The controller speak: US economic strategy explained

Tsow: Mr. Controller, thank you for granting me this interview.

Controller: No problem. What do you want to know?

T: First of all, I wonder why oil prices have been fluctuating so wildly lately. One minute they're up to US$150 a barrel, the next minute they've plummeted to $50.

C: Yes, that's interesting, isn't it?

T: Is there some sort of diabolical international cartel that manipulates the price?

C: Don't be paranoid, boy, it's just market forces. When the economy goes kerflooey, less oil is consumed, so the price goes down. Economists have a technical term for this process. It's called the Kerflooey Syndrome.

T: That's good to know. Now, I wonder about the measures the US government is taking to revive the economy. Interest rates have been cut almost to zero. Pretty soon they WILL be zero.

C: Yes, that's nice, isn't it? Now the banks won't have to pay their depositors all that pesky interest.

T (bleating): But I've been keeping my money in a bank. I depend on that interest! High interest rates are good for me!

C: Well, they're not good for the banks. How would you like to be a big banker and have to pay out interest every month to a miserable schlemiel like you? You have to have some sympathy for the bankers.

T: Oh, I do. I pity them every time I shuffle down to the bank in my rags and see them driving around in their Benzes looking for a place to park.

C: You keep your money in that bank, boy. You haven't seen anything yet. We will soon move into an area of negative interest rates. That is, the bank will charge YOU interest on the money you've deposited. You'll be paying, one per cent, two per cent, pretty soon up to ten percent a month on your savings.

T: Whaaaat? But how can they do that?

C: Easy. They'll just deduct the money from your account every month. And they'll charge you a fee for doing it, and another fee for the monthly statement.

T (sputtering): That's outrageous! How can they justify charging me interest on my own money?

C: They're keeping it safe for you, boy! They're doing you a favour! Consider it a safekeeping fee. If you didn't keep it in a nice, safe bank, you'd probably hide it under your mattress, where it would be easy prey for thieves … and, in your case, for rats, termites and cockroaches. You'd better be grateful to your bank.

T: Gosh, I hadn't realised they were so altruistic. Now, another thing I don't understand is this economic stimulus package everybody is talking about.

C: Yes? What's the problem?

T: Last time they had one, they sent every taxpayer $600. It was supposed to make everybody go out and buy stuff, and that was supposed to stimulate an economic recovery.

C: Yes. So what's the problem?

T: It didn't work, and now the economy is in worse shape than ever. I deposited my $600 in the bank. It didn't stimulate me to buy anything at all.

C: Well that was a very foolish thing to do, boy, with interest rates about to move into negative territory. Also very unpatriotic. Almost treasonous, I should think. Give us a few more years and we'll be hanging traitors like you. You should have gone out and spent it, the way every patriotic, right-thinking American was supposed to do.

T: But thousands of people are out of work, and thousands more soon will be. If the government gives them stimulus money, they won't spend it - they'll hoard it for the hard times ahead.

C: Well, if they do that, they're being very short-sighted. With the stock market in the cellar, with banks gearing up to charge interest on deposits, where are people going to put their rapidly depreciating money? The smart citizen will run out and spend it while it's still worth something.

T (suddenly getting it): Ah! So the banks and the government have trapped us in a Catch-22 situation. We HAVE to spend what little money we have - or lose it.

C: There you go, boy, you're getting more intelligent by the minute. And by spending your money, you'll stimulate the economy, the economy will rebound, prosperity will return, and the Kingdom of Heaven will arrive on Earth. Why, I expect to hear the sweet singing of angels and those heavenly trumpets any day now.

T: But I'll be broke.

C: That's irrelevant. You'll have done your patriotic duty. They may even give you a medal. And if you're wondering what to spend your money on, I'll tell you. Buy a Chrysler. Or a Ford. Or a Chevrolet. They're bound to appreciate in value, because soon the auto industry will be extinct, and those big old gas-guzzlers will be collectors' items. Besides, our heroic, hard-working American auto industry needs a helping hand at this sensitive time.

T: I think I'm starting to get it, sir. But the government has been agreeing to all these bailout packages - mortgage bail-outs, bank bail-outs, now the auto industry wants a bail-out. They're talking hundreds of billions of dollars. Where is all the money going to come from?

C: My boy, don't worry your tiny brain about it. The people in charge know what they're doing. I'll tell you a little secret. We're going to … (whispering) b-o-r-r-o-w it. Shhhh! Don't tell anybody!

T: Yeah, but who are we going to borrow it from?

C: Well, this is really top-secret, son, and I have to swear you to silence on this, but we're going to borrow it from China.

T: From China?! But how are we ever going to pay it back?

C: Ah, that's the key to the whole business. We're not.

T: Whaaaat? We're going to borrow all that money and never pay it back?

C: That's right. The operative word here is "default". D-e-f-a-u-l-t. You ever hear of a default? We're going to default on our entire national debt.

T: But if the Chinese know we're going to default, they'll never lend us the money.

C: Well, we're not going to tell them. What do you think we are - stupid? And if they get stroppy, why, we'll just nationalise the Chinatowns in all our big cities.

T: I see. Brilliant if you think about it.

C: Of course. Don't worry, son. Despite all appearances to the contrary, the people who are in charge of our economy really do know what they're doing. You just go out and spend all your money, now, like a good citizen, and let us big poo-bahs do your thinking for you.

T: Thank you, sir. Gosh, it's a relief to know that somebody so smart is in charge.

C: Altruistic, too. Don't forget the altruism.