How might President Trump get the United States back to work ?

Keep in mind that deficits don’t matter – when you are a Republican.

Democrats find it hard to complain about government spending and really hate doing the whole ‘austerity’ fan dance. So they rarely give Republicans a hard time about deficits.

At the end of the day budget deficits are something that are used by Republicans to beat Democrats over the head.

Anyway who needs a deficit ?

We have the Federal Reserve – that defender of free markets and friend of the Republic – to help Mr Trump to deliver on his promises.

How so you say?

Try this on for size.

Donald Trump announces in his first hundred days that rebuilding the infrastructure of the United States is a national priority and will get Americans back to work in real jobs.

It is time to build some Trump-o-bhans

He announces that he is going to set up a Bobbie-Mac – as a little brother organisation to Freddie Mac and Fannie Mae – and this organisation will be charged with reviewing and approving the building projects of state governments on the infrastructure front.bob-the-builder

Green lights for new bridges, freeway extensions, very fast trains etc will be forthcoming and Hi-Vis will be the new black.

“Can we fix it?”  Yes we can!


State governments will be told to ‘create’ infrastructure bonds that pay a tiny 0.00005% (interest is not really the point of this exercise) and sell them to “Bobbie-Mac”.

The Federal Reserve which once was gobbling down securitised housing mortgages from Freddie and Fannie like they were going out of style – to keep the housing market on life support – will now start recycling the maturing proceeds – from its $1.25T RMBS portfolio – in the securitised bonds ‘IBS’ Infrastructure Backed Securities being created by “Bobbie-Mac” or even just crank out some fresh accounting entries to pay for the IBS and expand that Federal Reserve balance sheet by another lazy trillion or two.

Yum they taste good and as we know it is not printing money – it is just an “asset swap” – some accounting entries for IBS.

And they don’t appear on the Federal Budget either. Bonus points !!!

Now some might say that the Federal Reserve has no business buying bonds for new highways, railways, bridges etc and perhaps they are right and perhaps the state governments will never pay back “Bobbie-Mac” for the funds they receive in exchange for their 0.000005% bonds.


But who cares? – with the mountain of private and public debt out there driving deflation across the globe a bit of ‘asset swap’ cash that never makes its way home to the Federal Reserve is not going to be an issue (until the economy is running at full capacity) and who is going to complain anyway?

Progressives whinging about President Trump rebuilding public infrastructure and putting Joe 6-pack back to work?

No way!

Republicans with happy donors delirious from padding out construction tenders?

No way!

No Federal Government deficit blow out as it is just the Federal Reserve expanding its ‘independent’ balance sheet. Just an “Asset Swap” a few more securities in the Federal Reserve filing cabinet and the Federal Reserve paid for it all with a few accounting entries.

Time for some MMT – really Modern Monetary Trumpery.

Categories: Macrobusiness

1 reply »

  1. Keep in mind that the neoliberal consensus has no objection to making money.

    Their only objection is to money creation by the public sector spent in the interests of the public with limited easy ways of leeching that money into private pockets.

    If that ‘problem’ is addressed the neoliberal consensus is open to anything.

    As I noted below the neoliberal consensus (as against the sound money Austrian crowd who are a different kettle of fish) had few objections to the Federal Reserve acquiring $1.25T in securitised mortgages created by private banks post the GFC because it ticked all the boxes.

    1. Money created privately

    2. Fees for doing so kept privately

    3. The risk of default being handed over to someone else to worry about (The Fed)

    I don’t see why the neoliberal consensus would have any problems with the Fed buying up lots of securitised ‘infrastructure’ bonds that are issued in connection with big fat PPP infrastructure deals.

    THEY LOVE THAT STUFF as we have seen in Australia – which leads the way in the model.

    Exhibit 1

    A $2 Billion dollar 12 km long Light Rail aka ‘Tram’ in Sydney.

    Exhibit 2

    A $2B price tag for 10 km of surface standard railway in south western Sydney

    At that rate $1 Trillion only buys you 6000 km of Tram network. That works out to about 3 spoke lines of 20km (60km of track) for about 100 US cities – that doesn’t even get you any new bridges, upgraded airports, fast trains, upgraded highways.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s