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After the Fed Burns Billions in Profits – Now They’re Quickly Bleeding Billions as Rates Rise

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What’s Happening:

There is a reason so many Americans are against big government. Worse still, a big government that controls much of the nation’s wealth. It’s because, when push comes to shove, the government doesn’t seem to know what it’s doing.

We’ve seen that up close and personal ever since 2020. When the government makes hasty decisions that affect all of us, it rarely works out well. That’s especially true for the Federal Reserve and U.S. Treasury, which have a big impact on everyone’s pocketbook.

And, after burning through billions of profits, the Fed is about to lose big time.

From Yahoo Finance:

The bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years…

The US Treasury will see a “stunning swing,” going from receiving about $100 billion last year from the Fed to a potential annual loss rate of $80 billion by year-end, according to Amherst Pierpont Securities LLC.

Back in 2020, the federal government spent billions to “rescue” businesses during the crisis. It gobbled up insane amounts of assets to prevent markets from collapsing thanks to shutdown orders that froze society. It was the government’s way of fixing the very problem it created.

But now, the Federal Reserve is hiking up interest rates again and again. And the value of bonds are dropping as people sell them at a record pace. That will result in massive losses to the U.S. Treasury. It could experience an annual loss rate of $80 billion by the end of the year. Just last year, it had $100 billion on hand.

As complex as this all sounds, there is a very simple moral. When the government has too much power over our markets, economies, and banks–the worst happens. The federal government was not designed to manage or control markets, investments, or businesses. Whenever it tries too hard to manipulate these things, it makes a bigger mess than we had before.

Perhaps more people need to rethink “big government.”

Key Takeaways:

  • The US Treasury could lose billions as interest rates are hiked up.
  • Bonds are being sold off due to inflation and the recession, leading to major losses.
  • This comes after the federal government burned through billion in 2020.

Source: Yahoo Finance

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