Each year, the Federal Reserve typically transfers its profits to the U.S. Treasury, which then end up in the hands of taxpayers. Now, numbers from 2013 are finally available, and the Fed dumped $79.6 billion into the Treasury last year. This may seem like an exorbitant number, but the fact is that it’s actually down from the year before, in which funds sent to the Treasury totaled $88.4 billion as a result of Operation Twist, a program which earned the Fed money through sales of short term debt.

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As far as the Fed is concerned, the preliminary numbers from 2013 cast a positive light on the American economy. It should come as no big surprise, too, as the Fed has been working recently toward scaling back its bond-buying program. There are a variety of reasons one could argue for why the Fed has decided to take this route, but all signs point to the fact that the American economy is growing stronger as each year passes.

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The Fed’s bond-buying program

In an attempt to jump-start the economy after the recession, the Fed started purchasing bonds totaling $85 billion per month — a staggering number that was most likely never meant to be held as a constant. In December, the initial stages of scaling back the program were carried out, and the Fed now purchases only $65 billion per month in bonds. Next week, it plans to reduce its buying by another $10 billion, eventually hoping to scale back even further.

What has many people a bit concerned about the Fed’s scaling-back of their bond-buying program is what the residual results might end up being. The profits that have come from the Fed and sent to the Treasury each year have been hugely beneficial to U.S. taxpayers, yet there’s no doubt that they are affected in some ways by the Fed’s bond-buying program. If the program continues to be pared down, it’s anyone’s guess as to what might occur. The Fed has even declined to talk about what potential effects the paring down of its bond-buying program might have on its profits, even though officials remain positive about where the U.S. economy is going.

A continuing recovery

At this point, most economists would agree that things are indeed looking up for America. The bond-buying program has, for the most part, worked just as planned, and consumer confidence is on the rise. If things continue to move in this direction, it would be fair to assume that interest rates will continue to rise. As this occurs, however, it’s not exactly clear as to how the Fed will react. On paper, it may appear as if it is losing assets, which could be enough to scare some people. In reality, however, a loss of value would only occur if the U.S. Central Bank was to sell off its assets, which is not likely to happen.

At the moment, the Fed is paying 0.25 percent interest to banks on the reserves that are held at the U.S. Central Bank. As one might expect, these funds are directly related to the Fed’s bond-buying program. As the program scales back, then, it’s possible that the amount of funds held at the Central Bank will drop, perhaps even noticeably. Still, it’s an expected turn that would have a very hard time upsetting the improving economy that the bond-buying program is partially responsible for creating in the first place.

An effective signpost

Paying close attention to the amount of money the Fed sends to the treasury each year is essential for monitoring economic development. America has been lucky in that the past couple years have shown quite high numbers in terms of the Fed’s payout to the U.S. Treasury, and it will no doubt be interesting to see what the future holds. At the moment, it’s looking as if things are in the black for America — good news after years of being stuck in the red.

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