(Reuters) - The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal said, citing people familiar with the matter.
Fed officials have approached Congress about the move, which could include issuing bills or some other form of debt and would provide the central bank with more flexibility to tackle the financial crisis, the Journal said.
Jesse argues that the measure is a preamble to "Selective Default and Devaluation."
This makes little sense unless the Fed wishes to be able to set different rates for their debt, and make it a different class, and whore out our currency, the Federal Reserve notes, without impacting the sovereign Treasury debt itself, leaving the door open for the issuance of a New Dollar.Rosenberg out of Merrill Lynch suggests, among other things, that in fact the rationale behind the proposal is to provide themselves with a tool to mop up excess liquidity once this little crisis is over. (The "old way" of doing this was for the Fed to sell treasuries but, you see, they've now few treasuries left, the government paper having been replaced by illiquid mortgage dreck that the banks couldn't unload.) Additionally, Rosenberg speculates that this might be driven by the Fed's desire to operate more independently of the Treasury. A third point of view, from an East Coast broker, has it that this is an attempt to circumvent the statutory debt ceiling. Whatever the "correct" answer is, there has certainly been no shortage of coverage/opinions on what would normally be considered a highly arcane matter.
What an image. The NY Fed as a GSE, the new and improved Fannie and Freddie. Zimbabwe Ben can simply print a new class of Federal Reserve Notes with no backing from Treasuries. BenBucks. Federal Reserve Thingies.
Perhaps we're missing something, but this looks like a step in anticipation of an eventual partial default or devaluation of US debt and the dollar.
As for me, I've not the faintest. But the scramble to explain and shed light reminds me of when my first child was being born. For those of you who haven't been through this before, the process, at least for the guy, is exceptionally boring, especially if your wife/mate is all doped up. The kid's vitals are wired back into the nursing station, and it is effectively the two of you in a room, alone, waiting. After about twelve hours of this I'd exhausted my reading material and was trying to get comfortable on a chair that was just about impossible to get comfortable on when all of the sudden all hell broke loose. Two nurses come flying in. They look at the scope and start tweaking dials. One of them leaves to return shortly thereafter with two more people in tow. Tables get wheeled in covered with stainless instruments arranged just so. Doctors arrive. Everyone is speaking everyone in "hospital voices." Neither my wife nor I knew what in the world was going on and certainly no one was telling us diddly. But one thing was certain: Something was wrong.
In the end, the kid came out just fine, even if her head got a bit mashed up on the way through. Nowadays, except when torqued up on candy, she is even pleasant to be around. We're not sure, given the cacaphony surrounding this proposal, that the Fed's offspring will be so lucky.
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