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The Federal Reserve has suffered a staggering loss of $200 billion! Fortunately, it has entered a rate-cutting cycle; otherwise, who knows how long the Federal Reserve would continue to incur losses.

As the central bank of the United States, the Federal Reserve is required by regulation to hand over its annual profits to the U.S. Treasury. However, this year is quite exceptional. The Federal Reserve submitted a report to the Treasury, stating that it has suffered a loss exceeding $200 billion since the beginning of the year, so naturally, there are no profits to be handed over. For now, it can only record a negative number. When it turns things around and wipes out this loss, then it can hand over profits again.

As the central bank of the United States, it does not engage in any investments, so how could the Federal Reserve suffer a loss? The reason is simple: major banks in the United States have some reserve deposits and some valuable bonds deposited with the Federal Reserve. When the Federal Reserve receives this money, it is required to pay interest. A few years ago, the U.S. benchmark interest rate was 0, which meant that a large number of banks deposited these funds with the Federal Reserve and hardly received any interest. Over the past two years, in order to ease the staggering inflation within the United States, the Federal Reserve has raised the benchmark interest rate from 0 to around 5.5%. With the rise in the benchmark interest rate, it is equivalent to an individual being able to achieve an annualized return of over 5% just by depositing money in a U.S. bank without doing anything. Therefore, the money that commercial banks deposit with the Federal Reserve also needs to be paid for. As a result, the Federal Reserve has spent hundreds of billions of dollars to pay the interest on these reserve funds from commercial banks. Of course, the Federal Reserve also has some ways to generate income, and after offsetting each other, the Federal Reserve has lost more than $200 billion this year.

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So, we say that raising interest rates carries a huge burden. Of course, for the entire U.S. economy, raising interest rates also has a huge burden, which is the soaring interest on U.S. Treasury bonds. U.S. Treasury bonds now exceed $35 trillion, which is more than 130% of its GDP. No wonder the world's richest man, Musk, said a while ago that the United States is about to go bankrupt. After all, you are so heavily in debt. Moreover, let's think about it, with a principal of $35 trillion, what about the interest? Although U.S. Treasury bonds have been formed over decades and not every bond's interest is as high as it is now, but on average, it has been calculated that the United States today pays more than $1 trillion in interest on Treasury bonds alone each year. An average of 23% interest? That is to say, as the United States continues to raise interest rates, just paying the interest on Treasury bonds will be higher than military spending.

The Federal Reserve can no longer hold on and has hastily announced a rate cut of 50 basis points, and in the coming months, the Federal Reserve will continue to cut rates. There is no other way, if you do not lower interest rates, not only will the Federal Reserve be heavily in debt, but even the U.S. government will borrow new debt in the future, which will not be to repay old debts, but to repay the interest on old debts.