Disclaimer: The next is a parody of a “leaked” transcript of a latest phone dialog between Federal Reserve Chairman Jerome Powell and Secretary of the Treasury Janet Yellen.
Powell (answering telephone): Powell right here.
Yellen: Jay, the way you doing, Janet right here, been which means to name you one among as of late.
Powell: What’s in your thoughts over there at Treasury?
Yellen: Properly, I see that you simply’re decreasing rates of interest, so I simply needed to inform you that’s nice information for us over right here at Treasury. We’re all the time on the lookout for methods to economize, what with all this debt we’re making an attempt to handle and pay curiosity on. Once I was in your job, we have been capable of maintain rates of interest traditionally low, barely above zero, and nobody a lot talked concerning the dimension of the federal debt or paying curiosity on it. Now it’s develop into a headline problem in all places, although I nonetheless don’t see anybody stepping as much as do something about it. You and I’ve our jobs to do, and each Congress and the President carry on spending. I simply get caught paying the payments. After which on occasion we run up towards a debt ceiling that requires some fancy footwork to deal with.
Powell: Properly, I get caught assuring there’s satisfactory liquidity within the financial system and low-cost loans for the federal authorities. After all you recognize that we didn’t decrease rates of interest for any political motive or to maintain curiosity funds underneath management. No, we comply with the information in setting financial coverage. I’m nonetheless getting some flack concerning the Fed’s massive steadiness sheet that predates your and my time on this job, as you recognize, however everybody appears to love the outcomes of all this debt on the Fed’s books so I doubt it is going to come again to hang-out us. I count on to be nominated and confirmed for a second time period irrespective of who turns into president, at the very least if we are able to maintain unemployment affordable, although the inflow on the border does hassle me a bit. Apart from, the large bulk-up on the Fed’s debt possession started with somebody earlier than you and I took over, so we are able to all the time blame him for it.
Yellen: Say, since we’re speaking debt, I additionally needed to provide you a heads-up about our upcoming Treasury debt auctions as a result of I sit up for some Federal Reserve participation. Week after subsequent we’re doing a 2-year word providing for 69 billion {dollars}, a 5-year for 70 billion {dollars}, and a 7-year for 44 billion. We haven’t scheduled a 20- or 30-year public sale presently. Ditto for any future TIPS [Treasury Inflation Protection Securities]. You realize we all the time handle our credit score wants rigorously to time them with scheduled spending wants.
Powell: Oh, I do know you do. However I don’t know the way a lot we are able to take part in these upcoming debt auctions. As I mentioned, I’m underneath the gun on the dimensions of the Fed’s steadiness sheet, so I’ve to watch out.
Yellen: Sounds as if in case you have some misgivings about taking part in our debt auctions. However hey, we each work for a similar employer, and we all know there must be some coordination and cooperation if our employer is to succeed. What do you imply, it’s possible you’ll not have the ability to present the funds we want for these auctions? Our Treasury Division checking account is in your system’s district banks, so we’re one among your clients, and also you’re liable for producing infusions to our account as we want them. I’ve obtained payments to pay!
Powell: I hear you, however typically folks begin to ask questions concerning the Fed’s independence and I get a bit of nervous once I hear that discuss. However sit tight and I’ll see what I can do on this finish.
Yellen: Hey, on a distinct matter that may make life simpler for each of us, the opposite day I had an inspiration that you simply would possibly wish to take into consideration. How about forgetting the disagreeable enterprise of accumulating taxes? I hate overseeing the IRS as a result of everybody hates the place, and it needs to be abolished. Needs to be straightforward to do if we simply coordinate and work collectively and clarify convincingly why we are able to cease accumulating taxes. The key is to only start issuing sufficient debt to pay for the whole lot that manner as an alternative of bothering with taxes. Everybody will like it.
Powell: Hmm, an attention-grabbing notion. Possibly these MMT folks have the proper concept in spite of everything. Create all these financial institution reserves and print all that cash, and don’t fear about repaying the debt as a result of it’s denominated in {dollars}, our personal sovereign forex that we are able to all the time print extra of. I’m nonetheless fearful, although, concerning the Federal Reserve’s massive steadiness sheet. And I’m wondering if Congress and voters would catch on to what we’re doing with taxes?
Yellen: I wouldn’t fear about Congress. If these elected nitwits might ever get their act collectively to determine it out, I’d be shocked. No, the way in which to go is simply to do it. Needs to be a bit of cake. We simply public sale off a bit of extra debt each week and nobody will know the distinction.
Powell: I’ll take into consideration this. Within the meantime, I’ve to get going right here to verify the newest financial stats, and suppose forward about our schedule for future rate of interest cuts. Good speaking to you, and thanks for calling.
Yellen: Nice, and let’s keep in contact.
Powell: You bought it.
The Upshot
The dialog ended at this level as each events hung up. May these two highly effective people, of their official capacities heading their respective highly effective entities of the US federal authorities, pursue Yellen’s suggestion to cancel taxes and fund all federal spending with debt? Keep tuned on this creating story.
