Posted tagged ‘Mortgage-Backed Securitys’

Federal Reserve Money Injections Since 2000 Haven’t Worked as Advertised.

September 27, 2012
Plot of the US Federal Reserve Open Market Pur...

Plot of the US Federal Reserve Open Market Purchases of Repo Mortgage Backed Securities (MBS), 2000–2007; based on US government data from http://www.newyorkfed.org/markets/omo/dmm/historical/tomo/search.cfm (Photo credit: Wikipedia).

In an article by Phoenix Capital Research on ZeroHedge.com, it lists all the money injections by the Federal Reserve and the Government from 2008 through 2012. One way the Fed pushes money into the economy is by purchasing Mortgage Backed Securities from the entities that hold them, namely banks. The mortgage is now on the balance sheet of the Fed, and the money is now held, as reserve currency (numbers electronically created), on account at the Fed. The bank can now loan ten dollars for every one dollar held as reserves. The reason they can do this is because we operate under a ten percent fractional reserve banking system which means, (more…)