"Taking a look at the balance sheet of The Federal Reserve, or for that matter, any central bank, is like seeing the eighth wonder of the world. Unlike any other business enterprise, the Fed can expand its balance sheet by printing as many dollar bills as it wants. It's like creating winds merely by waving your hands
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The Fed can't in any manner be compelled to discharge its liabilities in terms of any other tangible good or services. At best, you could receive government securities by paying back in dollars whenever the Fed is selling. Beyond this, the Fed liabilities are only as good as something written on a piece of paper. In a nutshell, paper promises beget only other kinds of paper promises.
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All of us are connected to the Fed's balance sheet in one way or another. The currency notes that we hold are liabilities of the Fed. Likewise, a part of money lying in our checking accounts which is kept by banks in their reserve accounts gets reflected as liabilities of the Fed. Any push or pull in the Fed's balance sheet would ultimately ripple down to our lives. We just need to get a better grip for our own good."
http://www.investopedia.com/articles/economics/10/understanding-the-fed-balance-sheet.asp
Topic: Good article about FED (Read 1135 times)
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