(Source: Forbes) – The 12 Federal Reserve banks have assets, including risky assets. They have liabilities. They have a thin capital cushion. Could one of them become insolvent?The possibility ought to concern you if you have any Federal Reserve notes in your wallet. These notes aren’t redeemable for gold or anything else tangible. They are trust-me money. What if people stop trusting the dollar? What are you going to be able to buy with it?

Fed insolvency is a scenario pooh-poohed by most bankers and the Fed’s own staff. When I saw Dallas Fed boss Richard Fisher at a conference earlier this year he laughed off my question about what rising interest rates would do to his bank’s balance sheet.

Source: Forbes

Jul. 13 2011 – 8:58 am

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