Fed's 109-Year Free Money Machine Grinds to a Halt

The Federal Reserve has stopped making money for the U.S. government after 109 years.

For most of the last century, the Fed turned a profit every year and handed it over to Washington to spend on various projects.

However, in 2023, the machine broke, and the Fed lost money for the first time in its history. The 2026 loss is the biggest ever, at hundreds of billions of dollars.

The pandemic played a significant role in this situation, as the government spent trillions on stimulus checks, grants, and bailouts. The Fed created new money to lend it to Washington, but interest rates were low, so it only earned about 2% on these loans.

Now that inflation has increased, the Fed is fighting it by raising the federal funds rate to around 4%. This means earning less than it pays out, resulting in significant losses.