US government is not borrowing enough.

[RandomGuy]

We need to issue more debt.

In case some of you didn't notice, yields on T-notes have recently gone negative.

If someone is willing to let you have money for less than the cost of inflation, that means there is a massive demand for your debt.

Wonder why that is the case?


Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.
http://www.bloomberg.com/news/2012-09-10/big-banks-hide-risk-transforming-collateral-for-traders.html

Our borrowing costs will never again be this low. Time to borrow another 5 trillion or so and pump it into infrastructure, IMO.

There is your jobs program.

This is akin to financing $10,000 at negative interest for an expansion on your house that will end up adding $15,000 in value

[DarrinS]

This logic is like spending a shitload on a variable rate credit card because the current rate is very low.

When rates go up, the interest ALONE on the debt will be staggering.

[ChumpDumper]

This logic is like spending a shitload on a variable rate credit card because the current rate is very low.

When rates go up, the interest ALONE on the debt will be staggering.Is the interest rate on the national debt variable?

[101A]

Is the interest rate on the national debt variable?

I have understood that it is; could be wrong, however.

[boutons_deux]

http://www.bloomberg.com/news/2011-10-24/treasury-considers-first-new-bonds-since-tips-with-u-s-floating-rate-note.html

lots of different bonds:

http://en.wikipedia.org/wiki/United_States_Treasury_security

[CosmicCowboy]

Is the interest rate on the national debt variable?

Of course it is. If the term is 10 years then that means when the note is due you have to borrow the same amount of money at whatever the prevailing rate is. It won't stay zero forever. Notes are rolling over constantly, thus the average interest rate changes constantly.

[ChumpDumper]

Of course it is. If the term is 10 years then that means when the note is due you have to borrow the same amount of money at whatever the prevailing rate is. It won't stay zero forever. Notes are rolling over constantly, thus the average interest rate changes constantly.Oh, so your answer is actually no.

Thanks.

[DarrinS]

Is the interest rate on the national debt variable?

yes

[ChumpDumper]

yesCC said it wasn't.

I'll let red team huddle and decide what they believe. Go check your email lists for help.

[TeyshaBlue]

Structurally? No. Functionally? Sorta.

[CosmicCowboy]

Structurally? No. Functionally? Sorta.

exactly.

Chumps just an argumentative little bitch.

[Wild Cobra]

We need to issue more debt.

In case some of you didn't notice, yields on T-notes have recently gone negative.

If someone is willing to let you have money for less than the cost of inflation, that means there is a massive demand for your debt.

Wonder why that is the case?

They are betting on the future.

If I can be the bond holder $1,000,000,000 worth of short term debt, and exchange it for a bond with a positive rate when it's due, it's a win-win for me. I my lose a few pennies per $100 initially, but turn around and get 2 or more pennies per dollar! Once I have the $1 billion, it's easy to turn that around to interest paying in the future, as the government always gets more debt.

Also a win-win for the current administration. Lowers his deficit, and puts it out as higher debt to a later administration.

[ChumpDumper]

exactly.

Chumps just an argumentative little bitch.No, I was asking for an answer and I got it. Thanks for giving the idea in the OP legs. The theory makes more sense now after red team muddied the waters.

And thanks for getting angry again. :toast

[CosmicCowboy]

No, I was asking for an answer and I got it. Thanks for giving the idea in the OP legs. The theory makes more sense now after red team muddied the waters.

And thanks for getting angry again. :toast

It's not anger, it's contempt.

[ChumpDumper]

:cry

[coyotes_geek]

We need to issue more debt.

In case some of you didn't notice, yields on T-notes have recently gone negative.

If someone is willing to let you have money for less than the cost of inflation, that means there is a massive demand for your debt.

Wonder why that is the case?


http://www.bloomberg.com/news/2012-09-10/big-banks-hide-risk-transforming-collateral-for-traders.html

Our borrowing costs will never again be this low. Time to borrow another 5 trillion or so and pump it into infrastructure, IMO.

There is your jobs program.

This is akin to financing $10,000 at negative interest for an expansion on your house that will end up adding $15,000 in value

While I'm 100% in favor of spending more money on infrastructure, there's a long lag time between deciding to spend a bunch of money on infrastructure and actually spending it. As we saw with the 2009 stimulus, the "shovel ready" concept towards immediate job creation is a myth. A "shovel ready" project is something small, like a park or some sidewalk improvements, and there aren't nearly enough of those projects to make a noticeable difference. The big infrastructure projects that spur a noticeable increase in economic activity aren't going to get designed until the money to build them is available. Not trying to shoot down the idea that we should spend a bunch of money on infrastructure, but any noticeable stimulative effect from doing so would be years away.

There's also a "funnel effect" that would dilute the stimulative effect. IIRC, infrastructure is only about a $200 billion / yr industry. It's not like you can just drop a couple trillion and expect it all to get spent in a few years.

As for the debt side, even at record low interest rates net interest on the debt is still running us over $200 billion a year. And that's before we have to start borrowing money to pay back social security when they need to start cashing their holdings in. When interest rates do start to go up, that $200 billion will start rising exponentially. According to the latest proposed budget for FY 2013 (http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/tables.pdf) (page 6) that net interest is already expected to triple by 2020 before tacking on that additional $5T you think we should borrow.

[boutons_deux]

renewing, expanding, making "smart" the ancient, shitty electrical grid is probably several $1T

sewers and water systems, esp in the older cities, a few more $T

French-style TGV train between the population centers already defined, a few $100B (esp in TX)

extending solar and wind tax credits for 10 years minimum would have immediate effect.

A national clearing house to coordinate the best ways, equipment for residential/commerical solar feed-in systems would continue/stimulate $100Bs more in rooftop solar.

Paying for doctors' and nurses' educations in return for 20+ years as govt medical employees. Giving complete exemption for income tax for 20 years for doctors and nurses who locate to underserverd areas.

1000s of decrepit bridges

setup a national bank as a non-profit public utility.

expand medicare to hard-core public insurance option with govt owned/run/manned hospitals, clinics.

[RandomGuy]

Of course it is. If the term is 10 years then that means when the note is due you have to borrow the same amount of money at whatever the prevailing rate is. It won't stay zero forever. Notes are rolling over constantly, thus the average interest rate changes constantly.

The interest rate doesn't generally change for decades.

I could live with paying negative interest rates for decades.

[CosmicCowboy]

The interest rate doesn't generally change for decades.

I could live with paying negative interest rates for decades.

oh really?

http://www.tradersnarrative.com/wp-content/uploads/2008/01/federal%20funds%20rate%201957%20to%202008.png

[RandomGuy]

This logic is like spending a shitload on a variable rate credit card because the current rate is very low.

When rates go up, the interest ALONE on the debt will be staggering.

With the slight problem, as Chumpy noted... interest rates on US debt doesn't generally change. 30 year notes lock in rates for a long, long time.

https://www.fms.treas.gov/bulletin/index.html
TABLE FD-5.—Maturity Distribution and Average Length of Marketable
Interest-Bearing Public Debt Held by Private Investors

Most of it tends to be about 5 years out. A pretty hefty spike in all maturities. Hard to tell from these tables what the aging composition is of new debt (i.e. 5 yrs 10 yrs 30, etc)

[CosmicCowboy]

With the slight problem, as Chumpy noted... interest rates on US debt doesn't generally change. 30 year notes lock in rates for a long, long time.

https://www.fms.treas.gov/bulletin/index.html
TABLE FD-5.—Maturity Distribution and Average Length of Marketable
Interest-Bearing Public Debt Held by Private Investors

Most of it tends to be about 5 years out. A pretty hefty spike in all maturities. Hard to tell from these tables what the aging composition is of new debt (i.e. 5 yrs 10 yrs 30, etc)

That's why nobody wants 30 year notes. They are churning shorter and shorter term notes to keep the game going.

[RandomGuy]

TABLE PDO-2.—Offerings of Marketable Securities
Other than Regular Weekly Treasury Bills
Better.

Eyeballing it, shorter term seems to be dominant in the last few months, with most amounts being in the 2-5 year range.

30 year debt is at an unsurprising 3% coupon, 2.7% yield.

[RandomGuy]

That's why nobody wants 30 year notes. They are churning shorter and shorter term notes to keep the game going.

According to the table the overall average has been climbing slightly. The data does not support this assertion, and appears to contradict it.
(it is just a word document, small and easily accessible, read it yourself. :) )
https://www.fms.treas.gov/bulletin/b2012_3fd.doc

[RandomGuy]

TABLE FD-5.—Maturity Distribution and Average Length of Marketable
Interest-Bearing Public Debt Held by Private Investors

2007 amount of 20+ year maturity debt: 178,417
2012 -----------------------------------529,973

Dunno... "average age" seems to be swinging around a bit, hard to tell exactly. generally about 5yrs in most periods of table.

[RandomGuy]

oh really?

http://www.tradersnarrative.com/wp-content/uploads/2008/01/federal%20funds%20rate%201957%20to%202008.png

I mean the rate, once issued, generally doesn't change. That is the definition of "coupon rate". Hopefully you give me enough credit for at least that much sense.

[RandomGuy]

While I'm 100% in favor of spending more money on infrastructure, there's a long lag time between deciding to spend a bunch of money on infrastructure and actually spending it. As we saw with the 2009 stimulus, the "shovel ready" concept towards immediate job creation is a myth. A "shovel ready" project is something small, like a park or some sidewalk improvements, and there aren't nearly enough of those projects to make a noticeable difference. The big infrastructure projects that spur a noticeable increase in economic activity aren't going to get designed until the money to build them is available. Not trying to shoot down the idea that we should spend a bunch of money on infrastructure, but any noticeable stimulative effect from doing so would be years away.

There's also a "funnel effect" that would dilute the stimulative effect. IIRC, infrastructure is only about a $200 billion / yr industry. It's not like you can just drop a couple trillion and expect it all to get spent in a few years.

As for the debt side, even at record low interest rates net interest on the debt is still running us over $200 billion a year. And that's before we have to start borrowing money to pay back social security when they need to start cashing their holdings in. When interest rates do start to go up, that $200 billion will start rising exponentially. According to the latest proposed budget for FY 2013 (http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/tables.pdf) (page 6) that net interest is already expected to triple by 2020 before tacking on that additional $5T you think we should borrow.

Then we should get started.

5T is just off the top of my ass.

We need to throw money at this problem, and that needs to start with setting priorities and gathering enough information about what needs to happen. If we have to commit and earmark (oh yeah, I went there) money for it in the future then let's do so.

[Nbadan]

What happened to the inflation hawks? :lol

[Nbadan]

For the record, I think that throwing too much money, either through a new, too-large stimulus or through a combination of lower taxes and a new stimulus could be inflationary and also lead to even higher crude oil prices......Growth under 3% is not the end of the world....growth at 5% or over might be....

[Wild Cobra]

There's also a "funnel effect" that would dilute the stimulative effect. IIRC, infrastructure is only about a $200 billion / yr industry. It's not like you can just drop a couple trillion and expect it all to get spent in a few years.

Not only the "funnel effect," but such stimulus in the end is probably only better than "trickle down" because we have infrastructure to show for it afterwards. But... At how much debt for our progeny?

[Wild Cobra]

renewing, expanding, making "smart" the ancient, shitty electrical grid is probably several $1T

You want subsidies for the energy companies?


sewers and water systems, esp in the older cities, a few more $T

That's what proper taxes and sewer rates are for. Aren't these cities spending their money right? You really want redistribution of such tax dollars?


French-style TGV train between the population centers already defined, a few $100B (esp in TX)

Severe cost overruns. Endless tax subsidies as the actual ride costs far exceed ticket prices. Why do you want more endless debt?


extending solar and wind tax credits for 10 years minimum would have immediate effect.

Why don't we just buy people like CC more battery carts with tax subsidies?


A national clearing house to coordinate the best ways, equipment for residential/commerical solar feed-in systems would continue/stimulate $100Bs more in rooftop solar.

Why don't you believe in the free market?


Paying for doctors' and nurses' educations in return for 20+ years as govt medical employees. Giving complete exemption for income tax for 20 years for doctors and nurses who locate to underserverd areas.

Why only their profession? Why not tax exempt yours and mine?


1000s of decrepit bridges

We have a road tax for such repairs.


setup a national bank as a non-profit public utility.

Hail Hitler... Nationalize everything!


expand medicare to hard-core public insurance option with govt owned/run/manned hospitals, clinics.

Do you mean medicaid?

[Wild Cobra]

The interest rate doesn't generally change for decades.

I could live with paying negative interest rates for decades.


oh really?

http://www.tradersnarrative.com/wp-content/uploads/2008/01/federal%20funds%20rate%201957%20to%202008.png
Random...

What do you know that we don't?

[Wild Cobra]

Fixed:

Then we should get started.

5T is just off the top of my ass.

We need to throw more money in the fire, and that needs to start with setting priorities and gathering enough information about how much faster we want to fail. If we have to commit and earmark (oh yeah, I went there) all our children's future money, then let's do so.

[RandomGuy]

Random...

What do you know that we don't?

In your case, quite a bit. :p


Seriously though, not all the rates on t-bills have been lower than inflation, but some of the auctions have produced yields there, and they continue to hover around that line now.

To be fair, and honest, a good deal of the demand has been from the Fed's activities, and even the Fed cannot expand its balance sheet forever.

[RandomGuy]

Fixed:

Says the guy who oh-so-cavelierly commits his children's money to the bet that CO2 emissions won't have an actual effect on our climate.

I don't mind committing my kid's money on shit I know will be around for them and thier kids to use.

Maddow's suggestion about something fairly straightforward, such as buried power cables, would seem to be something that most New Englanders would think a good investment right about now.

[RandomGuy]

For the record, I think that throwing too much money, either through a new, too-large stimulus or through a combination of lower taxes and a new stimulus could be inflationary and also lead to even higher crude oil prices......Growth under 3% is not the end of the world....growth at 5% or over might be....

Higher crude prices are probably a good thing for the US, given how much natgas we are producing, and how much said prices would end up moving manufacturing back to the US. Growth over 5%, would be not a likely thing at all, from what I understand, but hardly be the "end of thd world".

[DarrinS]

http://www.cbo.gov/publication/21960

[boutons_deux]

Repugs have been whining about the inflation risk, in bad faith of course, from (any more) stimulus spending, for 4 years.

The economy still sucks, "23 million" at un- or underemployed, and there's no (demand) inflation.

[Winehole23]

http://dailydish.typepad.com/.a/6a00d83451c45669e2017ee4a29c0d970d-550wi (http://dailydish.typepad.com/.a/6a00d83451c45669e2017ee4a29c0d970d-pi)

[Wild Cobra]

http://dailydish.typepad.com/.a/6a00d83451c45669e2017ee4a29c0d970d-550wi (http://dailydish.typepad.com/.a/6a00d83451c45669e2017ee4a29c0d970d-pi)
How many of those times, like the debt financed during the Carter years, had higher interest rates to pay back when the bonds can to term, like in the Reagan years?

It would be more appropriate to look at what presidency financed how much at what rate, and if it came due during his presidency, or the next.

[coyotes_geek]

It would be more appropriate to look at what presidency financed how much at what rate, and if it came due during his presidency, or the next.

.............because we all know that Presidents have complete and absolute control over interest rates.

[RandomGuy]

http://www.cbo.gov/publication/21960


In CBO's most recent projections, which assume that current laws remain the same, annual deficits decline from the $1.3 trillion recorded in 2010, but the cumulative deficit from 2011 through 2020 exceeds $6.2 trillion. Borrowing to finance that deficit--in combination with an expected rise in interest rates--would lead to a fourfold increase in net interest payments over the next 10 years, from $197 billion in 2010 to $778 billion in 2020. As a percentage of GDP, net interest outlays would more than double during that period, rising from 1.4 percent to 3.4 percent.

3.4% of GDP to finance the projected debt. Hardly an Apocalyptic prediction.

[dbestpro]

It's the favorite game in America. It's called "Kick the Can".

If you kick the can far enough you won't have to worry about it, but your kids will. Of course we don't really care too much about the kids now a days, anyway. Crumb snatchers just get in the way of an IPAD purchase.

[ElNono]

If you kick the can far enough you won't have to worry about it, but your kids will.

How do "the kids" will have to worry about it?

[RandomGuy]

It's the favorite game in America. It's called "Kick the Can".

If you kick the can far enough you won't have to worry about it, but your kids will. Of course we don't really care too much about the kids now a days, anyway. Crumb snatchers just get in the way of an IPAD purchase.

Eyup.

Don't tax you, don't tax me, tax that man behind the tree!

Raise my taxes, pay down the debt. I can bear a sacrifice for that.

Now see what happens to the first politician that says "I am going to raise your taxes".

GMAFB.

[coyotes_geek]

3.4% of GDP to finance the projected debt. Hardly an Apocalyptic prediction.

Remember that whole debt ceiling armaggedon circus? That was over, what, $1T of cuts and/or taxes over a 10 year period where our cumulative GDP would be in the $150T range, give or take? That's only 0.6% of GDP and democrats and republicans were ready to set themselves on fire over it. A 2% of GDP increase in net interest expenses over the next 8 years is a way bigger deal than you're making it out to be.

[RandomGuy]

Remember that whole debt ceiling armaggedon circus? That was over, what, $1T of cuts and/or taxes over a 10 year period where our cumulative GDP would be in the $150T range, give or take? That's only 0.6% of GDP and democrats and republicans were ready to set themselves on fire over it. A 2% of GDP increase in net interest expenses over the next 8 years is a way bigger deal than you're making it out to be.

Sort of.

Not an apocalypse, but then not something that I think should be shrugged off, either.

I am of the opinion that we need to do something to cut our overall debt load. I just don't think it is the end of the world if we don't do that right away. :dramaquee

[Wild Cobra]

3.4% of GDP to finance the projected debt. Hardly an Apocalyptic prediction.
Really?

1.4% to 3.4%. Now factor in exponential growth!

When does it start going down? How long until the interest will be 100% of GDP at these rates of growth?

[RandomGuy]

Really?

1.4% to 3.4%. Now factor in exponential growth!

How long until the interest will be 100% of GDP at these rates of growth?

Never.

Easy question.


As for when it starts going down, that is up to us, isn't it?