Why The Fed Is Bankrupt And Why That Means More Inflation

In 2011, the Federal Reserve invented new accounting methods for itself so that it could never legally go bankrupt. As explained by Robert Murphy, the Federal Reserve redefined its losses so as to ensure its balance sheet never shows insolvency. As Bank of America’s Priya Misra put it at the time: “As a result, any future losses the Fed may incur will now show up as a negative liability (negative interest due to Treasury) as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible.” That was twelve years ago, and it was all academic…