That this question is even asked shows how the Federal Reserve has been transmuted from a debt monetizing, currency debasing, bank-cartel enabling, Creature from Jekyll Island to something mystical and magical, capable of keeping markets and economies perpetually afloat on oceans of fiat liquidity, immune from the accounting considerations that tether the rest of us to reality. From Jane L. Johnson at mises.org:
Financial statements of the US Federal Reserve, which consists of the board of governors in Washington and twelve district reserve banks across the country, indicate that the consolidated system has generated both capital and operating losses for the past couple of years. The Fed was created in 1913 to issue and circulate an “elastic currency” that could respond to consumers’ demand for cash, end bank runs known then as “money panics,” and serve as a “lender of last resort” to the nation’s commercial banks. How is it possible that the Fed could be losing money after one hundred years of operation?
The debate has raged in the banking and finance communities. Two investigators, Paul Kupiec at the American Enterprise Institute and Alex Pollock at the Mises Institute, have analyzed Fed financial statements and presented their findings about these Fed losses in publications such as the Wall Street Journal and on the websites of the American Enterprise Institute, the Mises Institute, the Federalist Society, and Law and Liberty. The Wall Street Journal has produced a nontechnical video explaining how the Fed makes (and loses) money.
Capital Losses and Operating Losses
The Fed’s capital losses are derived from its large bond portfolio of low-coupon US Treasury and mortgage-backed securities purchased in earlier times of low rates during the period of quantitative easing following the 2008–09 financial crisis. As the Fed has now raised interest rates in its efforts to reduce inflation, the market value of its bond portfolio has inevitably declined. Estimates of these capital losses range as high as $100 billion. The bond portfolio resides in the System Open Market Account, which is managed by the Federal Reserve Bank of New York on behalf of the entire Fed system.
Pingback: The Federal Reserve is Running Losses. Does This Cost Anyone Anything? By Jane L. Johnson — Der Friedensstifter
Endless attempts to get something for nothing, disguised in endless cloaking devices, all have one thing in common. Eventually the “something” becomes seen for what it is. Less than
“something” as it accelerates toward “nothing!” In this case, the value of what has become. the ghost of money called the “dollar.” As I write this, the bankers have enabled the value of the dollar, since the creation of the Federal Reserve, to deteriorate by over 95% of what it was worth in 1913!
The article reminded me of a movie starring Kevin Spacey and Jeremy Irons. “Margin Call” was made several years ago and was an extremely DARK movie taking place in an imagined 24-hour period. I don’t recommend it as it was a terrible distortion of “capitalism,” a distortion made possible by fiat and the inescapable consequences said fiat remorselessly stimulates in the minds of – in this case, those who have come to inhabit Wall Street – i.e., a subset of those who have become lured by fiat’s seeming to provide “something for nothing.”
There are, literally, no admirable characters in the movie! ALL are shown amoral/immoral, with only an occasional pang of moral uncertainty (quickly dismissed), as they seek to save their asses by destroying the asses of those in their trust, ALL now-threatened by fiat’s naked “shell game,” a game that had previously been lavishly “productive.”
At its base, a Central Bank serves as the means for both bankers and politicians to “short circuit” Capitalism’s nervous system – i.e., its money! The bankers attaining almost unimaginable profits – for some indeterminate amount of time, the politicians, in turn, given access to seemingly limitless credit/debt. The rest of us suffering the consequences. Consequences that themselves, are obscured by the “cloaking device” of the slow but accelerating loss in value of capitalism’s “nervous system,” its money that has become but a “ghost” of money!