JamesL
Registered: Sep 2008
Posts: 2059 |
10-05-12 11:02 PM
WASHINGTON – The Federal Reserve Open Market Committee announced today the launch of a new monetary policy initiative called “Operation Zero Deficit,” a new $25 trillion program aimed at eliminating the federal deficit.
“Over the past few years we have learned that our unconventional monetary policies have enormous unintended consequences,” said Ben S. Bernanke, Chairman of the Federal Reserve. “Very positive ones, it turns out, in that the U.S. Treasury has earned a windfall from our securities purchases. We now believe we can expand our monetary programs to eliminate the federal deficit.”
The committee outlined a plan to purchase the following classes of income-generating investments:
- $5 trillion in dividend paying stocks
- $5 trillion in sovereign debt of southern European countries
- $5 trillion in credit card debt extension
- $5 trillion in high yield corporate debt
- $5 trillion in infrastructure projects
The Federal Reserve staff projected that the new program would generate over $1 trillion per year of interest income, all of which – less administrative expenses – would promptly be remitted to the U.S. Treasury. “If Congress can keep spending flat, we think the U.S. government is looking at a balanced budget next fiscal year,” he said. “But if Congress spends a little more, we can always adjust our purchases higher and generate more income.”
President Barack Obama declined to comment on the activities of the central bank due to its traditional independence from the executive branch. However, in a brief statement after a campaign rally in Ohio, he did praise Mr. Bernanke as a “true patriot” whose commitment to refund almost 100% of the Fed’s earnings to the Treasury was “an admirable example for all Americans.”
Many members of Congress hailed the program as an inspired solution to what had been a seemingly intractable national problem. “Are you serious? Are you serious?” a befuddled House Minority Leader Nancy Pelosi (D-CA) asked repeatedly when prompted for comment on the Capitol steps. After a pause she smiled and said “I frankly don’t know why somebody didn’t think of this sooner.”
In conjunction with the Fed’s announcement, the Consumer Financial Protection Bureau announced that it would be issuing a new branded consumer credit card to any American who requested one. Interest on the card, to be called the “Deficit Buster Gold Card,” is to be fixed at 4%, and will have no credit limit. Consumer advocates hailed the program. “Now consumers can know that interest incurred on their everyday purchases will go straight to reduce the deficit, not to line the pockets of greedy banks,” said Massachusetts Senatorial candidate Elizabeth Warren.
Several Senators were drafting proposals to submit to a new office at the Fed that will evaluate potential infrastructure projects. Senator Chuck Schumer (D-NY) said that the New York delegation had “some great ideas” for building a new bridge and tunnel across the Hudson River at a cost of “a mere $50 billion.” “We would happily sell the Fed bonds secured by the tolls. We see it as a ‘win-win-win.’ New York gets new roadways, the Treasury makes money, and we in Congress don’t even have to appropriate a dime or raise taxes. Beautiful.”
Standard & Poors and Moody’s upgraded the debt of the U.S. Government back to its prior AAA status. “The United States has taken an enormous step toward fiscal sustainability,” the bond rating firms stated in a joint report released after the Fed announcement. “The ability of the U.S. to service its debt can now never be questioned.” In a blog post, Paul Krugman, the Nobel Prize-winning economist, commented that the Fed’s move would usher in a virtuous circle of investment and debt reduction which he called “a new golden age.”
European political leaders saw the implications differently. A spokesman for the Prime Minister of Greece said that his country’s Parliament would consider issuing new debt, perhaps “as much as $500 billion Euros” to satisfy the Fed’s anticipated demand. Since the Greek government is hesitant to comply with ECB austerity demands, interest rates on its bonds were poised to rise before the Fed’s announcement. “I think we can sell them as much as they could possibly want,” he said.
A high ranking official in Spain’s economic ministry, who declined to comment because of the sensitivity of the matter, confided that his country believed it was “now in the driver’s seat.” Knowing how much income the Federal Reserve needs to generate every year “will allow us to dictate terms.”
At the offices of the Simpson Bowles Deficit Reduction Commission, a skeleton staff could be seen removing boxes and furniture into moving trucks. “When the ducks fly over the cow manure, it’s time to load the hay,” former Senator Alan Simpson said mysteriously.
http://www.forbes.com/sites/realspi...n-zero-deficit/
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