2013-03-25econintersect.com

What does it mean? While it may be fun to note that the Fed isn't much of an investor and might even operate at a loss in the future when interest rates rise, for practical purposes, it's meaningless. The Fed could operate at zero profit, or even at a loss, indefinitely by merely increasing its liability to the Treasury, or heaven forbid, marking to market some of the $460 billion in gold that it owns and carries on the books at a cost basis of $42 billion. The Fed will also probably never sell any of the paper that it holds, and since it doesn't mark to market it will probably never in actuality show a "loss." Its remittances to the Treasury, while shrinking to near zero, should continue.



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