Will the United States government soon offer a 50-year or even a 100-year bond? That is what the Donald Trump administration is studying, says Treasury Secretary Steven Mnuchin.
Speaking in an interview with CNBC, the Treasury Secretary, a former Goldman Sachs employee, explained that the administration is looking into the matter, adding that it could potentially save taxpayers plenty of money.
“I think it’s something we should seriously look at,” Mnuchin said. “I’ve already begun to talk to the staff about looking at that. We’ll reach out to the market, investors, different people, but I think it’s something that is a very serious issue of whether we should explore whether we can raise 50- or 100-year money at a very slight premium. That’s something that makes sense for Treasury to look at.”
He added that the Trump administration is not yet ready to make any formal announcement regarding long-term bonds.
The idea behind a long-term bond is that you can secure the historically low interest rates right now and lower the government’s future debt payments. In other words, you are kicking the can down the road once again.
Numerous countries around the world have taken advantage of long-term bonds. Mexico, Canada, Ireland, Spain, Austria, Japan and a few others have all started selling 50-, 70- and even 100-year bonds.
And it is something that many in the financial community have celebrated, especially in an era of subzero interest rates. Prior to his inauguration, Barron’s magazine urged the 45th president to take a page out of Alexander Hamilton’s book and adopt long-term bonds, while Larry Kudlow has been advocating the idea for quite sometime.
Despite government and central banks’ newfound affection for long-term bonds, the instrument of delay has already entered into bubble territory (SEE: The looming bubble in long-term debt).
It looks like the ghost of Hamilton is casting his shadow more and more on United States politics. Perhaps you can thank that Broadway show for that.