Fed up with Fed

by Rick Herschlag

Are zero-interest T-bills actually the antidote to usury?

Last month, the U.S. Treasury began offering a four-week T-bill with a return of zero point zero percent. That’s growth we can all be proud of. Apparently, the money will be kept in a king size mattress in the Federal Reserve Bank basement. The only problem is, the mattress is due back Monday to the D.C. Rent-A-Center.

Finally, an investment option to go with the national savings rate. Uncle Sam is laundering money like a Colombian drug lord, except the Colombian drug lord is solvent. You’re better off investing your money in an Illinois Senate seat.

The Federal Reserve’s new motto is: “The Fed—more reliable than loaning money to your a-hole brother-in-law.” I haven’t enjoyed this kind of investment opportunity since my change rattled intact through a Gatorade machine into the coin return slot. But like many savvy investors with nothing left to invest, I’m waiting for the rate to double. In the meantime, zero-interest T-bills address the whole biblical issue of usury. Which reminds me, if you ever invest in a zero-interest T-bill, make sure to tithe.

During the four weeks, your money will travel to China and back. Your bills will return pressed and folded. George Washington will be smiling. Lincoln will be yukking it up. Your zero-interest T-bill will outpace the Dow Jones Industrial Average, the NASDAQ, and the S&P. And you will owe the Chinese more than you did at the beginning of the month. Satisfaction or your money back.

All we really need now is a better name for this fabulous product. Somehow, zero-interest T-bills just doesn’t do it for me. How about let’s-not-and-say-we-did-bills? Or right-back-at-you-bills? Or avoid-disappointment-and-aim-low-bills? Or why-even-freaking-bother-bills? Better still, Zen-bills. Which raises the question, if a zero-interest T-bill falls in the woods, does anyone roll it over?

Clearly, the U.S. Government has mastered the fine art of not promising too much, having long ago mastered the fine art of not delivering. In a related offer, the Fed would like to borrow your car Friday night. They will return it virtually intact, with only a few extra miles on the odometer and a barely noticeable smudge on the front passenger’s seat.

You know what they say—if it doesn’t sound too good to be true, it probably isn’t. It won’t be long before we’re actually paying the Fed to hold our money. And anyone else, for that matter, who will babysit our sinking dollar. When you come right down to it, this is too good a deal for the Gambino family not to get a piece of. In the current economic environment, simply getting back all or most of your cash is a thrill matched only by going hunting with Dick Cheney and not getting shot in the face.

In the final analysis, reuniting people with their money is a service about as virtuous as taking, then releasing a hostage. But it’s a lot better than Bernie Madoff did.


Rich Herschlag is the author Before the Glory: 20 Baseball Heroes Talk About Growing Up and Turning Hard Times Into Home Runs (HCI, 2007). His other books include Lay Low and Don’t Make the Big Mistake (Simon & Schuster, 1997) and Women Are From Manhattan, Men Are From Brooklyn (Black Maverick, 2002).

5 replies »

  1. The rates of T-Bills are determined at auction, not by the government.

    With the exception of the Yen, the dollar hasn’t been sinking as of late compared to other currencies.

    Lower rates on T=Bills and T-Bonds and Notes means that the instruments increrase in value because of the inverse correlation betweein price and interest rate. People who had their 401-K’s in bond funds did very well this past year, like 20-30% appreciation.

    As far as paying the Fed to hold our money, for generations the Swiss banks had a negative interest rate.


  2. Laura,

    I did find it very funny, but in the interest of accuracy had to include a few facts. I don’t mean to be a fuddy duddy, but I guess that’s the way I am.


  3. Well, at least December’s inflation rate was only 0.09, but taking the 08 average of 3.85% would mean that you’re losing money.

    In other words, i hope that there’s a little change left over.

    I did hear on the way home that the Fed is cutting short-term rates to 0.0%. Everything must go, 90 days same as cash.

  4. Jeff is right technically, but I never actually said the government determined the rate. The Fed made an offering at zero-zero, and it was gobbled up. They had to turn away about four times as much. Though not all the news is bad, since I can’t remember the last time this happened with T-bills, I thought it was worth a few lighthearted observations. Ironically, and on a serious note, with money all dressed up and no place to go, and more money still being injected, we might be looking at real inflation one day not so far from now. But that’s for another article.