The Federal Reserve posted profits of $52 billion in 2009. The abnormally high profits were due to extra interest on assets held by the Federal Reserve; the Fed increased its balance sheet substantially as a result of its efforts to combat the financial crisis. Some of the extra interest came from increased holdings of Treasuries; some came from loans the Fed gave to bail out financial firms. After paying for its operating expenses, the Fed returned $46 billion of its profits to the U.S. Treasury.
PS. Hope I spelled "seigniorage" right. Microsoft Word, in its great wisdom, keeps suggesting "senior age".
The Reserve Bank of Australia became the first G20 central bank to raise interest rates today, increasing its policy interest rates by 25 basis points to 3.25%. Of course, Australia has done very well through the financial crisis, relatively speaking. It's banks have remained pretty strong, China has continued to demand Australia's commodity exports, and Australia has only had one quarter of negative GDP growth. (Australia's real GDP fell 2.8% at an annual rate in 2008Q4. while in the United States, recessions are declared by the NBER Business Cycle Dating Committee, many countries simply consider a recession to be in effect after two consecutive quarters of negative economic growth.)
The RBA's decision to raise interest rates resulted in a drop in the dollar. With Australia raising interest rates, investors know that there are assets out there where they can get higher returns, so low-yielding Treasuries don't look like such a good deal, despite their safety. The decision is also a vote of confidence in the world economy, which could increase investor's expected returns on assets other than Treasuries. As Australia and other countries (possibly Korea?) start raising interest rates ahead of countries like the United States and Japan, keep your eye out for a revitalization of the carry trade, where investors borrow in countries with low interest rates, and invest in countries with higher interest rates.
If you want to make the Forbes 400, apparently it helps to have mathematician parents. If you want to make it in the tech field, drop out of college; if you want to make it in finance, get an Ivy MBA and work for Goldman Sachs. It doesn't hurt to fail early in life, but don't have a December birthday!
This is my first post, so let's get right to the substance. I just received an email asking me what I thought about this article: http://www.guardian.co.uk/commentisfree/2009/jan/20/george-monbiot-recession-currencies
I have worked in economic policy and research in Washington, D.C. and Ghana. My husband and I recently moved to Guyana, where I am working for the Ministry of Finance. I like riding motorcycle, outdoor sports, foreign currencies, capybaras, and having opinions.