Upside Down Fed

Respectfully I say to thee
I'm aware that you're cheating
But no one makes me feel like you do
--Diana Ross

When the Fed was in the middle of expanding its balance sheet amid various 'quantitative easing' (QE) programs, we observed that prices of the fixed income securities on the Fed's highly leveraged balance sheet would not have to fall much to render the Fed technically insolvent.

It appears that has occurred. The latest quarter financial statements indicate that bonds purchased and held by the Fed have  unrealized losses of over $66 billion, which eclipses its tiny sliver of $39 billion in capital. Can you say upside down?

Most people view this as a technicality because the Fed can literally print money out of thin air to cover those losses. As the author concludes, however, it is difficult to imagine a consequence-free future in this money-printing regime.