So what does it mean? In the near-term, nothing: the Fed ignores losses because in a pickle it can just print money -- converting it into inflation.Longer term, though, every last penny the Fed loses is going on the taxpayer tab.Because all those losses cancel the money the Fed is supposed to pay treasury every year. These are called Fed remittances, and they're the profits from printing money and lending it out -- essentially a licensing fee for counterfeiting.Those Fed remittances had been running about 80 billion a year. But now they'll be underwater for potentially decades.It's worth noting this is fresh territory -- the Fed never before turned in a loss until 2022. Now it will be losing money until our kids are grown.
I never know how afraid I should be of these things. It seems natural that an overpowered financial artifice would create endless novelty. What does a financial super-institution do when it's hurt? It uses one of its other super powers to heal itself. The only way it seems like it could end is by destroying, or losing access to, the source of its power. Which is what? Our productivity?