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News

The ‘Fed-Cred’ Way to Growth

Evan Cooper Sep 20, 2016


There’s such a simple, easy and powerful way to get the economy booming again that I’m surprised no one has advocated it before.

Well, maybe the underlying concept – helicopter money – has previously been toyed with, but policymakers always make everything so complicated. Here’s the idea in a nutshell: a Federal Reserve credit card.

How the Card Would Work

The thought is that the Federal Reserve should issue and distribute its own credit card – in both Visa (V ) and MasterCard (MA ) formats to be fair to the credit card oligopoly. The card would be a plain ‘vanilla’ kind without cashback privileges or bonus miles, or any other perks or features to eat into the business of other credit cards. Issuing a credit card would probably break a few rules, but the Fed makes its own rules anyway.

The best part of the Fed-Cred card, which everyone over 21 could receive, is that any credit balance would be charged interest at the federal funds rate: the interest rate at which banks and credit unions lend reserve funds to each other to meet Fed requirements. Currently, that rate is effectively 0.4%, which is within the Fed’s target rate range of 0.25% to 0.5%.

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