My Personal Central Bank
Editor's note: P.J. O'Rourke wants his own personal central bank.
The famed satirist wants to get rich and stay rich. So he started doing some research...
In today's Masters Series – originally published in the June issue of our new American Consequences online magazine – P.J. discusses how to go about creating it... who he would appoint to his board... and what else he can get his central bank to do for him...
My Personal Central Bank
By P.J. O'Rourke, editor in chief, American Consequences
Most of my colleagues here at American Consequences are skeptical about central banks. Not me. I like them. I want one of my own.
Of course, I don't want an enormous central bank like the Federal Reserve. Where would I put it? Although we live in a big old house in the country, we don't have enough bedrooms to host seven Federal Reserve Board Governors and a dozen Reserve Bank Presidents at those Federal Open Market Committee (FOMC) meetings they have all the time. We'd have to put some of them in the hayloft. (Do they bring their families?) Plus, we'd have to feed them. I hope FOMC members are okay with weenies and burgers on the grill and a cooler full of beer.
No, what I want is a compact, household-size type of central bank for my own personal use. A small, handy O'Rourke Central Bank that would fit in the laundry room or in the mudroom between the dog kennels.
The reason I want my own central bank is that I've been reading up on the Federal Reserve Act of 1913 and the mandate it gave to the Federal Reserve Bank – specifically, the mandate as it was amended during the 1970s and '80s in "Section 2A. Monetary policy objectives."
I have two monetary policy objectives.
- Monetary objective: Get rich.
- Policy objective: Stay rich.
Therefore, I was interested to see what Section 2A had to say, which I quote below with my own comments in brackets.
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates [e.g. the O'Rourke checking account balance and Visa card limit] commensurate with the [my] economy's long run potential to increase production [maybe someone will turn one of my books into a hit movie], so as to promote effectively the goals of maximum employment [I could do without "maximum employment," but I've got three kids to put through college so it's not like I've got a choice], stable prices [especially for the shoes and clothes my wife and daughters shop for on the Internet], and moderate long-term interest rates [on the credit card debt to pay for those shoes and clothes].
My kind of mandate!
But there's a problem with getting the United States Federal Reserve Bank to exercise its mandate on my individual behalf and help me reach my monetary policy objectives. I have to stand in line.
The Federal Reserve is a large establishment for use by the general public – kind of like the men's room at Penn Station in New York. And, kind of like the men's room at Penn Station, all sorts of stuff goes on inside the Fed that I don't want anything to do with, such as mopping up government deficits and pissing on free enterprise.
I prefer a private facility. In fact, I prefer a private everything – private railroad car, private jet, private tropical island. But these are expensive. According to what I've read about the history of central banking, a private central bank would have a zero-dollar purchase price and virtually no maintenance costs.
(An extremely condensed history of central banking: In 1694, the English King William III was fighting the Nine Years' War with France and ran out of money. He said, "Let's have a Bank of England to borrow some from." The Chancellor of the Exchequer Charles Montagu, 1st Earl of Halifax, said, "Jolly good idea." And Bob's your uncle.)
Most of what a central bank does is "open market operations." These consist of buying bonds from a government. In the case of the O'Rourke Central Bank, I'm the government. I have any number of "PJ Treasuries," "P-Bills," "J-Notes," etc., all neatly hand-lettered on my personalized stationary and available in denominations up to $1 godzillion with maturities ranging from "after I'm dead" to "when hell freezes over."
A central bank pays for bonds by issuing currency. I'll use the color Xerox down at the copy store. It's not counterfeiting when a central bank does it.
Of course, my central bank will need to be a "politically independent" institution, the way the Federal Reserve is. The President of the United States can't just tell the Chairman of the Federal Reserve what to do.
On the other hand, the President does appoint the Fed Chairman and the Fed governors too.
So I'm going to appoint my dogs, Clio, Georgie, and Bodey. They're very cute dogs so I don't foresee any problems with Senate confirmation. (Senators rejecting cute dogs would cause a furious national outcry on Facebook and Twitter.)
I assure you my dogs are very independent. If I tell them, "sit," or "stay," or "come," they just look at me with dull incomprehension and keep on chasing squirrels. And yet I think I can get them to give me a unanimous bark of approval for pursuing my monetary policy objectives... "Clio, Georgie, Bodey – want a treat?!"
Now, what else can I get my central bank to do for me?
A central bank manages the currency and money supply of a nation. In this case that's the United States of Me. I'm headed back to the Xerox machine at the copy shop right now.
A central bank also manages a nation's interest rates. There are a number of different interest rates that a central bank manages – target rate, nominal rate, effective rate, discount rate. Therefore my central bank will manage interest rates so that I, too, have a variety to choose from.
There's that ultra-low rate on my Visa card balance that I mentioned before. But in other situations, I'd like other rates. No more 0.4% six-month CDs, please. The Reserve Bank of My House will make sure that the return on my savings account falls somewhere between Venezuela government bond yields and Mafia loan shark vigorish.
My central bank can take care of this because another thing central banks do is oversee commercial banks.
And my local bank could use a little oversight. Next time I go there I'll bring Georgie, the chairman of my Fed. Georgie is an adorable black Lab, but she also has teeth like a set of steak knives and a deep and fearsome growl. Then I'll explain to the bank manager that when I balanced my checkbook, yes, I did add a $1,230 check I wrote to my previous balance of $984 instead of subtracting the $1,230 from the $984.
But that's what a government does with "off budget" federal spending involving such programs as Social Security. Therefore, using official U.S. federal budget math, I now have $2,214 in my checking account, not -$246. And Georgie will provide oversight by going, "Grrrrr..."
That's one more thing central banks do – facilitate government debt and deficits. In fact, harking back to King Billy in 1694, that's all central banks do.
And I've got plenty of debt and deficits already and don't need any more.
Also note that, per King Billy, the debt and deficits always seem to be used to finance bad ideas such as a Nine Years' War with France. Or nowadays, massive entitlement programs that devastate work ethic, destroy family ties, and strip people of their personal responsibility and self-respect. In my case the debt and deficits would probably finance a Harley-Davidson. At my age this would quickly turn me into a "rolling organ donor."
Which makes me wonder whether having my own personal central bank is such a good idea after all.
The main difference between governments and individuals is that governments have central banks and individuals don't. The other main difference between governments and individuals is that governments are much stupider. This is because governments have central banks to fund their stupidity.
Individuals are forced to be "fiscal conservatives." If we become ridiculously indebted far beyond our ability to repay, we lose the house, the car, and the boat.
Individuals are required to have a sensible "macroeconomic policy." It's fine for the Fed to ruin whole sectors of the economy by creating an immense pool of assets that only exist on paper. But when an individual does that, he's Bernie Madoff.
Individuals are constrained by a cautious and moderate "foreign policy." An individual can't afford to invade a neighbor's home. He'll be shot (especially up here in rural New England where I live).
Individuals don't have the assets to damage the social fabric with public policies that turn inner cities into war zones. The only individuals who have those kinds of assets are drug lords... and they get arrested.
So... I wonder. If I had my own central bank and the unlimited power that an unlimited amount of money would give me, would I start to become as stupid as a government?
What's to stop me?
Regards,
P.J. O'Rourke
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