The Fed Puts the Hurt on Uncle Sam

Oct 11, 2022 | Finconomics 101, No Bull Economics

Banner

As we discussed in a previous post, the Fed’s ginormous $9 trillion bond portfolio generated $107.8 billion in net interest income for the federal government in 2021. This went a long way to subsidize the federal government’s $515 billion interest expense paid out in 2021.

Now that the Fed has hiked interest rates so aggressively, the interest it must pay on its $3 trillion in bank reserves is more than offsetting the interest it collects on its bond portfolio such that it is currently generating an operating loss of $2.9 billion.

While the press is saying that this is not a big deal because the Fed is not at risk of going bankrupt (it will just print more money to cover these losses), what they are not talking about is the impact on the federal government which is no longer being subsidized by the Fed ($107.8B in 2021) while its borrowing costs are dramatically rising because of The Fed’s interest rate hikes. How will the federal government pay for an extra couple of hundred $ billion in borrowing costs? Hopefully, the Fed will reconsider its rate hikes (which are incapable of curtailing supply-driven inflation) by taking pity on the federal government which is starting to share in the pain of indebted Americans everywhere.  

Liabilities and Capital Graph
Liabilities and Capital

Follow us on LinkedInTwitterFacebook, and YouTube!

Disclaimer of Liability
No Bull Economics
Restaurant Research

Email Sign-up

Jack in the Box Corporate Insights

Jack in the Box results reflected an improvement in: dining room openings (60% of system); innovation, upsell & add-ons sales; digital progress which is helping frequency; and late-night.

How to Circumvent Food Shortages?

The vulnerabilities of a long-distance supply chain have become very evident over the last couple of years, especially when it comes to farming.

This Week in Summary 11/18/2022

We want to spotlight Target this week which provides valuable insight on consumer spending.

How Would You Value the Federal Reserve?

Here is an idea: let’s take the Federal Reserve public in the world’s largest IPO.

How to Pass Along Inflationary Costs Without Losing Traffic?

Wendy’s is avoiding standardized menu price increases and turning to strategic increases designed not to price out lower income consumers.

Investors in Retail Stocks Think Consumers are Back

Recent retail stock gains would suggest that investors are confident in consumer strength, despite continuing inflationary issues.

Papa John’s & Chili’s Reveal the Plight of Cash Strapped Consumers

The relevant question remains whether consumers who are increasingly cash-strapped can be convinced to pay more for higher quality levels?

This Week in Summary 11/11/2022

Market melt up & the midterm elections

DoorDash’s Grip on Labor Costs is Funding New Investments

Doordash’s platform generated +10% of all restaurant industry sales.

3Q Results for Bloomin’, Texas Roadhouse & Cheesecake

Full serve restaurant sales performance is currently a function of customer demographics.

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company