A VISIT TO THE FED
Jim Self
12/15/2021
I saw a fella in the FED office the other day behind a desk with a phone and a computer and a cardboard box. Fred was his name. He received a phone call apparently from the treasurer and he was told the government had some bills to pay but no money in the checking account and they needed to write out about 40 billion dollars in checks this week. So Fred pulled out a blank bond, wrote 40 billion dollars on it, and put it in the box with a bunch more of them. Then he typed in $40 billion in his computer on the place that said, “Deposit”. Under “Balance”, the number changed from $0 to $40 billion. Then under “IOU” the number changed from “$28 trillion” to “28 trillion, 40 billion.
He said,” When we need money we tell the market on this phone. Anybody who wants a bond just calls me and tells me how much they want in interest. If it's too high we just say sorry, No can do. Then we write out our own bond. They are like IOUs. If we didn't do that we would have to pay 6 or 7 percent on the bonds. Way too much. Listen. If we had to pay 7% on these bonds we would owe...well....7% of 28 trillion dollars is $1.96 trillion. But let's keep that to ourselves. OK? Don't want everyone to know that. As long as we can keep writing and buying our own bonds we can keep the interest rate down around 1%".
I asked him how many of those bonds he has. He opened a back door to the office and there were racks lining both sides of the hall 200 feet long and about two thirds of them were stacked to the ceiling like books in a library. Hundreds of them. He pointed at them and said, “All of those boxes were full”.
We all know that borrowing too much money is a bad thing. “Well, what happens if you owe it to yourself? Do you still have to pay interest on the bonds? I asked. He said,” Sure! No problem! We just write out another bond to cover the checks!”
When I walked out of there I didn't feel very good about things and I still don't.
I don't think I can leave this alone. So there will be more to come. Just remember...how much 1.96 trillion dollars is. Compare it to the 700 billion Defense Bill we just passed.
And then consider the 1.75 trillion dollar budget Build Back Better that Biden, Pelosi, Schumer and their Progressive followers are fighting for...and what they will fight for next time...and next time...and next time.
