The United States may adopt the latest trend of ultra-long bonds as a way to tackle its massive debt problems.
Treasury Secretary Steven Mnuchin reiterated to Bloomberg Television that the federal government is studying the “costs and benefits” of implementing a policy of ultra-long bonds. This would essentially kick the can down the road and sell off 40-, 50- or even 100-year bonds to hungry investors.
Mnuchin said that the Treasury will collaborate with the Treasury Borrowing Advisory Committee (TBAC), a group that includes members from JPMorgan Chase, Bank of America, Citadel, Pimco and Goldman Sachs.
He believes that long-term bonds, like the ones adopted by the likes of Ireland, Italy, Span and Japan, could “absolutely” make sense to provide some relief and finance the federal government.
“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.”
To the minds of the Trump administration, it’s a great idea. Consider what the business news network writes:
The Treasury also said Wednesday it will maintain at $62 billion the issuance of longer-term debt for the sixth straight quarter.
The department will sell $24 billion in three-year notes on May 9, $23 billion in 10-year notes on May 10 and $15 billion in 30-year bonds on May 11, it said in its quarterly refunding announcement of longer-term debt sales. The auctions will raise about $12.3 billion in new cash, it said. The Treasury plans to target a cash balance at $200 billion over the quarter. This cash buffer was $222 billion as of May 1.
The department has been using extraordinary accounting measures to continue to meet its financing needs and stay under the debt-limit since its previous suspension expired in March. Most analysts project the Treasury can continue with these measures before hitting the federal debt limit, which is set by Congress, until the October-November period — at which point Congress must either lift it or suspend it again.
For fiscal conservatives, it’s a horrific idea that will not achieve the primary aim of balancing the books, paying off the debt and avoiding a fiscal crisis.
This is something that Alexander Hamilton promoted. Just because he was the subject of a blockbuster smash hit Broadway show, it doesn’t mean politicians should be turning to him for policy advice.
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