U.S. Weighs Selling 50- and 100-Year Bonds After Yields Plummet(bloomberg.com)
bloomberg.com
U.S. Weighs Selling 50- and 100-Year Bonds After Yields Plummet
https://www.bloomberg.com/news/articles/2019-08-16/u-s-treasury-to-do-market-outreach-again-on-ultra-long-bonds-jzejo2qu
128 comments
That would be reasonable if the US was funding investments with debt. Instead it’s subsidies mostly tax breaks and consumption for little long term return.
Lowering the cost of debt is still a good idea, but let’s not pretend we are in a fiscally sound situation.
Lowering the cost of debt is still a good idea, but let’s not pretend we are in a fiscally sound situation.
You can't subsidize a tax break. That doesn't make any sense because you don't need to spend money to give people a tax break.
> you don't need to spend money to give people a tax break.
Only if the government is running a surplus, and the tax cuts are less than the size of the surplus.
When the government is running a deficit, any tax cut results in additional debt, the financing of which is paid for by future taxpayers. So yes, in this case (running a deficit) there are measurable costs associated with tax breaks.
Only if the government is running a surplus, and the tax cuts are less than the size of the surplus.
When the government is running a deficit, any tax cut results in additional debt, the financing of which is paid for by future taxpayers. So yes, in this case (running a deficit) there are measurable costs associated with tax breaks.
Surplus is not needed as you could print Treasury "banknotes".
Since the Trump tax cuts add another trillion dollars to the national debt, the government is actually borrowing money to pay for those cuts.
That also means it will be a future generation that eventually has to pay for those tax cuts.
That also means it will be a future generation that eventually has to pay for those tax cuts.
If a tax break isn't matched by a corresponding budget cut, it is literally spending money to give people a tax break. What really sucks about unsubsidized, targeted tax cuts is that it's the result of politicians essentially taking everyone's money (the American taxpayers), then instead of using that money for the sorts of things taxes are supposed to be used for (the government), they just hand out a bunch of money to their donor class and essentially defraud the government. The biggest R donors have literally made a profit off of this over the years.
It's less a tax break and more like vulturing public money to pay off their friends and maybe buy some more votes. Unsubsidized tax breaks of this nature, by these people, for their stated reasons over the last 40 years are really just ripping off the entire American public and funneling it to the likes of Betsy Devos' family, and the Koch brothers, and the Mercers. And obviously Trump himself has been dipping his beak in it, any way he possibly can. A better man would do everything in his power to avoid even the appearance of corruption, but he has been utterly shameless about it. Example: raising the fees for Mar-a-lago membership from $100k to $200k at the same time as he became president. I believe they are $500k now. That makes a lot of sense, I'm sure there's nothing weird going on there and that's just a totally normal thing to happen in plain sight.
But seriously, it sure as hell looks like base corruption to me, nothing high-minded or philosophical about it. The Austrian economic philosophies used to justify the whole R fetish for unfunded tax cuts were the economic equivalent of healing crystals and magnetic bracelets 40 years ago, never mind now. Now it's just embarrassing to see anyone making these claims. Especially the whole notion that it is somehow fiscally conservative to have huge unfunded tax cuts, because cutting taxes will magically increase tax revenue by fueling growth. They may as well change their platform to, if elected they promise to be really good boys and girls and will donate the additional gifts from Santa to the IRS, thereby offsetting the huge transfer of public funds to their donor class.
Of course there are no shortage of people who think of themselves as smarter than average (and unburdened by weaknesses like empathy, or feelings of great responsibility towards their fellow citizens) might excuse it as a "starve the beast" scheme, but if anything that's even more idiotic. "Starve the beast" is a shitty excuse for passing the buck in the shittiest way possible, when all you really want to do is take a bunch of everyone's money and give it to yourself and your donor class. It is such a weak excuse, and is especially feeble when it's used in the name of some brand of fiscal conservatism.
I remember a comedian in the '90s fondly describing Republican politicians as, more than anything else, "mean old men who will guard your money". Like, sometimes you need that- you need people who will make it a priority to guard public money tooth and nail, and fight to lower taxes and let people keep more of their money. I don't know if I would vote for that person, but I get it, and for most of my life at least that's how they've unapologetically presented themselves. And I kinda get it, there's a need for fiscal watchdogs like that in the government. They're still using a lot of the same words that they did in the '80s and '90s, but they have never been more hollow, or used to this degree to defend what appears to be the diametric opposite of their fiscally conservative claims: bankrupting the government and paying off their donors and trying to brush it off as some noble act that somehow increases freedom and prosperity for all of America.
It's less a tax break and more like vulturing public money to pay off their friends and maybe buy some more votes. Unsubsidized tax breaks of this nature, by these people, for their stated reasons over the last 40 years are really just ripping off the entire American public and funneling it to the likes of Betsy Devos' family, and the Koch brothers, and the Mercers. And obviously Trump himself has been dipping his beak in it, any way he possibly can. A better man would do everything in his power to avoid even the appearance of corruption, but he has been utterly shameless about it. Example: raising the fees for Mar-a-lago membership from $100k to $200k at the same time as he became president. I believe they are $500k now. That makes a lot of sense, I'm sure there's nothing weird going on there and that's just a totally normal thing to happen in plain sight.
But seriously, it sure as hell looks like base corruption to me, nothing high-minded or philosophical about it. The Austrian economic philosophies used to justify the whole R fetish for unfunded tax cuts were the economic equivalent of healing crystals and magnetic bracelets 40 years ago, never mind now. Now it's just embarrassing to see anyone making these claims. Especially the whole notion that it is somehow fiscally conservative to have huge unfunded tax cuts, because cutting taxes will magically increase tax revenue by fueling growth. They may as well change their platform to, if elected they promise to be really good boys and girls and will donate the additional gifts from Santa to the IRS, thereby offsetting the huge transfer of public funds to their donor class.
Of course there are no shortage of people who think of themselves as smarter than average (and unburdened by weaknesses like empathy, or feelings of great responsibility towards their fellow citizens) might excuse it as a "starve the beast" scheme, but if anything that's even more idiotic. "Starve the beast" is a shitty excuse for passing the buck in the shittiest way possible, when all you really want to do is take a bunch of everyone's money and give it to yourself and your donor class. It is such a weak excuse, and is especially feeble when it's used in the name of some brand of fiscal conservatism.
I remember a comedian in the '90s fondly describing Republican politicians as, more than anything else, "mean old men who will guard your money". Like, sometimes you need that- you need people who will make it a priority to guard public money tooth and nail, and fight to lower taxes and let people keep more of their money. I don't know if I would vote for that person, but I get it, and for most of my life at least that's how they've unapologetically presented themselves. And I kinda get it, there's a need for fiscal watchdogs like that in the government. They're still using a lot of the same words that they did in the '80s and '90s, but they have never been more hollow, or used to this degree to defend what appears to be the diametric opposite of their fiscally conservative claims: bankrupting the government and paying off their donors and trying to brush it off as some noble act that somehow increases freedom and prosperity for all of America.
>Instead it’s subsidies mostly tax breaks and consumption for little long term return.
There's nothing wrong with consumption. Consumption is what drives the US economy and makes it the powerhouse that it is. The American consumer is what is keeping the US out of a recession while export-driven economies like Germany are heading into recession.
The problem with our fiscal policy was that the tax cuts passed by Trump almost exclusively went to the richest people who have a low MPC (marginal propensity to consume). There's nothing wrong with expanding the deficits, the US doesn't need to worry about debt and the falling bond yields confirms that. But that fiscal spending should have been targeted at the poorest people in America. It should have been to give them universal health care or free higher education, not cutting corporate taxes.
There's nothing wrong with consumption. Consumption is what drives the US economy and makes it the powerhouse that it is. The American consumer is what is keeping the US out of a recession while export-driven economies like Germany are heading into recession.
The problem with our fiscal policy was that the tax cuts passed by Trump almost exclusively went to the richest people who have a low MPC (marginal propensity to consume). There's nothing wrong with expanding the deficits, the US doesn't need to worry about debt and the falling bond yields confirms that. But that fiscal spending should have been targeted at the poorest people in America. It should have been to give them universal health care or free higher education, not cutting corporate taxes.
Why has this idea that consumption is wealth-generating caught on so thoroughly? Consuming, consuming, consuming seems like it's just burning the stored wealth of the country, by selling off our valuable productive assets in exchange for trinkets (really, we're selling dollars, but those come back looking to buy up real estate, companies, etc).
What's really wealth generating is investing in things that fuel long term productivity growth at a higher rate than the cost - education, automation, useful infrastructure (here's looking at you, Chinese ghost cities), tools/machinery, and R&D. Everyone buying TVs is the complete opposite, yet it would show up as a short term boost to the GDP.
What's really wealth generating is investing in things that fuel long term productivity growth at a higher rate than the cost - education, automation, useful infrastructure (here's looking at you, Chinese ghost cities), tools/machinery, and R&D. Everyone buying TVs is the complete opposite, yet it would show up as a short term boost to the GDP.
The problem is that you're under the impression that "consumption" is somehow less virtuous than "investment".
You mentioned China, but that's a perfect example of an economy that isn't driven by consumption. And they desperately want it to be. China is extremely reliant on exports and state-driven infrastructure spending. If there was actual domestic demand for everything they produce they'd be in a much better spot and that infrastructure would actually be utilized.
You mentioned China, but that's a perfect example of an economy that isn't driven by consumption. And they desperately want it to be. China is extremely reliant on exports and state-driven infrastructure spending. If there was actual domestic demand for everything they produce they'd be in a much better spot and that infrastructure would actually be utilized.
I'm under the impression that the main driver of long-term wealth is increases in productivity. Hence why "investment" in productive assets (including a well educated populace) is a larger driver of long-term wealth than "consumption".
They're reliant on exports and state-driven infrastructure spending because they're not yet wealthy, per capita. It's the stored wealth that allows a consumption-driven economy, not the other way around.
They're reliant on exports and state-driven infrastructure spending because they're not yet wealthy, per capita. It's the stored wealth that allows a consumption-driven economy, not the other way around.
Most Americans are in debt and have no stored wealth. I know that intuitively it seems like stored wealth should be good for an economy but it’s not the case. Spending more money than you have (debt) is actually better for the economy because it results in more movement of goods and services. Leveraged consumption grows businesses which hire more people which creates wealth. I do think that education is important, but you also need consumption to drive demand for educated professionals in growing businesses. In short you need both for the economic cycle to work.
I'm not arguing against debt. I understand that debt can grow the economy, increase asset values, increase incomes, etc etc, but debt only helps the long term wealth of a country if it's used toward productive ends. It helps GDP/incomes in the short term if it's spent on consumption, but spending the credit on unproductive investments doesn't increase the amount of debt that people/businesses can service long term. When an economy can no longer service more debt, that's when you see debt crises and contractions begin.
EDIT: Here's a pretty good overview of debt cycles, and when debt helps/doesn't: https://www.youtube.com/watch?v=PHe0bXAIuk0 Or if you have more time to devote to the subject: https://www.amazon.com/Big-Debt-Crises-Ray-Dalio-ebook/dp/B0...
EDIT 2: When I say "stored wealth", I don't mean the amounts in normal peoples' savings accounts, but the productive capital of the country - land, businesses, infrastructure.
EDIT: Here's a pretty good overview of debt cycles, and when debt helps/doesn't: https://www.youtube.com/watch?v=PHe0bXAIuk0 Or if you have more time to devote to the subject: https://www.amazon.com/Big-Debt-Crises-Ray-Dalio-ebook/dp/B0...
EDIT 2: When I say "stored wealth", I don't mean the amounts in normal peoples' savings accounts, but the productive capital of the country - land, businesses, infrastructure.
There is a huge amount of stored wealth locked up in homes that will be sold in the next 10-15 years from boomers dying or downsizing.
Homes are largely proxies for other wealth. Individuals don’t own subway systems or good schools, but access to such things are extremely valuable. Aka, location, location, location. This is why the home prices are so unstable they are propped up by demand for such access not the structures themselves.
Counter intuitively this creates huge downward pressures on property values as boomers move or die off.
Counter intuitively this creates huge downward pressures on property values as boomers move or die off.
Debt-financed consumption won't help the long term debt cycle, but increasing consumption seems like it could still be an element of economic growth.
For example investments have two sides the saver (who loans the money) and the borrower for the building, infrastructure, factory, etc. Normally the interest rate can be raised to encourage saving and discourage investment, or lowered to discourage saving and encourage investment.
But what if the interest rate is already low, and companies still don't want to invest? Then you are limited by the amount of credit-worthy investment opportunities and not the savings. You could lower real interest rates to be negative, but do you really want to pursue investments with a negative yield?
In that case, turning some of those excess savings into consumption would help things move along. There already was more than enough savings, so that wasn't limiting investment. And the increased demand will stimulate the need for more buildings, factories, etc, and provide more opportunities for companies to invest (borrow) again.
China has wanted to lower its saving rate somewhat - they've used the government to build out infrastructure and real estate at a tremendous rate, but it's unlikely that they will be able to find enough infrastructure investments (that are actually good investments, with positive returns) to keep going at the same pace forever.
Interest rates are pretty low right now, and companies are accumulating huge cash balances (rather than investing) so the idea for more consumption to increase investment opportunities doesn't seem too crazy. But if such a thing were to be attempted maybe it would be better to use tax policy or other means rather than increasing the debt indefinitely.
https://en.wikipedia.org/wiki/Global_saving_glut
For example investments have two sides the saver (who loans the money) and the borrower for the building, infrastructure, factory, etc. Normally the interest rate can be raised to encourage saving and discourage investment, or lowered to discourage saving and encourage investment.
But what if the interest rate is already low, and companies still don't want to invest? Then you are limited by the amount of credit-worthy investment opportunities and not the savings. You could lower real interest rates to be negative, but do you really want to pursue investments with a negative yield?
In that case, turning some of those excess savings into consumption would help things move along. There already was more than enough savings, so that wasn't limiting investment. And the increased demand will stimulate the need for more buildings, factories, etc, and provide more opportunities for companies to invest (borrow) again.
China has wanted to lower its saving rate somewhat - they've used the government to build out infrastructure and real estate at a tremendous rate, but it's unlikely that they will be able to find enough infrastructure investments (that are actually good investments, with positive returns) to keep going at the same pace forever.
Interest rates are pretty low right now, and companies are accumulating huge cash balances (rather than investing) so the idea for more consumption to increase investment opportunities doesn't seem too crazy. But if such a thing were to be attempted maybe it would be better to use tax policy or other means rather than increasing the debt indefinitely.
https://en.wikipedia.org/wiki/Global_saving_glut
Divide total American wealth by it’s population and you find the average American has an extreme amount of wealth relative to the rest of the world. American private debt seems like a huge deal, but it’s largely owned by other Americans.
This is a red herring. It's about consumption now vs consumption later. The whole point of investment is for more future consumption. If growth is below capacity, consumption now is rather less virtuous than investment for the future.
And this is the vicious cycle how we got stagflation. You don't stop deflation by cutting your spending and investing more. There is nothing to invest into because no one is buying the services and products you have invested in.
Fiscal policy and the private sector have not done enough to ensure long term growth -- as mentioned asset inequality has lead to a lot of capital in the hands of actors that do not spend money. Advancement in technology is deflationary by nature and so a lot of growth is only realized by the top.
In times like this the public sector must intervene to frame the future for it's citizens and economy: focus on the health and education of your citizens, mitigate future risk by funding solutions to climate change, secure safety by spending on military and providing equal opportunity to quell internal social unrest.
If you have strong instutions and control the currency that your debt is in (US, UK, Japan, China -- as long as the communist party maintains its current strength) this is the way to go, globalization will take a hit but will cycle back in the future.
In times like this the public sector must intervene to frame the future for it's citizens and economy: focus on the health and education of your citizens, mitigate future risk by funding solutions to climate change, secure safety by spending on military and providing equal opportunity to quell internal social unrest.
If you have strong instutions and control the currency that your debt is in (US, UK, Japan, China -- as long as the communist party maintains its current strength) this is the way to go, globalization will take a hit but will cycle back in the future.
Blindly investing money into “the poor” is a foolish endeavor that yields little strength to a country. Herd immunity and preventative health is a quantifiable thing and so I support universal healthcare. But we have to stop this disasterous assumption that the only reason people are poor is their circumstances.
The best way to help poor people is to lower the minimum wage so they can get jobs.
Subsidizing the poor increases consumption which is bad not only for the first order effect (throwing away money)... but also for the little thought of second order effect: it incentivizes people to build businesses that cater to consumption that was in the first place unsustainable. Smart people that could have been doing something else instead facilitate the creation of businesses that are only funded by inflation and cheap credit.
This is the story of the US economy in the past 30 years. The two largest disasters in recent history: the student loan bubble and the housing bubble, were both founded upon the notion that we should “give money away” without any real measurement of whether or not there would be a return on capital.
Our government should invest the majority of capital in basic research, healthcare, education and infrastructure... not the creation of a consumption driven bloated welfare state.
The best way to help poor people is to lower the minimum wage so they can get jobs.
Subsidizing the poor increases consumption which is bad not only for the first order effect (throwing away money)... but also for the little thought of second order effect: it incentivizes people to build businesses that cater to consumption that was in the first place unsustainable. Smart people that could have been doing something else instead facilitate the creation of businesses that are only funded by inflation and cheap credit.
This is the story of the US economy in the past 30 years. The two largest disasters in recent history: the student loan bubble and the housing bubble, were both founded upon the notion that we should “give money away” without any real measurement of whether or not there would be a return on capital.
Our government should invest the majority of capital in basic research, healthcare, education and infrastructure... not the creation of a consumption driven bloated welfare state.
A serious and frequently permanent loss of productivity occurs when people live on a financial cliff where minor unfortunes can propel even smart individuals into unemployment and homelssness, and their children into poorer education outcomes, while minor investments and more equitible distributions of wealth in a society create robust sustainable growth.
In the case of student loans, they should have come with restrictions on increases in admin costs at the college as tuition has inordinately increased. In terms of the housing crisis, do not discount the role of predatory lending by institutions that used to engender trust. I find your position to ignore context and subtelty, and to propogate myths about poverty and the impoverished as primarily being the result of a meritocracy.
In the case of student loans, they should have come with restrictions on increases in admin costs at the college as tuition has inordinately increased. In terms of the housing crisis, do not discount the role of predatory lending by institutions that used to engender trust. I find your position to ignore context and subtelty, and to propogate myths about poverty and the impoverished as primarily being the result of a meritocracy.
> The best way to help poor people is to lower the minimum wage so they can get jobs.
Raising the minimum wage can have a negative effect on jobs, but unless it's hard to find minimum wage jobs right now, I don't see what lowering the minimum wage will achieve. Also there's labor force participation to consider - if unskilled jobs are too low paying, some people at the margins will choose not to participate (for example, by living with their parents).
> Subsidizing the poor increases consumption which is bad not only for the first order effect (throwing away money)... but also for the little thought of second order effect: it incentivizes people to build businesses that cater to consumption that was in the first place unsustainable.
> Our government should invest the majority of capital in basic research, healthcare, education and infrastructure
Consumption funded by debt may be bad, but I wouldn't suggest that consumption (in other words, having a consumer-driven economy) is throwing away money. Many goods that people spend their own money on (consumer electronics, cars, clothing, etc) have competitive markets with reasonable prices and/or steady improvements. On the contrary to throwing away money, it seems pretty efficient at delivering utility. Especially when compared to recent trends in healthcare, education, and infrastructure.
I agree with some of the other comments that productivity determines the long-run living standards of a country, and that consumption is not investment and it may be a bad idea to finance it with debt. But I don't think the answer is to reduce people's ability to consume goods & services, but rather to enable doing it in a sustainable way.
Raising the minimum wage can have a negative effect on jobs, but unless it's hard to find minimum wage jobs right now, I don't see what lowering the minimum wage will achieve. Also there's labor force participation to consider - if unskilled jobs are too low paying, some people at the margins will choose not to participate (for example, by living with their parents).
> Subsidizing the poor increases consumption which is bad not only for the first order effect (throwing away money)... but also for the little thought of second order effect: it incentivizes people to build businesses that cater to consumption that was in the first place unsustainable.
> Our government should invest the majority of capital in basic research, healthcare, education and infrastructure
Consumption funded by debt may be bad, but I wouldn't suggest that consumption (in other words, having a consumer-driven economy) is throwing away money. Many goods that people spend their own money on (consumer electronics, cars, clothing, etc) have competitive markets with reasonable prices and/or steady improvements. On the contrary to throwing away money, it seems pretty efficient at delivering utility. Especially when compared to recent trends in healthcare, education, and infrastructure.
I agree with some of the other comments that productivity determines the long-run living standards of a country, and that consumption is not investment and it may be a bad idea to finance it with debt. But I don't think the answer is to reduce people's ability to consume goods & services, but rather to enable doing it in a sustainable way.
The decreases in price for these consumer goods you mention came largely as a result of globalization and offshoring of production. Our economy went upmarket towards services which were largely meant to facilitate this consumption (eg advertising and mass media). The American public became lazy, conditioned to consume and entitled.
The modern American consumer is only in debt because debt is so easy to obtain, not because his wages are too low to survive.
Visit Latin America or Asia where there throngs of people much happier and healthier on far less. The welfare state makes the familial structure unnecessary in America — I won’t comment on this. But it is a third order effect even more deeply troubling than the economic ones I highlighted earlier.
The modern American consumer is only in debt because debt is so easy to obtain, not because his wages are too low to survive.
Visit Latin America or Asia where there throngs of people much happier and healthier on far less. The welfare state makes the familial structure unnecessary in America — I won’t comment on this. But it is a third order effect even more deeply troubling than the economic ones I highlighted earlier.
Electronics manufacturing has been outsourced for a long time, but the prices still fall (and labor is not getting any cheaper in China). Both electronics and cars are designed in the US and many cars are made here. I'll give that clothing is mostly about outsourcing.
I can agree maybe broadly that there are social trends in the US that are contributing to people being unhappy, but I don't think lowering the minimum wage will put that particular cat back in that particular bag. And besides, is it really minimum wage workers, of all people, who are lazy and entitled? Most minimum wage jobs are not particularly pleasant and you just have to do the work and put up with it, and you aren't showered with free food, high salaries and other perks. Do other countries where entry-level workers have it better have more social problems?
I suppose maybe they are entitled compared to some third-world countries. What does that make a tech worker then? We complain about the free food not infrequently.
I think attempting to blanket punish people who are willing to work but don't have valuable skills in the global labor market, will only backfire politically, and probably deservedly so.
I can agree maybe broadly that there are social trends in the US that are contributing to people being unhappy, but I don't think lowering the minimum wage will put that particular cat back in that particular bag. And besides, is it really minimum wage workers, of all people, who are lazy and entitled? Most minimum wage jobs are not particularly pleasant and you just have to do the work and put up with it, and you aren't showered with free food, high salaries and other perks. Do other countries where entry-level workers have it better have more social problems?
I suppose maybe they are entitled compared to some third-world countries. What does that make a tech worker then? We complain about the free food not infrequently.
I think attempting to blanket punish people who are willing to work but don't have valuable skills in the global labor market, will only backfire politically, and probably deservedly so.
I agree it is too late to enact things like a lower minimum wage — the damage is already done.
The real problem came from cheap consumer credit... everything in our economy is built around the existence of such credit. Consumers are conditioned and targeted to consume and borrow. Full stop.
Same thing happened with education — 4 years of productive time were siphoned towards college degrees that didn’t mean much.
This is the gutting of the middle class... not fiscal conservatism.
The real problem came from cheap consumer credit... everything in our economy is built around the existence of such credit. Consumers are conditioned and targeted to consume and borrow. Full stop.
Same thing happened with education — 4 years of productive time were siphoned towards college degrees that didn’t mean much.
This is the gutting of the middle class... not fiscal conservatism.
The student loan thing (and the cost inflation) is definitely part of it.
I'd also point to globalization and technological changes - unskilled labor is less valuable when there's more supply from automation and outsourcing. And technology has enabled more consolidation even on the nation level - it's now easier for one company to service the entire market; think Amazon vs local shops, or Uber vs local taxi companies. Better communication and transport joins many local markets into one big market and creates fewer, bigger winners.
Land use policies probably have something to do with it too. Historically in the US people have moved from place to place for economic opportunities as new industries developed. But doing new urban development is more difficult than it used to be and supply is added very slowly. The areas with the most global companies and economic opportunities are mostly a handful of cities, but the cost has become prohibitive for new entrants that aren't skilled professionals (despite there being plenty of regular jobs available with higher wages). And of course the people already living there get squeezed too.
I'd also point to globalization and technological changes - unskilled labor is less valuable when there's more supply from automation and outsourcing. And technology has enabled more consolidation even on the nation level - it's now easier for one company to service the entire market; think Amazon vs local shops, or Uber vs local taxi companies. Better communication and transport joins many local markets into one big market and creates fewer, bigger winners.
Land use policies probably have something to do with it too. Historically in the US people have moved from place to place for economic opportunities as new industries developed. But doing new urban development is more difficult than it used to be and supply is added very slowly. The areas with the most global companies and economic opportunities are mostly a handful of cities, but the cost has become prohibitive for new entrants that aren't skilled professionals (despite there being plenty of regular jobs available with higher wages). And of course the people already living there get squeezed too.
We should force the poor into indentured servitude or slavery as a proper solution, as the South was better off when workers were all unpaid and uncared for. Giving everyone's tax money to wealthy people will result in a better world for everyone. /s
Libertarian fantasy must be a pretty dull medium. Always the same story.
Libertarian fantasy must be a pretty dull medium. Always the same story.
This wasnt a very substantive comment...
People go to HN to avoid discourse like this :(
People go to HN to avoid discourse like this :(
Tax breaks are just borrowing using the good credit of the US on behalf of the private sector. Because the Treasury can borrow so cheaply is it bad that it is the one borrowing?
Yes, because different borrowers receive different rates than would otherwise occur. That distorts the discovery and prioritisation of opportunities in the private sector.
In particular, it elevates rent seeking over productive risk taking.
In particular, it elevates rent seeking over productive risk taking.
>The US should absolutely lock in these low interest rates to fuel green infrastructure and technology.
The best time to build infrastructure is yesterday. It's always cheaper to do it before you truly need it. Bring on the 6-lane highways nobody wants and the subway stops that nobody needs.
That said, maybe I'm just jaded from living in a dump of a state where one infrastructure plan after another gets neutered by rich people who don't want it where it should be.
The best time to build infrastructure is yesterday. It's always cheaper to do it before you truly need it. Bring on the 6-lane highways nobody wants and the subway stops that nobody needs.
That said, maybe I'm just jaded from living in a dump of a state where one infrastructure plan after another gets neutered by rich people who don't want it where it should be.
I saw this clip earlier this morning which reminds me of our current central bankers trying to manage economic policy all by themselves via short term interest rates.
https://www.youtube.com/watch?v=8GhJNjt9IT4
https://www.youtube.com/watch?v=8GhJNjt9IT4
What about fiscal responsibility? If you have your house in order there are lots of options.
I'm not sure what "glut in capital" really means. Capital is the "means of production" and includes things like buildings, developed land, and equipment. A glut in capital would mean that there are too many of these things and many are left idle, e.g., empty houses because nobody wants to pay even a low rent to use them.
Where I live, for example, there's a shortage of housing and houses are rented for higher prices than they should be. This is a capital shortage, not a capital glut.
Monetary policy, such as governments running up large debts and central banks keeping interest rates low, leads to a large amount of "paper wealth" in circulation, which doesn't relate directly to physical capital. People and organizations are apparently happy to hoard this paper, so that it doesn't lead to inflation in the real economy.
Where I live, for example, there's a shortage of housing and houses are rented for higher prices than they should be. This is a capital shortage, not a capital glut.
Monetary policy, such as governments running up large debts and central banks keeping interest rates low, leads to a large amount of "paper wealth" in circulation, which doesn't relate directly to physical capital. People and organizations are apparently happy to hoard this paper, so that it doesn't lead to inflation in the real economy.
Inequality of assets had risen to extraordinary levels. The world is awash with cash looking for somewhere to park. If wealth taxes are politically inconceivable, fine; let the government sell negative real yield bonds instead. Nobody's even forced to buy them.
How many dollars should the government borrow for 99 cents to be repaid in a century?
How many dollars should the government borrow for 99 cents to be repaid in a century?
Wealth taxes in the United States are not just politically and practically infeasible. The Constitution requires that a wealth tax be in proportion to each state’s population.
Where does it say that, and what does that mean?
You’re right, we should therefore make representation proportionate to each state’s population, fair trade.
(Obviously no consensus on a constitutional amendment but some states have passed laws that their electoral college votes must go towards the popular vote, which could get more widespread enough)
(Obviously no consensus on a constitutional amendment but some states have passed laws that their electoral college votes must go towards the popular vote, which could get more widespread enough)
We already do have proportionate representation in the house.
The electoral college was specifically designed to be a mixture of the house and senate systems. At some point it might be good for you to get over the 2016 election.
The electoral college was specifically designed to be a mixture of the house and senate systems. At some point it might be good for you to get over the 2016 election.
I don't represent any disdain toward the 2016 election.
I can recognize that the left does have the numbers in this country and they flocked towards the coasts. They can selectively flock back to enough counties to make every single state blue if they could tolerate middle america for a single year.
Only needs to happen once to remove power from the people that benefit from the electoral college.
I can recognize that the left does have the numbers in this country and they flocked towards the coasts. They can selectively flock back to enough counties to make every single state blue if they could tolerate middle america for a single year.
Only needs to happen once to remove power from the people that benefit from the electoral college.
I'm not over the 2000 election being decided by "hanging chad" yet.
Good question, the Austrian 100 yr bond has doubled in price, mostly over the last month. I’ve never seen a bond trade for this high a price (200+). Unless Austria has low-key formalized their citizenship by investment program forcing rich passport traders to buy gov bonds then this just shows desperation for stability and the US can further capitalize on that with a new series.
Should the US consider selling perpetual bonds, with no maturity date? I know Britain used to do this (the bonds were called Consols). Is this form of finance now discredited?
If it's cheap.... But British consols were 4% so they opted to pay back instead of bleeding money forever.
It makes sense when it pays interest, when interest is close to zero, I'm not sure how it would work.
Next will be selling consols.
(For those who've never heard of them: https://en.wikipedia.org/wiki/Consol_(bond) )
(For those who've never heard of them: https://en.wikipedia.org/wiki/Consol_(bond) )
Next they'll offer 100 year student loan enforceable on your children and grandchildren. :-)
Some worry that it won't cover inflation and others worry that it is "saddling future generations with debt". It seems like they can't both be right, but we don't know who is wrong? It's hard to make predictions, especially about the future.
Could it be considered a hedge against deflation? (Or not as much inflation as you expect?)
Could it be considered a hedge against deflation? (Or not as much inflation as you expect?)
> it is "saddling future generations with debt"
Can’t comment on the other parts, but this argument is nonsense. The debt is saddled when the money is spent. 10y rolled over 10x or 100y is irrelevant.
As an analogy, the length of time a dollar spent on a credit card will take to be paid off has nothing to do with the card’s term. It’s purely a function of spending and balance settling, the latter being a function of discretionary income and fiscal sense.
Can’t comment on the other parts, but this argument is nonsense. The debt is saddled when the money is spent. 10y rolled over 10x or 100y is irrelevant.
As an analogy, the length of time a dollar spent on a credit card will take to be paid off has nothing to do with the card’s term. It’s purely a function of spending and balance settling, the latter being a function of discretionary income and fiscal sense.
In my naive and ignorant perspective, it _feels_ like it paves the way to spend more now without thought of how to pay it back.
A 10-year bond carries the likelihood that a way to pay it back will need to be considered in the near future, when many involved in selling the bonds are still around to figure out how to pay them back. Who here, with at least 50% confidence can say they'll be around in 50 years? 100 years?
The issuance of bonds on that scale appear to carry the assumption that it will be paid back _somehow_ at _some point_ with little regard as to how. Isn't the current social security crises partly the fault of not thinking at scale of a century?
Again, ignorance and nativity, please correct me where I'm not understanding.
A 10-year bond carries the likelihood that a way to pay it back will need to be considered in the near future, when many involved in selling the bonds are still around to figure out how to pay them back. Who here, with at least 50% confidence can say they'll be around in 50 years? 100 years?
The issuance of bonds on that scale appear to carry the assumption that it will be paid back _somehow_ at _some point_ with little regard as to how. Isn't the current social security crises partly the fault of not thinking at scale of a century?
Again, ignorance and nativity, please correct me where I'm not understanding.
> A 10-year bond carries the likelihood that a way to pay it back will need to be considered in the near future
Consider someone with multiple mortgages. Their taking out a 20y mortgage has little bearing on when that debt will be extinguished. Maybe cash is flowing and it’s gone in two. Maybe it’s repeatedly refinanced for fifty years.
There is no evidence that Congress or the electorate even consider the term structure of federal debt when considering spending. Deficits are a fiscal, not Treasury, matter.
Consider someone with multiple mortgages. Their taking out a 20y mortgage has little bearing on when that debt will be extinguished. Maybe cash is flowing and it’s gone in two. Maybe it’s repeatedly refinanced for fifty years.
There is no evidence that Congress or the electorate even consider the term structure of federal debt when considering spending. Deficits are a fiscal, not Treasury, matter.
Mortgages are paid back in monthly installments, ensuring that money is recuperated in the meantime or the property becomes repossessed. Bonds are repaid when mature, no?
Seems like an unfair comparison when talking about an inheritance of debt. Am I misunderstanding something?
Seems like an unfair comparison when talking about an inheritance of debt. Am I misunderstanding something?
Yes, mortgages are amortised while Treasuries are not. That said, the dominating factor is refinancing. If $1 is financed with a 30y mortgage, it could be paid off in 2 years or the mortgage could be refinanced after 20 years for another 30y. Same with the federal debt.
Bottom line is we have no evidence Congress or voters take into account term structure when setting taxes and spending. Those are the drivers of deficits and debt. Not the duration of the bonds issued to finance it.
Bottom line is we have no evidence Congress or voters take into account term structure when setting taxes and spending. Those are the drivers of deficits and debt. Not the duration of the bonds issued to finance it.
> In my naive and ignorant perspective, it _feels_ like it paves the way to spend more now without thought of how to pay it back.
While the policy recommendations made by people embracing Modern Monetary Theory may be debatable, the core descriptive feature of that theory is correct: when a government is budgeting in its own fiat currency, the treatment of finances as “fiscal”—literally, relating to a purse into which revenue goes and from which spending flows—is fundamentally a misleading metaphor: government spending creates money and government taking in money destroys it. Government “borrowing” is literally destroying money from the hands of the volunteers to offset the monetary impacts of money created by spending with the promise to create more money and give it back to those volunteers at a specified later date. Paying back isn't really an issue the way it is for non-fiat-issuers.
There is no fiscal policy, only broad-focus monetary policy and distributionally targeted monetary policy. (Traditional monetary policy is the former, traditional “fiscal” policy is a mix.)
While the policy recommendations made by people embracing Modern Monetary Theory may be debatable, the core descriptive feature of that theory is correct: when a government is budgeting in its own fiat currency, the treatment of finances as “fiscal”—literally, relating to a purse into which revenue goes and from which spending flows—is fundamentally a misleading metaphor: government spending creates money and government taking in money destroys it. Government “borrowing” is literally destroying money from the hands of the volunteers to offset the monetary impacts of money created by spending with the promise to create more money and give it back to those volunteers at a specified later date. Paying back isn't really an issue the way it is for non-fiat-issuers.
There is no fiscal policy, only broad-focus monetary policy and distributionally targeted monetary policy. (Traditional monetary policy is the former, traditional “fiscal” policy is a mix.)
Basically, when one of the two parties in a transaction conducted in USD is the US government, all “typical” financial concepts/terms have to be completely redefined. Take for example interest rate, the most basic and straightforward single number in the terms of any loan. It’s really not “interest” when you’re buying government bonds because it’s a fiat currency and you’re going to be paid back in the same. It’s more like buying rights to shares in a shady company on an unregulated exchange that vests after n years, with the hope that decisions the company makes pertaining to issuance of future shares will not “unfairly” dilute your stock (after all, the stock isn’t “split” in the normal sense) beyond what you’re set to gain in the terms of your options... while simultaneously betting on the waxing and waning of the currency’s global usage and adoption subject to foreign policy, investment domestically and abroad, etc. all on top of attempting to “play the market” and win.
I don’t know if it’s even possible to fully grasp the sheer complexity of all the factors, let alone the factors themselves.
I don’t know if it’s even possible to fully grasp the sheer complexity of all the factors, let alone the factors themselves.
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until you can't roll it over anymore
Everyone who says "we're saddling future generations with debt" are almost exclusively rich people that want to cut entitlement spending.
Which is why it's absolutely great that they're on the way to earning negative yields on their wealth. If they want a positive real yield from risk-free assets like Treasuries they should advocate for Medicare For All and increased infrastructure spending.
Which is why it's absolutely great that they're on the way to earning negative yields on their wealth. If they want a positive real yield from risk-free assets like Treasuries they should advocate for Medicare For All and increased infrastructure spending.
It's not absolutely great. All those pension funds that are going to support decidedly unwealthy retirees (teachers, police, other public servants) are going to be in dire straits. And if those blow up, it's going to be a pretty big problem for those unwealthy people, and a political problem for everyone else.
And it's not just wealthy people who worry about the national debt, I think that's a pretty big concern for anyone who gives half a shit about social safety nets.
And how do real yields correlate at all with Medicare For All and infra spending? If anything, higher real yields make it harder for the government to balance its budget as debt servicing costs rise.
I'm really confused.
And it's not just wealthy people who worry about the national debt, I think that's a pretty big concern for anyone who gives half a shit about social safety nets.
And how do real yields correlate at all with Medicare For All and infra spending? If anything, higher real yields make it harder for the government to balance its budget as debt servicing costs rise.
I'm really confused.
If Medicare For All were passed it would be a massive increase in fiscal spending and a lot of it would be financed with debt. After that supply and demand will take care of the yield the market expects for risk-free assets.
The reason why Germany has negative yielding sovereign debt is because they have a political aversion to any kind of deficit spending, and that's a detriment to growth all across Europe as well as to their own people.
The reason why Germany has negative yielding sovereign debt is because they have a political aversion to any kind of deficit spending, and that's a detriment to growth all across Europe as well as to their own people.
>It's not absolutely great. All those pension funds that are going to support decidedly unwealthy retirees (teachers, police, other public servants) are going to be in dire straits.
>And it's not just wealthy people who worry about the national debt, I think that's a pretty big concern for anyone who gives half a shit about social safety nets.
None of this is a concern to a country that mints its own currency. National debt is simply a fully controlled savings account service run by the government.
The reason the wealthy "worry" about the national debt (except when it comes to military spending) is because they want to see public sector spending on people restricted (to keep wages down) and things (to keep inflation down).
>And it's not just wealthy people who worry about the national debt, I think that's a pretty big concern for anyone who gives half a shit about social safety nets.
None of this is a concern to a country that mints its own currency. National debt is simply a fully controlled savings account service run by the government.
The reason the wealthy "worry" about the national debt (except when it comes to military spending) is because they want to see public sector spending on people restricted (to keep wages down) and things (to keep inflation down).
Most (all?) of the pension funds I described aren’t run by the national government in the US, they’re typically run at the state level - CalPERS, for example, in California. Teachers, police, firemen are employed at the local level. Given that Medicare for All is a proposed US policy, I think it’s reasonable to scope this discussion to US concerns.
Yes, the wealthy have some reasons to worry about it, but it’s silly to say that they’re the only ones with some reason to be concerned about it. Normal retirees on a fixed income and others trying to save for retirement, a house, whatever don’t want their savings completely debased either.
And citizens in general probably won’t like the effects if the USD loses its reserve currency status due to lax monetary policy.
Yes, the wealthy have some reasons to worry about it, but it’s silly to say that they’re the only ones with some reason to be concerned about it. Normal retirees on a fixed income and others trying to save for retirement, a house, whatever don’t want their savings completely debased either.
And citizens in general probably won’t like the effects if the USD loses its reserve currency status due to lax monetary policy.
For a while, U.S. has targeted X% inflation. What happens if we sell a 100 year bond at Y% yield and then in 50 years economists learn we should target less than Y% inflation? In that case are we stuck between either the bonds growing faster and faster and faster than the dollar, or being constrained in inflation targets?
Thereby illustrating what a stupid idea it is. That's the whole problem, everyone want to just push financial problems into the future.
So pretty sure that’d be a form of institutional capital “parking” for later generations. I could see pension plans buying into them, maybe?
Many institutions, such as university endowments or sovereign wealth funds, invest on these time scales.
Example:
https://www.bloomberg.com/news/articles/2017-08-29/why-yale-...
And as another commented, these bonds can be traded long before they mature.
And as another commented, these bonds can be traded long before they mature.
Of course they can be traded at anytime. I think I’m somewhere between “why doesn’t this already exist” and “who cares”. It sounds at once both useful for creating long term assurances and highlights how different such financial choices are from common individual personal finance choices.
That's one way to put it. Another way to put it is saddling future generations of Americans with debt.
> Another way to put it is saddling future generations of Americans with debt.
It would be wasteful not to borrow money at near zero rates
It would be wasteful not to borrow money at near zero rates
>It would be wasteful not to borrow money at near zero rates
Someone gave me this argument recently. Mostly because she would have made a couple thousand in fees. I'd have been out tens of thousands in fees and interest. It wouldn't have done me a lick of good unless I had something amazing to invest in, which means I could have borrowed some money later.
The same actually does apply to the government spending dumb ass Saudi/Japanese tribute money. If they're not investing it in something useful for the future, it's just lighting money on fire.
Someone gave me this argument recently. Mostly because she would have made a couple thousand in fees. I'd have been out tens of thousands in fees and interest. It wouldn't have done me a lick of good unless I had something amazing to invest in, which means I could have borrowed some money later.
The same actually does apply to the government spending dumb ass Saudi/Japanese tribute money. If they're not investing it in something useful for the future, it's just lighting money on fire.
Yes and no. The borrowing can prop up counterproductive spending, such as hiring smart people for government sinecures, keeping them from being creative in the public sector, etc. Also, budget dependence on cheap debt has in the past been a very costly habit for many countries when the high interest times come along again.
Only if the generation borrowing is approximately same as the one paying it back :)
When the US government has a debt there is wealth out in the non-US government above what clearing the balance sheet would allow. It’s actually a measure of the governmental contribution to social wealth. The pickle is in making the other side of the balance sheet positively affect the wealth of the nation the greatest. “Or it should be.”
A surplus would be the government taking wealth in from the non-US government side. Something that sounds a lot more like governmental corruption and waste than the other option. Exactly equalling it out would make the entire economy zero sum.
A surplus would be the government taking wealth in from the non-US government side. Something that sounds a lot more like governmental corruption and waste than the other option. Exactly equalling it out would make the entire economy zero sum.
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It’s highly worrisome when dollar values get to be so large, that the fundamentals of finance that we all follow in our daily lives are completely thrown out the window. Voting over and over to raise the debt ceiling, printing more money, keeping interest rates low in a strong economy are all things common sense thinking would be weary of. It's starting to feel like the same myopic thinking that lead to the Mortgage-backed securities crisis is making similar decisions again
Running a household and running an economy are totally different things. There is a reason macro and microeconomics are taught separately.
See that's the problem. At the end of the day, its humans trading with humans whether it's 100 people or 10 Billion. The core of any economy and any transaction is trust. Trust that you are getting an even barter for your payment. Profits are always second to Trust in any market and when that trust is violated by clever accounting, there is always a time of reckoning.
See that's the problem, a sorting algorithm just moves values around, whether it's 100 values or 10 Billion.
At the end of the day if bubble sort is good enough for a micro controller it's good enough for a data center.
At the end of the day if bubble sort is good enough for a micro controller it's good enough for a data center.
Until you realize a data center is a bunch of small nodes working together.
And of course bubble sort is the perfect solution for distributed sorting.
I don't get your argument. If something doesn't work on the small scale it certainly won't work on a large scale. That's exactly my original point about managing global finance
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Bubble sort works amazingly well on the small scale.
It shits itself on the large scale.
Just like how trying to run an economy like you do a household results in the great depression.
It shits itself on the large scale.
Just like how trying to run an economy like you do a household results in the great depression.
That's the converse of my argument. I'm saying that things that don't fly at small scale, don't become good ideas at large scale. Constantly calling the credit card company and asking for a credit raise instead of paying the bill, printing more money to pay the bill, and encouraging not saving for a rainy day by keeping interest rates low are all things that are terrible ideas for the individual so why is it good for 100 individuals grouped together? Actually, the answer is obvious: statistics are easier to manipulate with groups.
>I'm saying that things that don't fly at small scale, don't become good ideas at large scale.
They absolutely do.
Fourier transform multiplication methods are a terrible idea if you run them on numbers that aren't hundreds of digits long, but the only way to multiply truly large numbers.
They absolutely do.
Fourier transform multiplication methods are a terrible idea if you run them on numbers that aren't hundreds of digits long, but the only way to multiply truly large numbers.
Why not do some research and learn about this stuff? Very smart people spend a lot of time thinking about how to run economies: at least consider their ideas before you dismiss them.
I wonder if these will come in TIPS versions. We had quite substantial inflation in 1919, 14-18%, followed by massive deflation in 1921 approaching -16%, and +9-15% in 1980/1981.
Looking at the past 25 years, you might get the idea it's not a good idea to buy TIPS bonds, but is hyperinflation inevitable or is it a solved problem?
Looking at the past 25 years, you might get the idea it's not a good idea to buy TIPS bonds, but is hyperinflation inevitable or is it a solved problem?
When your reputation is on the brink you attempt to borrow more. It matters little what the rate turns out to be, as long as it is lower than it will be once the reputation is soiled.
What’s the probability that the US exists in 100 years?
If it won't someone else will pay.
Countries fall and mutate but their borrowings get paid.
https://en.wikipedia.org/wiki/Repudiation_of_debt_at_the_Rus...
https://www.nytimes.com/2000/11/19/world/russia-redeeming-cz...
Countries fall and mutate but their borrowings get paid.
https://en.wikipedia.org/wiki/Repudiation_of_debt_at_the_Rus...
https://www.nytimes.com/2000/11/19/world/russia-redeeming-cz...
Presumably, the collapse of the government would coincide with a period of hyperinflation. Since US bonds are payable in US dollars (I think), that would effectively wipe out the debt.
In the Russian example, the bond holders claimed they were owed about 100x the actual payout.
In the Russian example, the bond holders claimed they were owed about 100x the actual payout.
Hyperinflation would only come from the successor government's stupid decision to print money. If the successor government is led by smart, reasonable, and ethical people, I don't see how hyperinflation must be a consequence.
That's an interesting question!
Can anyone suggest a good way to estimate this?
I'd estimate the odds at around 80%-90%, but I don't have any coherent working to back that up.
Note that very few human institutions have lifespans of 1000 years or more: a few universities and the Catholic church. I'd hazard a guess it is highly unlikely that the US exists in 750 years.
Can anyone suggest a good way to estimate this?
I'd estimate the odds at around 80%-90%, but I don't have any coherent working to back that up.
Note that very few human institutions have lifespans of 1000 years or more: a few universities and the Catholic church. I'd hazard a guess it is highly unlikely that the US exists in 750 years.
God, the fools they would need to find to buy these sort of instruments... There is no way whatever rate they peg these at are going to cover inflation over that time period...
> the fools they would need to find to buy these sort of instruments
These fools run your pension fund.
These fools run your pension fund.
I have a pension fund?
Would a 100 year bond be a good match for an annuity? (I guess that's what you're making reference to). 30 year bonds match the expected life expectancy of someone buying an annuity, 100 year bonds not so much.
Longer time to maturity implicates larger interest rate risk. But with rates near zero there seems to be only one way to go. In higher interest rate environment Treasury might repurchase bonds with discount. So this is free money.
On the other hand if US goes Japanese for next decade or two it might be last chance for holding gov bonds without paying for the privilege ;-)
On the other hand if US goes Japanese for next decade or two it might be last chance for holding gov bonds without paying for the privilege ;-)
What pension fund?
The public employee ones your taxes backstop and guarantee 7% returns despite only getting 3-5%
My company offers a pension, and a 401(k). But then, I'm not in SV.
More for me :)
All you have to do is tell people to put money into their 401k "FUTURE SECURE FUND (TM)###" and let the fund managers steer all the money to the 50 year bonds :)
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###Terms and conditions apply, see fund prospectus for details. Past performance does not guarantee future results. Complete loss of funds and/or negative returns may occur.
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###Terms and conditions apply, see fund prospectus for details. Past performance does not guarantee future results. Complete loss of funds and/or negative returns may occur.
We just need to ease, quantitatively, to make the contracts come true in the numeric sense.
Because of course, prices are costs. ;- )
Because of course, prices are costs. ;- )
Haha yes exactly. We also need to do so before a recession, to prevent a recession.
Everybody loves big numbers. Especially presidents. They can put their faces on the new bills that will be required.
Everybody loves big numbers. Especially presidents. They can put their faces on the new bills that will be required.
What’s the advantage for the US government?
Edit: Answering my own question the treasury sells EE Savings Bonds the can be redeemed early, and T bills that can be sold to someone else and not redeemed by the US government.
Clearly the government would like to lock in rates expected to be as low as possible for as long as possible.
Edit: Answering my own question the treasury sells EE Savings Bonds the can be redeemed early, and T bills that can be sold to someone else and not redeemed by the US government.
Clearly the government would like to lock in rates expected to be as low as possible for as long as possible.
If they think rates are nearing a bottom, and will go up from here it obviously makes sense.
Check out projections of US interest on debt expense. In a few years time it may exceed all other spending categories. Much of the US government borrowing is short term.
What happens when rates rise? So, it makes sense to lock in as much borrowing they can at low rates.
Check out projections of US interest on debt expense. In a few years time it may exceed all other spending categories. Much of the US government borrowing is short term.
What happens when rates rise? So, it makes sense to lock in as much borrowing they can at low rates.
>These could be cashed in early if rates rise
I don't think that's how T-bonds work. You can sell them on the secondary market, but that doesn't matter to the government — it locks in the rate it sold them at.
I don't think that's how T-bonds work. You can sell them on the secondary market, but that doesn't matter to the government — it locks in the rate it sold them at.
Why do you say they can be cashed in? US treasuries are generally nonputtable.
Got confused looking at treasury direct a while ago. https://www.treasurydirect.gov/indiv/research/indepth/ebonds...
The US should absolutely lock in these low interest rates to fuel green infrastructure and technology. Debt used to fund infrastructure and technology is the most effective use in our current environment.