Tuesday, 8 April 2008

We at the Fed ..

.. are still optimistic. Not so because we believe there is reason to be, but because this is pretty much the only thing we can help you with. Giving you verbal support and friendly pats on the back. Things will be fine.
How and why may seem a mistery to you, and well, pretty much to us as well, but being in the optimistic business these days means not digging to deep and for sure not asking too many questions. Just keep smilingand breath deeply

We started out in early 2007 as rookie optimists. We used to be neutral you see, not optimistic, not pessimistic. When things werent going well we wouldnt try to convince people otherwise, or when things went well we smiled and nodded modestly. Nowadays, however you need a bit more marketing. Otherwise how you gonna get 10 bucks for selling your memoires, or let alone a consulting job when you leave the Fed. The CV wont do it, and we understood that in 2007, when this whole pile of debt that the American consumers piled up started to behave as debt normally does, a burden for the future. So when it became clear that our lifestyle and consumer culture is facing a rupture we decided to try to maintain a poker face and keep telling everybody that things will be fine. We went out Junk Debt Mountain, stared down into the abyss and didnt like what we saw. So we walked back to our ivory towers, and decided to pretend nothing happened. As if none of us really saw, what we saw. Im hearing that Tim (New York Fed Vice Chairman) and Richy (Dallas Fed) are still having nightmares.

So we sat there telling everyone that things are fine, until the proverbial hit the fan in August, and since then its been mayhem. We kept our pokerface even with all the casualties around us, and hope that if we pokerface and bluff a lot then eventually the cards will turn in our favour. They didnt .. we though this can only happen to others not us. Think about it.. since the 90's things were going well for us. Official inflation was low (and when it was not we introduced some statistical gimmickery to make it look lower), and the stock market did well. Thats pretty much what counts. The fact that the Average Joe Americans didnt actually get much benefit from the prosperity is disturbing but I guess they just need to work harder, like 20 hours a day in an unlit sweatshop. Its not our fault our folks got so lazy. We gave them cheap mortgages so they can pay for overvalued homes. This way we get to make mone money, and let them think that one day they actually will own a half a million buck property financed by a 40k per year income. We call this, the American Dream. Now its turning into the American Nightmare unfortunately (we are considering removing this sentence from the printed version)

By November it became clear that we are all sitting in a big pile of .. you know .
so we switched to Plan B; we remain optimistic, pokerface but throw all manner of central banking caution to the wind to try and save our banking buddies. We got afraid that if we dont save them, it will bring down the whole system that we so carefully built. We decided to use public money to save them, and if thats not enough we let some of our friends in the Middle East and China buy up our financial institutions. We dont feel ashamed of it at all, its all done for the common good. Our common good.

Since late last year, we managed to make the dollar a total pariah among currencies and in exchange we got ..ehhmm.. well we rescued a few of our banking buddies. The fact that the dollar is toast, somewhat questions are determination to stick to our mandate to ..ehhmm.. maintain the purchasing power of the currency.
Cutting rates hasnt done much either. For an average fellow to borrow money is still done at the same interest rates as a year ago. Provided someone is willing to lend them at all. Some mortgage lenders are rumoured to use man eating giant spiders inside their branches to try to discourage new customers.

However, we are scared to suggest that perhaps some banks or investors ought to go bankrupt because this is how things work in capitalism. We much more like this new Socialism, Socialism For The Rich, where the poor keep bailing out the rich.

We are in April now and things are finally looking up. We arranged a deal between JP Morgan, the bankrupt Bear Sterns, and us whereby JP Morgan gets Bear Sterns for a few bucks, a used blowdryer and packet of cigarettes. If things wont work out, we will guarantee any financial commitments Bear Sterns might be unable to honour. Its fine, because we are also operating as a pawn shop now (24 hours a day) whereby we take half-defaulted zombie mortgage loans, hedge fund manager yachts, and golden cufflinks as collateral to provide funding to the banking system.

We are not sure this will do the trick. We are hearing that fewer Americans have jobs. Those who have, dont want to borrow money to buy ropeless jumping ropes, 300 inch plasma TV's or the new Grand Cherokee SUV with a built in Surface to Air Missile (for our fellow patriots in the Bible Belt).
They are still puking the last meal. No point offering them a cheese and bacon burger after they have had 3 pounds of raw minced beef stuffed down their throat.

We may need to cut interest rates to zero, and offer a free DVD and a Miami condo for anyone brave enough to borrow money to invest in anything other than gold. Its a bit embarassing to admit that gold is at a record high, it kind of shows that there is a bit of a distrust in us being able to maintain the value of paper money. But if you cant beat them join them, so Im off to hit my second day job which I need in order to be able to feed my kids.
Im using my saved up money to buy gold and fresh water supplies.

Hang in there
The Fed

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