Central Bank Losses Grow and Bailouts Arrive: Is the Federal Reserve Next? Awake-In-3D

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Central Bank Losses Grow and Bailouts Arrive: Is the Federal Reserve Next?

On October 26, 2023 By Awake-In-3D

In Fiat Debt System Collapse

The global fiat currency debt system is facing an unprecedented financial crisis as central bank losses are significantly increasing month by month. Some are already requiring public bail-outs.

These institutions, which include the U.S. Federal Reserve, are grappling with losses that not only show no sign of relenting, but also pose a substantial risk to the stability of financial systems around the world.

As the financial system grapples with these mounting losses, the Federal Reserve may have immunity (for now).

Central bank losses continue to escalate, growing from month to month, posing a severe threat to global financial stability. Recent examples are Sweden’s Riksbank and the Bank of England.

  • The impact of these losses on everyday taxpayers is significant as they may ultimately shoulder the costs of bailouts to cover central bank deficits.
  • The U.S. Federal Reserve stands apart, thanks to its control over the world’s reserve currency and the use of deferred assets.

Global Central Bank Losses on the Rise

Flag outside of Sweden’s Central Bank building – Sveriges Riksbank

The financial predicament of central banks worldwide is indeed causing global concern, with the following facts highlighting the magnitude of the issue:

  • Sweden’s Riksbank reported a loss of over SEK 80 billion in 2022 resulting in a negative equity position (insolvency) of SEK -18 billion. It now needs a capital injection of at least SEK 80 billion to restore its equity to the basic level required by the Sveriges Riksbank Act.
  • The Bank of England, for instance, has already incurred losses estimated at £24 billion from selling bonds as of April 2023, a figure that experts predict could soon soar to a staggering £100 billion.
  • The U.S. Federal Reserve is not immune to these mounting losses, as it recently breached the $100 billion mark in losses.

In the midst of this financial turmoil, the U.S. Federal Reserve stands apart from the mounting financial problems of other central banks. Unlike its global counterparts, the Federal Reserve possesses a secret weapon.

A Growing Burden on Taxpayers – Bailouts

These central bank losses aren’t confined to the world of finance; they have a tangible impact on everyday people.

The burden of these losses ultimately falls on taxpayers, who may be required to cover the deficits created by these central bank losses.

The potential need for bailouts and the resulting public financial burden is an issue that cannot be ignored.

The Federal Reserve’s Secret Weapon

In the midst of this financial turmoil, the U.S. Federal Reserve stands apart from the mounting financial problems of all other central banks. Unlike its global counterparts, the Federal Reserve possesses a secret weapon.

The Fed is different because of its unique position as the issuer and controller of the world’s reserve currency, the U.S. Dollar.

Right to left: Janet Yellon – US Treasury Secretary and Jerome Powell – Federal Reserve Chairman

This distinctive role affords the Federal Reserve the following unparalleled advantages:

  • The Federal Reserve’s capacity to print its own currency provides it with the power to meet its debt obligations without the risk of default. This sets it apart from central banks that do not have this privilege.
  • The Federal Reserve employs a clever strategy involving “deferred assets,” which effectively conceals its losses and maintains normal operations without disruption. This strategy allows the Federal Reserve to maintain its operations indefinitely, even when facing mounting losses.

Can the Federal Reserve Go Bankrupt?

A crucial question arises: Can the U.S. Federal Reserve Bank go bankrupt, just like other central banks facing insurmountable losses? The answer lies in the Federal Reserve’s “unique” position of monetary privilege.

The Federal Reserve’s Special Bankruptcy Shield

The Federal Reserve’s financial stability is underpinned by its unique status as the issuer of the world’s reserve currency and its power to print money to meet its obligations. This affords the Federal Reserve the following key advantages:

  • Its control over the world’s reserve currency grants it the ability to meet debt obligations without the risk of insolvency, even as central bank losses mount.
  • The Federal Reserve’s use of “deferred assets” allows it to conceal losses effectively, ensuring its ongoing normal operations without disruption, even in the face of mounting financial challenges.

As the financial system grapples with these mounting losses, the Federal Reserve may have immunity (for now).

However, the broader implications of central bank losses raise questions about the global financial landscape and the role of central banks in the everyday lives of people around the world.

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