You're forgetting about the other side of the equation: the liabilities. The bottom line that you should be interested in is Assets - Liabilities. This represents the net sum of the Fed's holdings, and is only $56 billion.The "Vanishing assets" the Fed purchased? According to their latest report http://www.federalreserve.gov/releas...urrent/h41.htm the Federal Reserve holds $2.5 trillion in total securities with $1.65 trillion of those being US Treasury notes. I cannot see where you are getting a $54 billion figure from.
Think about it this way. If the Fed wanted to, would it be able to sell its assets and contract the monetary base back to 0? Clearly not. That means that the Fed has taken a net loss over the past 100 years, and that loss, naturally, was someone else's profit. (Whether that be the bankers or recipients of government funds)
I don't think you're understanding my point. I'm actually not talking about the Federal Reserve's profits. I'm more specifically talking about their net loss, over the past 100 years.Profits? The Federal Reserve returns all profits (minus their expenses) to the Treasury. They did not lose $2 trillion but instead earned some $80 billion and turned $77 billion over to the US Treasury. Last year the amount was even higher. http://www.nytimes.com/2012/01/11/bu...-treasury.html
For example, since you brought up this point, if you were to look at the Federal Reserve as a normal (for-profit) corporation, it is not accurate to say that the Federal Reserve returns all profits to the Treasury. In the context of this point, it would be better stated as an operating cost, and the Fed's profit is 0. In that sense, the Fed isn't returning all profits to the Treasury, but is simply not making any profits at all because of this "operating cost."
This cost, that the Fed sends to the Treasury, the government obviously turns around and spends. So this goes back to what I was saying earlier, there are only two possible profiteers of the "poofed" money, and that is, 1) bankers, and 2) recipients of government funds. The government itself clearly hasn't profited from this money, because it is deeply in debt. They just received the money and sent it out flying in random directions.
Again, back to the original point, the Fed has bought $2.15 trillion worth of assets but only has $56 billion in net assets. That means, over the past 100 years, it has lost $2.1 trillion into the economy (and that's just M0.. the M2 is obviously much higher). Yes, much of that went to the Treasury, but some of it was also lost to the bankers. You said it yourself, the Fed only hands over to the Treasury its Profits minus Expenses. Those expenses obviously include a banker profit component (or the Fed wouldn't have anybody to trade with - bankers don't work for free).
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