Restructuring US Debt With Interest Rates At Record Lows
IN THIS ISSUE:
1. Overview – Let’s Change the Subject Today
2. An Opportunity to Restructure Our National Debt
3. Do We Need a Historic 50-Year Treasury Bond?
Overview – Let’s Change the Subject Today
There is no shortage of negative economic and financial news that has been announced over the last week that I could continue to write about today. But the truth is, I’m tired of being all negative all the time. So today, I want to shift gears and tackle a topic that most Americans probably haven’t thought about, but one that I think we should.
That topic is whether the US should be moving to significantly restructure much of our $24 trillion in national debt into much longer-dated Treasury securities while interest rates are the lowest in our nation’s history. Consider today’s discussion an effort of thinking outside the box. I don’t claim to have all the answers, but this concept should be part of the national debate.
Much of our national debt is held in shorter-term US Treasury securities that mature and have to be rolled over every so often – such as Treasury bills, Treasury notes and T-bonds. The longest-dated bonds we offer mature in 30 years. Much of our debt was issued years ago at significantly higher interest rates.
But late last year, Treasury Secretary Mnuchin floated the idea that we should consider creating longer-dated bonds, including 50-year T-bonds and refinance our massive national debt for much longer to take advantage of today’s historically low interest rates. His idea didn’t garner much, if any, attention in the mainstream media or elsewhere. He hasn’t pushed the idea since.
But the more I think about it, the more sense it makes to me. Why not, is the question. While I have been an outspoken critic of our ballooning national debt and out of control federal spending all my career, our $24+ trillion national debt is what it is, and it’s only going to get bigger, increasingly bigger with the current unprecedented federal spending over coronavirus.
So, while I’m not ready to 100% endorse restructuring our national debt to much longer maturities, I am seriously considering it. Today, I’ll share with you the issues surrounding doing so and hopefully, get you to thinking about it as well. I don’t know about you, but that sounds so much better to me than continuing to harp on the very negative economic and financial issues of the corona crisis. There will be plenty of time to do that just ahead. Let’s jump in.