Fed Keeps Interest Rates Steady, Will Start Burning $10 Billion per Month in ‘Epic’ Bonfire

A visual depiction of quantitative tightening | Credit: Purple Slog, Flickr

WASHINGTON, DC–In a widely anticipated move, the Federal Reserve decided on Wednesday to keep short-term interest rates steady, and announced a start date for its plan to burn $10 billion per month in an “epic” bonfire.

The bonfire program represents the other side of the extraordinary monetary policy measures the Fed implemented in the wake of the Great Recession. Those measures included the creation of trillions of dollars in new money, which were then spent primarily on US Treasury Bonds and mortgage-backed securities, with the goal of lowering long-term interest rates and increasing economic activity.

Although economic growth never recovered to historically normal rates, interest rates did plummet as intended and have stayed consistently low. Now the Fed has determined the policies were successful enough, and is starting to unwind the initial money creation. This led to the tricky question of how to dispose of all the money they printed.

They ultimately settled on holding bonfires on the National Mall. But a Fed source, who requested anonymity to discuss the issue candidly, told The Daily Face Palm about some of the options the Fed considered.

One of the leading alternative proposals was to transform the excess money into tissues or unbranded Kleenex, which would be distributed to all of the soon-to-be-depressed retired government workers whose pension funds have been gradually bankrupted by the Fed’s ultra-low interest rate policy. “It seemed like the least we could do,” the Fed source explained.

However, researchers discovered a flaw in the concept. “Everyone knows the US dollar is bad at retaining its value over time,” the Fed source said. “It turns out it’s even worse at retaining snot–for any period of time.” And while the Fed expected many people would derive some pleasure from defacing small likenesses of Andrew Jackson (old $20s) and Alexander Hamilton ($10s) each time they blew their nose, it felt wrong to saddle them with a defective product, the source told The Daily Face Palm.

So the Fed decided to go with the bonfire approach. But fearing that the public would be unnerved to know that the nation’s central bank just creates and destroys money at will, the Fed wisely opted to brand the policy as “quantitative tightening” or “balance sheet reduction”, thereby ensuring nearly everyone would dismiss the topic out of boredom before understanding it.

 

*This is a satirical post. The source and quotations mentioned above are fictional, but the Fed did announce that it would start reducing its balance sheet by $10 billion a month starting in October, which entails destroying $10 billion (though most likely digitally, not in bonfires).

Leave a Reply

Your email address will not be published. Required fields are marked *