The Fed is losing money. Not a typo.
The private corporations that control America’s money supply called the Federal Reserve have lost money for the first time since 1915. The loss was foreshadowed in the Fed meeting in September when it was clear there would be more outgo than income.
The problems were triggered by an overspending Democrat Congress that exacerbated the issues set in motion by the government’s response to the 2008 market meltdown. It will take years to get back in the black. Years. And you’ll your grandkids will pay for it all, because they’re the nation’s cash machine.
“The central bank’s operating losses have increased in recent weeks because the interest it is paying banks and money-market funds to keep money at the Fed now exceeds the income it earns on some $8.3 trillion in Treasury and mortgage-backed securities it accumulated during bond-buying stimulus programs over the past 14 years,” The Wall Street Journal reported.
The Fed will continue to manipulate the markets with its monetary policy as per usual.
The Journal reported that “even though the net interest losses have no impact on the Fed’s day-to-day operations, they could cause political headaches down the road, in part because they are large and novel…” Novel — there’s that word again. This is untested territory.
It’s bad enough that the private Fed, whose Board of Governors are government actors, is losing money. But experts like Peter Schiff didn’t think it would happen until next year.
The way the Fed works is that its losses are turned into IOUs and paid later when there’s better cash flow. As Schiff put it, “we live in a world where the Federal Reserve gets to make its own accounting rules. And according to its own accounting rules, any net loss magically turns into a “deferred asset.” The immediate effect will be larger budget deficits because “the US government will see a reduction in revenue.”
The Journal notes that “the Fed doesn’t mark its assets to market but instead recognizes losses on its securities holdings only if it sells assets. The Fed is currently shrinking its asset portfolio passively, allowing up to $95 billion in securities to mature every month.”
The Biden Administration and Democrat Congress are spending taxpayer dollars at an alarming, inflation-inducing rate and now the government “will see a reduction in revenue.” Who’s caught in the middle of that monetary see-saw? Us.
Morgan Stanley chief global economist Seth Carpenter told the Journal that “the arrangement is akin to an institution facing a 100% tax rate and offsetting current losses with future income.” Don’t try this at home.
The Fed policies have sent tech and other stocks plummeting. Just last week, Meta, the Facebook parent company, lost 70% of its market capitalization. The Journal reported that the net effect of the Fed’s policies of “bond-buying and negative real interest rates drove investors into growth stocks, which inflated tech valuations. Social media companies have also been hurt by lower advertising spending as businesses cut marketing budgets amid economic uncertainty.”
Talk about a ripple effect.
Related: Lefty Washington State Is Now ‘Ground Zero for Wave Election Upset’ in Senate Race
Americans have responded to profligate spending by the Democrats and higher prices by teeing up an expected red wave in the November elections. The polls show people are afraid for their country. Fully 79% of people polled by CBS believe the country is “out of control.”
Heading into the final week before election day, 8 in 10 voters describe things in the country today as “out of control,” as opposed to “under control.”
This Fed news will only cause more concern.
Republicans Kevin McCarthy and Mitch McConnell had better be ready to lead and start cleaning up this mess, because Americans will be depending on them.
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