank can borrow the requisite funds from another bank that has a surplus in its account with the Fed. The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

The nominal rate is a target set by the governors of the Federal Reserve, which they enforce primarily by open market operations. That nominal rate is almost always what is meant by the media referring to the Federal Reserve “changing interest rates.” The actual Fed funds rate generally lies within a range of that target rate, as the Federal Reserve cannot set an exact value through open market operations.

Another way banks can borrow funds to keep up their required reserves is by taking a loan from the Federal Reserve itself at the discount window. These loans are subject to audit by the Fed, and the discount rate is usually higher than the federal funds rate. Confusion between these two kinds of loans often leads to confusion between the federal funds rate and the discount rate. Another difference is that while the Fed cannot set an exact federal funds rate, it can set a specific discount rate.

The federal funds rate target is decided by the governors at Federal Open Market Committee (FOMC) meetings. The FOMC members will either increase, decrease, or leave the rate unchanged depending on the meeting’s agenda and the economic conditions of the U.S. It is possible to infer the market expectations of the FOMC decisions at future meetings from the Chicago Board of Trade (CBOT) Fed Fundsfutures contracts, and these probabilities are widely reported in the financial media.


Interbank borrowing is essentially a way for banks to quickly raise liquidity. For example, a bank may want to finance a major industrial effort but not have the time to wait for deposits or interest (on loan payments) to come in. In such cases the bank will quickly raise this amount from other banks at an interest rate equal to or higher than the Federal funds rate.

Raising the federal funds rate will dissuade banks from taking out such inter-bank loans, which in turn will make cash that much harder to procure. Conversely, dropping the interest rates will encourage banks to borrow money and therefore invest more freely.[6] Thus this interest rate acts as a regulatory tool to control how freely the US economy operates.

By setting a higher discount rate the Federal Bank discourages banks from requisitioning funds from the Federal Bank, yet positions itself as a lender of last resort.

Comparison with LIBOR

Though the London Interbank Offered Rate (LIBOR) and the federal funds rate are concerned with the same action, i.e. interbank loans, they are distinct from one another, as follows:

  • The target federal funds rate is a target interest rate that is set by the FOMC for implementing U.S. monetary policies.
  • The (effective) federal funds rate is achieved through open market operations at the Domestic Trading Desk at the Federal Reserve Bank of New York which deals primarily in domestic securities (U.S. Treasury and federal agencies’ securities).[7]
  • LIBOR is calculated from prevailing interest rates between highly credit-worthy institutions.
  • LIBOR may or may not be used to derive business terms. It is not fixed beforehand and is not meant to have macroeconomic ramifications.[8]

Predictions by the market

Considering the wide impact a change in the federal funds rate can have on the value of the dollar and the amount of lending going to new economic activity, the Federal Reserve is closely watched by the market. The prices of Option contracts on fed funds futures (traded on the Chicago Board of Trade) can be used to infer the market’s expectations of future Fed policy changes. One set of such implied probabilities is published by the Cleveland Fed.

Historical rates

See also: History of Federal Open Market Committee actions

As of December 16, 2008, the most recent change the FOMC has made to the funds target rate is a 75 to 100 basis point cut from 1.0% to a range of zero to 0.25%. According to Jack A. Ablin, chief investment officer at Harris Private Bank, one reason for this unprecedented move of having a range, rather than a specific rate, was because a rate of 0% could have had problematic implications for money market funds, whose fees could then outpace yields.[9] This followed the 50 basis point cut on October 29, 2008, and the unusually large 75 basis point cut made during a special January 22, 2008 meeting, as well as a 50 basis point cut on January 30, 2008, a 75 basis point cut on March 18, 2008, and a 50 basis point cut on October 8, 2008.[10]

Explanation of federal funds rate decisions

When the Federal Open Market Committee wishes to reduce interest rates they will increase the supply of money by buying government securities. When additional supply is added and everything else remains constant, price normally falls. The price here is the interest rate (cost of money) and specifically refers to the Federal Funds Rate. Conversely, when the Committee wishes to increase the Fed Funds Rate, they will instruct the Desk Manager to sell government securities, thereby taking the money they earn on the proceeds of those sales out of circulation and reducing the money supply. When supply is taken away and everything else remains constant, price (or in this case interest rates) will normally rise.[11]

The Federal Reserve has responded to a potential slow-down by lowering the target federal funds rate during recessions and other periods of lower growth. In fact, the Committee’s lowering has recently predated recessions,[10] in order to stimulate the economy and cushion the fall. Reducing the Fed Funds Rate makes money cheaper, allowing an influx of credit in to the economy through all types of loans.

The charts linked below show the relation between S&P 500 and interest rates.

Bill Gross of PIMCO has suggested that in the past 15 years, every time the fed funds rate was higher than the nominal GDP growth rate, assets such as stocks and/or housing always fell. He even suggested that the best way to price the fed funds rate would be 100 basis points, or 1%, below the nominal GDP growth rate.[13]


Tribute to the ‘$Heli-Money$ Ben’

Tribute to the ‘$Heli-Money$ Ben’

Tribute to the '$Heli-Money$ Ben'


Fundamentals – The 10 Countries With The Biggest Gold Reserves In The World 2012

#10 India

#10 India

AP Images

Official gold holdings:
557.7 tonnes

Percent of foreign reserves in gold:

India’s central bank gold holdings lag those of major economies. The RBI is known to buy IMF gold and considers gold to be a safe investment, but rarely comments on its plans to buy gold.

Source:World Gold Council

#9 Netherlands

Official gold holdings:
612.5 tonnes

Percent of foreign reserves in gold:

Since 1991, the Dutch National Bank (DNB) sold 1,100 tonnes of gold. But, the bank considers gold to be “the ultimate reserve and anchor of trust in times of financial crisis,” according to Zero Hedge, and holds it for diversification purposes. Nout Wellink, president of the Dutch central bank has previously said that the DNB doesn’t intend to sell gold.

Source: World Gold Council

#8 Japan

Official gold holdings:
765.2 tonnes

Percent of foreign reserves in gold:

In 2011, the Bank of Japan sold gold to pump ¥20 trillion into the economy to calm investors after the tsunami and resulting nuclear disaster in Japan. Meanwhile, the country’s gold exports (which include private exports) are expected to reach 100 metric tonnes in 2011.

Source: World Gold Council

#7 Russia

Official gold holdings:
883.3 tonnes

Percent of foreign reserves in gold:

Russia’s central bank buys gold from the domestic market and Russian bullion banks, and purchased 15 tonnes of gold in the third quarter. Earlier last year the Central Bank of Russia said it planned to purchase over 100 tonnes of gold to rebuild its gold and Forex reserves.

Source: World Gold Council

#6 Switzerland

Official gold holdings:
1,040.1 tonnes

Percent of foreign reserves in gold:

Between 2000 – 2005 the Swiss National Bank sold 1,300 tonnes of gold which was in part tied to the launch of the euro. In 2010, its gold reserves reached a quarter of its total reserves.

Source: World Gold Council

#5 China

Official gold holdings: 
1,054.1 tonnes

Percent of foreign reserves in gold:

China reportedly made significant gold purchases in the final months of 2011 as it tried diversify from its holdings of U.S. Treasuries. China buys gold from its domestic market but doesn’t always immediately put it towards its reserves.

Source: World Gold Council

#4 France

Official gold holdings:
2,435.4 tonnes

Percent of foreign reserves in gold:

France is one of the countries that signed the Central Bank Gold Agreement which limits gold sales by European countries. The 19 signatories sold nearly 10 tonnes of gold in the first year of their new agreement (Sept. 2009 – Sept. 2010).

Source: World Gold Council

#3 Italy

Official gold holdings: 
2,451.8 tonnes

Percent of foreign reserves in gold:

Italy’s gold reserves are worth only a tenth of the bailout it needs. In 2011, Italian banks were looking to the Bank of Italy to buy gold and bolster their balance sheets ahead of stress tests.

Source: World Gold Council

#2 Germany

Official gold holdings:
3,396.3 tonnes

Percent of foreign reserves in gold:

Under the Central Bank Gold Agreement, Germany has sold 4.7 tonnes of gold since September 7, 2011. In November last year, the IMF said that Germany’s central bank sold gold, but most of it was sold to the ministry of finance to mint commemorative coins. Germany also refused to have its gold holdings boost the EFSF.

Source: World Gold Council

#1 United States

#1 United States

obama photos via Flikr

Official gold holdings:
8,133.5 tonnes

Percent of foreign reserves in gold:

The U.S.’s percent of foreign reserves in gold has gone from 74.8 percent in May, up to 75.5 percent in November, and has dropped again since.

Source: World Gold Council

Read more: http://www.businessinsider.com/countries-biggest-gold-reserves-2012-3?op=1#ixzz1ys4IuGQF