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This logic is like spending a load 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.
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/2012-0...r-traders.htmlStarting 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.
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
This logic is like spending a load 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?
I have understood that it is; could be wrong, however.
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.
CC said it wasn't.
I'll let red team huddle and decide what they believe. Go check your email lists for help.
Structurally? No. Functionally? Sorta.
exactly.
Chumps just an argumentative little .
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.
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.
It's not anger, it's contempt.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.
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 (page 6) that net interest is already expected to triple by 2020 before tacking on that additional $5T you think we should borrow.
Last edited by coyotes_geek; 10-30-2012 at 04:18 PM.
renewing, expanding, making "smart" the ancient, ty 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.
The interest rate doesn't generally change for decades.
I could live with paying negative interest rates for decades.
oh really?
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 e 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.
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.
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 do ent, small and easily accessible, read it yourself.)
https://www.fms.treas.gov/bulletin/b2012_3fd.doc
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.
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.oh really?
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