100 sats \ 8 replies \ @Undisciplined 5 Apr \ on: Fed Admits Losing $114 Billion econ
I'm not sure if that's how it works, but I guess we'll see. It would be pretty astonishing if the Fed could just run an arbitrarily large loss and have the treasury cover it. I think remittances were intended to be a one-way street.
That still raises the questions "What are these losses?" and "Where are they ultimately coming from?"
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That was my first thought when someone posted about this earlier in the week. I'm not actually sure if this is money destruction though.
The Fed is running a negative capital balance, in order to continue lending to banks. It seems like there would be more deflationary pressure if they just didn't lend to the banks.
It sounded like the idea is that they will create new money to cover these losses later, when price inflation gets back down below the target.
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It seems like there would be more deflationary pressure if they just didn't lend to the banks....It sounded like the idea is that they will create new money to cover these losses later, when price inflation gets back down below the target.
Yes, its a weird one to wrap my head around. The lender of last resort is now borrowing from "whom"?
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it feels like one after the other, a novelty problem with a novel solutions that creates a novel problem and so on
I'm pretty sure that's what a managed complex system falling apart is like.
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The losses have to be bad loans?
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My understanding is that the losses are the Fed continuing to lend to member banks despite not having any assets on their books. They're using the term "negative capital" in their accounting.
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They are geniuses.
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