Accounting Tweak

By now, most of you are familiar with how the Federal Reserve prints money to "buy" U.S. Treasuries. Of course the Federal Reserves balance sheet would probably look terribly strange if it was ever 100% exposed to public scrutiny....so they do their best to keep from ever being audited. That's how they can continue to keep the full "faith and confidence" intact that surrounds our paper money. And that's why you and I can continue to use this paper, and series of zeroes, to transact all of our business for another day.

And today we have this in the news;

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.

"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

See it here; http://www.cnbc.com/id/41198789

Did you guys catch that? The Fed COULD have gone broke...but NOW they have tweaked the accounting rules....so now they can't. Sounds like they are putting out a little more smoke and a few more mirrors.

Do you guys remember Enron? It was a HUGE energy corporation that went from $billions to zero...almost overnight back in 2002. The loss of confidence that this created in the stock market continued to push the markets lower throughout the year. Why did this happen? Because it turns out Enron was tweaking their books to make things appear better than they really are.

Could that be another foreshadowing? Could this be simply one more card stacked on the house of cards that has become the global financial system? How high can the house of cards be built before it tumbles.

All good questions. Best to keep our eyes fixed on Jesus....because if this thing falls before the rapture...we will need an anchor in the storm.

Hat tip to Mike S.