Ted Cruz Publicly Suggests Setting The Dollar On Fire and Triggering Hyperinflation

By Ending The Fed's Ability To Pay Interest On Reserves. This Makes Sense.

For some reason I can't figure out, Ted Cruz has been allowed to pitch the idea of destroying the dollar overnight to the mainstream media in terms that sound scholarly. I'm coming from the perspective that all information (at least on the MSM) is controlled, so I have no idea why Cruz is being allowed to mouth off on this but whoever allowed him to do so must know full well that what Cruz is saying is, "Let's destroy the entire bond market, like, tomorrow, and we'll all have an ecs-fuelled rave with black lights as the planet burns down."

Subscribe to EGI now before I’m forced to raise dollar prices to infinity because of Ted Cruz. Let’s wish him success.

Here's what I'm talking about. Bloomberg:

Texas Senator Ted Cruz pitched Republican senators Wednesday on ending the Federal Reserve’s authority to pay interest to banks, claiming it would save $1.1 trillion over a decade, with members of the party’s conservative flank lauding the idea.

“I made the case directly to the president in the Oval Office last week, I made the case at lunch today,” Cruz said in an interview at the Capitol. If the idea is added to Trump’s massive tax and spending package, it could help to offset the cost and limit its impact on the deficit, Cruz said.

Cruz noted payments of interest on reserves only started in 2008 during the financial crisis, but have exploded from $1 billion that year to $186 billion in 2024 as interest rates climbed.

“The case I made at lunch is we’re agonizing trying to find a $50 billion cut here and there. This is over a trillion dollars, big dollars in savings,” he said. “Half of it is going to foreign banks, which makes no sense.”

Congress first authorized the US central bank to pay interest on reserves in 2006 through the Financial Services Regulatory Relief Act. It was initially slated to take effect in 2011, but was pulled forward as the result of the 2008 financial crisis.

Policymakers have since added the overnight reverse repo facility — which pays interest on cash that counterparties, predominantly non-banks like money-market funds, park at the central bank — to solidify the Fed’s control over short-term rates.

But eradicating IORB could change how banks manage liquidity, potentially shifting cash back to money markets and crowding out existing participants in Treasury bills, repurchase agreements and fed funds, according to JPMorgan Chase & Co.

Money the Fed pays to banks as interest on reserves doesn’t come from congressionally appropriated funds. But the payouts do reduce the amount of money the Fed remits annually to the Treasury, funds the Treasury would otherwise be forced to borrow.

Before I comment, let me clarify that I wish Ted success. I want him to kill the dollar.

Here's the deal. If you take away the Fed's ability to pay interest to banks, interest rates will immediately fall to zero best case scenario, and will likely fall to negative nominal within days. Why? Because it costs money for banks to hold dollars and do nothing with them. They have to invest them somewhere or lose the purchasing power as "inflation" eats into them and they pay to house the dollars on top of that. There will be instant competition between banks to lend all those dollars out at zero rates so as to get rid of at least the cost of holding them, never mind attrition through "inflation".

Let's say it costs 2% a year for a bank