What’s Behind the Fed’s Project to Send Free Money to People Directly?
A lump-sum payment in digital dollars for all Americans during a recession or to raise inflation, as an alternative to QE and negative interest rates, which have failed.
By Wolf Richter. This is the transcript of my podcast last Sunday, THE WOLF STREET REPORT. You can listen to it on YouTube or download it wherever you get your podcasts.
There is a lot of discussion suddenly about a Federal Reserve project to make direct payments to households during an economic crisis. In March, legislation was proposed in the House and in the Senate to authorize the Fed to do this.
At the beginning of August, two former Fed officials floated a trial balloon of this type of operation with some specifics as to how it would work and how it would be accounted for on the Fed’s balance sheet.
And now, the president of the Federal Reserve Bank of Cleveland, Loretta Mester, gave a speech on the modernization of the decades-old, slow, and cumbersome payment systems we have in the United States. The Fed has been working on this modernization since long before the Pandemic. And near the end of that speech, she said that the Fed was looking into ways in which it could make direct and instant payments to every American, even those that don’t have bank accounts.
So free money for all Americans. This is very different from the stimulus checks because the government had to borrow the money that it sent to consumers. The Fed would just create the money and send it to consumers. And this is getting pretty serious now.
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