I recently listened to the angst filled cover version of the Beatles classic “With A Little Help From My Friends”, by bluesy crooner Joe Cocker. If you have not heard it recently, please quit reading right now and play it.
Here is how the chorus goes:
Oh, I get by with a little help from my friends
Mm, gonna try with a little help from my friends
Oh, I get … with a little help from my friends
Yes, I get by with a little help from my friends
With a little help from my friends
Having been in the markets for over 30 years, when I asked my own friends the question of whether the Fed’s “losses” on its bond holdings and cash-flows matter, I thought I saw eyes roll, as in – “that’s a stupid question”. Of course, according to conventional wisdom, the Fed’s losses don’t matter, because the Fed can literally print more money whenever it wants. From a simple accounting perspective, all the Fed has to do is to create an IOU — i.e., a “deferred asset” — which it will pay back in the future. So, we are assured, don’t worry about it.
The full note on this important topic can be downloaded at this link: LTA Thinking – With a Little Help from My Friends