Mustafas Mindwave

A former World Bank President, David Malpass, says the Federal Reserve is creating the illusion of a strong U.S. economy — and it could be backfiring on the dollar and real growth.
Here’s the core issue:
During years of low interest rates, the Fed loaded up on government bonds and mortgage securities. When rates later surged, those low-yield assets became costly to hold because the Fed now pays much higher interest on bank reserves and money market funds.
That’s why the Fed posted massive losses — including $114.6B in 2023 and $77.5B in 2024 — while building a large deferred asset before it can resume payments to the Treasury.
But Malpass argues this goes deeper than losses.
He says the Fed is effectively borrowing at high rates while holding lower-yielding assets — making it function more like a leveraged bond fund than a traditional central bank.
The real concern? The impact on the economy:
Banks can earn risk-free returns by parking money with the Fed instead of lending to businesses. That means less funding for small businesses, expansion, hiring, and overall economic growth.
In 2025, the Fed still paid around $167B in interest to banks — reinforcing this dynamic.
So the system looks like this:
Banks lend to the Fed (risk-free)
The Fed holds government debt
The Treasury misses out on remittances
The real economy gets less credit
Malpass also warns this setup masked government borrowing risks for years by keeping yields artificially low — encouraging more debt. Now, with higher rates, the true costs are surfacing.
This isn’t simple money printing — it’s capital being absorbed into central bank balance sheets while the private sector competes for what remains.
The dilemma:
Keep paying high rates → less lending to the real economy
Unwind too fast → risk breaking bond markets
Keep taking losses → potential pressure on confidence in the dollar
According to Malpass, it’s a difficult trap — and there’s no easy exit.

#EthereumFoundationSellsETHtoBitmineAgain #BankofEnglandMayPauseDigitalPound #TrumpSaysIranConflictHasEnded #CryptoVCFundingFalls74%inApril #U.S.SenatorsBarredfromTradingonPredictionMarkets