The Fed is insolvent. So…now what?

This could be your last warning, but I’m sure it is not your first. Things are shifting and you can feel it. Time to pay attention, and to act.

I spent most of my life trying to ignore the world of economics. It always seemed to be deliberately confusing and acts as if it’s designed to extract wealth from people who don’t have very much and give it to others who have no concept of “enough”. Historically, I didn’t have much to worry about other than trying making ends meet. So I focused on that. 

In the last 2 years or so, things have changed. A lot of things change when you turn 40 😉 Now I’m paying attention to the numbers, the structures, the games, and taking actions as I see fit. I still don’t have much in the way of savings, but at least I have some. The fact that I don’t have much means I can’t play the rich man’s strategy, because I can’t afford to lose as much or as often. Fees and qualifications are barriers to entry for any investments I would otherwise consider.

Still I’m paying attention to larger trends and news now. And rather than looking to pundits, I look to source material. When I’m planning for retirement and curious about when social security will go bankrupt, I start by reading their own reports. When I’m curious about how the Federal Reserve is managing money, I look to their data. I do the math. I did that today as a nervous distraction while hospital waiting room and…

Oh look, here’s something: THE FED IS INSOLVENT. The trend that led to this has been coming for some time now, but I didn’t think we’d get here quite this fast. 

However, this does not seem to be news. Why is this not news?!? …Oh right, because then things would have to change. “Go back to not paying attention, people. Nothing to see here, move along.

But seriously, I’m not making this up. Go here and see for yourself. That’s the “Federal Reserve Banks Combined Quarterly Financial Report” for Q3. Basically, the most recent data we have from the Fed itself. It was released this week, goes up to September 30th of this year, and hasn’t been audited yet. So fresh off the presses info.  

Here’s a picture of the part I’m referring to:

I’ve highlighted the key number here: $66,453 million (aka $66.5 Billion)

That highlighted number shows how much less their bonds are worth than they paid for them. That’s not a good thing by any means, but it’s not exactly unheard of either.

What’s a big deal is how big that number is, how quickly it got to be that big, and how much bigger it is than the Fed’s Total Capital — which is $39 Billion. 

As any 4th grader could tell you, if you have 39 of something, and you try to take away 66 of it, you’ve got a problem. 

It’s a negative number. In this case, a really big number of -$27.5 Billion or so. Which is a really big problem. 

But you’d never know it by watching the financial news. The boring details are strategically boring so that you won’t pay attention and business can continue as usual. …Until the moment that it can’t. 

That moment is coming soon.

As of this week, the largest and arguably most important financial institution in the world is insolvent, whether anyone choses to talk about it or not. That the USA, as with many other countries, spends more than it earns every year now (that’s the debt-to-GDP ratio going over 100%) is a scary thing all by itself. But put those two things together and my country will soon lose the ability to pay even the interest on its $22 TRILLION national debt. And there is no one left to bail anyone else out. 

Too big to fail has never been a viable strategy for the long term, and it won’t be for my America either. As it slips, so slips the world — which is irretrievably intertwined, financially speaking.

People may not be willing to look at all this yet. It’s emotionally hard, I get it. But that doesn’t make it any less important.

We can only work with the world as it is, not with the world as we wish it was. I’m sorry if it kicks up your fears, really. So it does, me too! And…now it’s time to grow up and deal with it anyway. 

What does “deal with it” look like? Well, for folks like you and me who don’t have much, it starts by learning and gaining more control.

Don’t expect that this will be easy. The systems that manage money are designed to scare you, confuse you, and bore you into letting other people borrow it from you. That’s not a bad deal if they pay you back as promised, but that is looking increasingly impossible for them to do, even if they wanted to (which, c’mon, they don’t really wanna do anyway). 

I don’t know what happens next. Nobody does. We’ll all find out together! But I think it’s safe to say that the world is becoming less stable again. Times do not get better indefinitely, and we’re looking at a downward trend for a while. Hopefully not a “Dark Ages” long while, but even then things did eventually get better again. And I’m confident they will this time too. 

Who knows, maybe we’ll even live to see it happen?

What you don’t want to do here is wait…or get panicky (panic will set in soon enough, and once that happens things will tend to get very nasty). Hey, you read this much, I bet you can read other things too! You can learn a bit every day, and make strategic choices and take new actions every day. You can do your best to ensure that you and those you love have a great shot at health & prosperity no matter what crazy shit goes down in the rest of the world. 

You can. You absolutely can. But you have to decide to start.

This could be your last warning, but I’m sure it is not your first. Things are shifting and you can feel it. Time to pay attention, and to act.

What’s one thing that you are inspired to do within the next 24hrs as a result of reading this? Go ahead & post it in the comments, we’re all looking for ideas!