
U.S. Weighs Selling 50- and 100-Year Bonds After Yields Plummet - sndean
https://www.bloomberg.com/news/articles/2019-08-16/u-s-treasury-to-do-market-outreach-again-on-ultra-long-bonds-jzejo2qu
======
40acres
Over the next generation fiscal policy will regain it's place (see post war
era) as the primary growth tool as opposed to monetary policy. Monetary policy
has led to a glut in capital that has no idea what to do with itself: it's led
to huge asset bubbles as seen with housing and start up evaluations.

The US should absolutely lock in these low interest rates to fuel green
infrastructure and technology. Debt used to fund infrastructure and technology
is the most effective use in our current environment.

~~~
Retric
That would be reasonable if the US was funding investments with debt. Instead
it’s subsidies mostly tax breaks and consumption for little long term return.

Lowering the cost of debt is still a good idea, but let’s not pretend we are
in a fiscally sound situation.

~~~
gtfratteus
You can't subsidize a tax break. That doesn't make any sense because you don't
need to spend money to give people a tax break.

~~~
usefulcat
> you don't need to spend money to give people a tax break.

Only if the government is running a surplus, and the tax cuts are less than
the size of the surplus.

When the government is running a deficit, any tax cut results in additional
debt, the financing of which is paid for by future taxpayers. So yes, in this
case (running a deficit) there are measurable costs associated with tax
breaks.

~~~
anticensor
Surplus is not needed as you could print Treasury "banknotes".

~~~
Retric
Printing money is just another tax, this time on people holding your currency.

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pjc50
Inequality of assets had risen to extraordinary levels. The world is awash
with cash looking for somewhere to park. If wealth taxes are politically
inconceivable, fine; let the government sell negative real yield bonds
instead. Nobody's even forced to buy them.

How many dollars should the government borrow for 99 cents to be repaid in a
century?

~~~
votepaunchy
Wealth taxes in the United States are not just politically and practically
infeasible. The Constitution requires that a wealth tax be in proportion to
each state’s population.

~~~
rolltiide
You’re right, we should therefore make representation proportionate to each
state’s population, fair trade.

(Obviously no consensus on a constitutional amendment but some states have
passed laws that their electoral college votes must go towards the popular
vote, which could get more widespread enough)

~~~
newfriend
We already do have proportionate representation in the house.

The electoral college was specifically designed to be a mixture of the house
and senate systems. At some point it might be good for you to get over the
2016 election.

~~~
rolltiide
I don't represent any disdain toward the 2016 election.

I can recognize that the left does have the numbers in this country and they
flocked towards the coasts. They can selectively flock back to enough counties
to make every single state blue if they could tolerate middle america for a
single year.

Only needs to happen once to remove power from the people that benefit from
the electoral college.

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nealabq
Should the US consider selling perpetual bonds, with no maturity date? I know
Britain used to do this (the bonds were called Consols). Is this form of
finance now discredited?

~~~
timwaagh
If it's cheap.... But British consols were 4% so they opted to pay back
instead of bleeding money forever.

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gumby
Next will be selling consols.

(For those who've never heard of them:
[https://en.wikipedia.org/wiki/Consol_(bond)](https://en.wikipedia.org/wiki/Consol_\(bond\))
)

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peter303
Next they'll offer 100 year student loan enforceable on your children and
grandchildren. :-)

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skybrian
Some worry that it won't cover inflation and others worry that it is "saddling
future generations with debt". It seems like they can't both be right, but we
don't know who is wrong? It's hard to make predictions, especially about the
future.

Could it be considered a hedge against deflation? (Or not as much inflation as
you expect?)

~~~
JumpCrisscross
> _it is "saddling future generations with debt"_

Can’t comment on the other parts, but this argument is nonsense. The debt is
saddled when the money is spent. 10y rolled over 10x or 100y is irrelevant.

As an analogy, the length of time a dollar spent on a credit card will take to
be paid off has nothing to do with the card’s term. It’s purely a function of
spending and balance settling, the latter being a function of discretionary
income and fiscal sense.

~~~
alpha_squared
In my naive and ignorant perspective, it _feels_ like it paves the way to
spend more now without thought of how to pay it back.

A 10-year bond carries the likelihood that a way to pay it back will need to
be considered in the near future, when many involved in selling the bonds are
still around to figure out how to pay them back. Who here, with at least 50%
confidence can say they'll be around in 50 years? 100 years?

The issuance of bonds on that scale appear to carry the assumption that it
will be paid back _somehow_ at _some point_ with little regard as to how.
Isn't the current social security crises partly the fault of not thinking at
scale of a century?

Again, ignorance and nativity, please correct me where I'm not understanding.

~~~
dragonwriter
> In my naive and ignorant perspective, it _feels_ like it paves the way to
> spend more now without thought of how to pay it back.

While the policy recommendations made by people embracing Modern Monetary
Theory may be debatable, the core descriptive feature of that theory is
correct: when a government is budgeting in its own fiat currency, the
treatment of finances as “fiscal”—literally, relating to a purse into which
revenue goes and from which spending flows—is fundamentally a misleading
metaphor: government spending creates money and government taking in money
destroys it. Government “borrowing” is literally destroying money from the
hands of the volunteers to offset the _monetary_ impacts of money created by
spending with the promise to create more money and give it back to those
volunteers at a specified later date. Paying back isn't really an issue the
way it is for non-fiat-issuers.

There is no fiscal policy, only broad-focus monetary policy and
distributionally targeted monetary policy. (Traditional monetary policy is the
former, traditional “fiscal” policy is a mix.)

~~~
ComputerGuru
Basically, when one of the two parties in a transaction conducted in USD is
the US government, all “typical” financial concepts/terms have to be
completely redefined. Take for example interest rate, the most basic and
straightforward single number in the terms of any loan. It’s really not
“interest” when you’re buying government bonds because it’s a fiat currency
and you’re going to be paid back in the same. It’s more like buying rights to
shares in a shady company on an unregulated exchange that vests after n years,
with the hope that decisions the company makes pertaining to issuance of
future shares will not “unfairly” dilute your stock (after all, the stock
isn’t “split” in the normal sense) beyond what you’re set to gain in the terms
of your options... while simultaneously betting on the waxing and waning of
the currency’s global usage and adoption subject to foreign policy, investment
domestically and abroad, etc. all on top of attempting to “play the market”
and win.

I don’t know if it’s even possible to fully grasp the sheer complexity of all
the factors, let alone the factors themselves.

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6gvONxR4sf7o
For a while, U.S. has targeted X% inflation. What happens if we sell a 100
year bond at Y% yield and then in 50 years economists learn we should target
less than Y% inflation? In that case are we stuck between either the bonds
growing faster and faster and faster than the dollar, or being constrained in
inflation targets?

~~~
phkahler
Thereby illustrating what a stupid idea it is. That's the whole problem,
everyone want to just push financial problems into the future.

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ianai
So pretty sure that’d be a form of institutional capital “parking” for later
generations. I could see pension plans buying into them, maybe?

~~~
option_greek
That's one way to put it. Another way to put it is saddling future generations
of Americans with debt.

~~~
chewz
> Another way to put it is saddling future generations of Americans with debt.

It would be wasteful not to borrow money at near zero rates

~~~
option_greek
Only if the generation borrowing is approximately same as the one paying it
back :)

~~~
chewz
Relax - we live in MMT era ;-)

~~~
ianai
Glad I’m not alone!!

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blackflame7000
It’s highly worrisome when dollar values get to be so large, that the
fundamentals of finance that we all follow in our daily lives are completely
thrown out the window. Voting over and over to raise the debt ceiling,
printing more money, keeping interest rates low in a strong economy are all
things common sense thinking would be weary of. It's starting to feel like the
same myopic thinking that lead to the Mortgage-backed securities crisis is
making similar decisions again

~~~
Invictus0
Running a household and running an economy are totally different things. There
is a reason macro and microeconomics are taught separately.

~~~
blackflame7000
See that's the problem. At the end of the day, its humans trading with humans
whether it's 100 people or 10 Billion. The core of any economy and any
transaction is trust. Trust that you are getting an even barter for your
payment. Profits are always second to Trust in any market and when that trust
is violated by clever accounting, there is always a time of reckoning.

~~~
pnx
See that's the problem, a sorting algorithm just moves values around, whether
it's 100 values or 10 Billion.

At the end of the day if bubble sort is good enough for a micro controller
it's good enough for a data center.

~~~
blackflame7000
Until you realize a data center is a bunch of small nodes working together.

~~~
pnx
And of course bubble sort is the perfect solution for distributed sorting.

~~~
blackflame7001
I don't get your argument. If something doesn't work on the small scale it
certainly won't work on a large scale. That's exactly my original point about
managing global finance

~~~
pnx
Bubble sort works amazingly well on the small scale.

It shits itself on the large scale.

Just like how trying to run an economy like you do a household results in the
great depression.

~~~
blackflame7000
That's the converse of my argument. I'm saying that things that don't fly at
small scale, don't become good ideas at large scale. Constantly calling the
credit card company and asking for a credit raise instead of paying the bill,
printing more money to pay the bill, and encouraging not saving for a rainy
day by keeping interest rates low are all things that are terrible ideas for
the individual so why is it good for 100 individuals grouped together?
Actually, the answer is obvious: statistics are easier to manipulate with
groups.

~~~
pnx
>I'm saying that things that don't fly at small scale, don't become good ideas
at large scale.

They absolutely do.

Fourier transform multiplication methods are a terrible idea if you run them
on numbers that aren't hundreds of digits long, but the only way to multiply
truly large numbers.

------
cmurf
I wonder if these will come in TIPS versions. We had quite substantial
inflation in 1919, 14-18%, followed by massive deflation in 1921 approaching
-16%, and +9-15% in 1980/1981.

Looking at the past 25 years, you might get the idea it's not a good idea to
buy TIPS bonds, but is hyperinflation inevitable or is it a solved problem?

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xxxpupugo
100 years? Won't most of the lenders would already die by that moment?

~~~
dehrmann
Sure, but bonds are often resold, so it's not like the value is lost.

~~~
phkahler
If you just want to create a market for something that won't produce real
value in your lifetime, buy crypto currency.

------
resters
When your reputation is on the brink you attempt to borrow more. It matters
little what the rate turns out to be, as long as it is lower than it will be
once the reputation is soiled.

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Animats
Now that's a bet against inflation.

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artfulhippo
What’s the probability that the US exists in 100 years?

~~~
chewz
If it won't someone else will pay.

Countries fall and mutate but their borrowings get paid.

[https://en.wikipedia.org/wiki/Repudiation_of_debt_at_the_Rus...](https://en.wikipedia.org/wiki/Repudiation_of_debt_at_the_Russian_Revolution)

[https://www.nytimes.com/2000/11/19/world/russia-redeeming-
cz...](https://www.nytimes.com/2000/11/19/world/russia-redeeming-czar-s-
bonds.html)

~~~
hedora
Presumably, the collapse of the government would coincide with a period of
hyperinflation. Since US bonds are payable in US dollars (I think), that would
effectively wipe out the debt.

In the Russian example, the bond holders claimed they were owed about 100x the
actual payout.

~~~
kccqzy
Hyperinflation would only come from the successor government's stupid decision
to print money. If the successor government is led by smart, reasonable, and
ethical people, I don't see how hyperinflation must be a consequence.

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Despegar
It's the market telling us that we need to pass Medicare For All and blow out
the deficit. The boomers with money deserve a positive real yield.

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outside1234
God, the fools they would need to find to buy these sort of instruments...
There is no way whatever rate they peg these at are going to cover inflation
over that time period...

~~~
chewz
> the fools they would need to find to buy these sort of instruments

These fools run your pension fund.

~~~
hew
What pension fund?

~~~
coryrc
The public employee ones your taxes backstop and guarantee 7% returns despite
only getting 3-5%

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Retric
What’s the advantage for the US government?

Edit: Answering my own question the treasury sells EE Savings Bonds the can be
redeemed early, and T bills that can be sold to someone else and not redeemed
by the US government.

Clearly the government would like to lock in rates expected to be as low as
possible for as long as possible.

~~~
dsp
Why do you say they can be cashed in? US treasuries are generally nonputtable.

~~~
Retric
Got confused looking at treasury direct a while ago.
[https://www.treasurydirect.gov/indiv/research/indepth/ebonds...](https://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds_eeredeem.htm)

