Russian capital flight from west to east has begun. Let’s not forget that Russia has repeatedly expressed its dismay at Europe’s handling of the debt crisis in Cyprus which imposed heavy losses on uninsured depositors, many of them Russian. This is not looking good for the Federal Reserve, by pulling out $105 billion dollars worth of US government bonds out of the system is a crippling amount money to take out US Bond market.
We’re looking at you, Russia.
Somebody just yanked $105 billion dollars worth of US government bonds out of the Federal Reserve, according to the latest data from the US central bank.
As you can see, a withdrawal of that scale is pretty much unprecedented. By way of background, the Fed does a lot of things. It sets monetary policy. It regulates banks. And it also is a bank. In fact, the Fed acts something like a trust bank for other foreign central banks, basically taking care of the Treasury bonds and other investments that those foreign central banks want to leave in the US. (That’s what “custody holdings” are.)
But there are times when a country might not want to leave all its assets in the US. Like, say, it’s involved in a major geopolitical standoff and there’s plenty of chatter about freezing assets belonging to its wealthiest citizens…
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