Tweet
The 10-year Treasury bond, the benchmark rate for the US in borrowing money, dipped to an all-time low yesterday of 1.459%. Treasury sold notes at that price at a $21 billion auction, amid high demand. Today it’s jumped back to an astronomical 1.48%.
These numbers are outrageous. It shows both what a basket case the rest of the world economy is right now, and how desperate investors are for some economic growth somewhere in the world. This kind of lending costs investors money. Adjusted for inflation, the US now borrows at a real negative interest rate. Yet this has done nothing to increase borrowing to take advantage of the rates. This is fiscal malpractice.
The market will literally pay us a small premium to take their money and keep it safe for them for five, seven or 10 years. We could use that money to rebuild our roads and water filtration systems. We could use that money to cut taxes for any business that adds to its payrolls. We could use that to hire back the 600,000 state and local workers we’ve laid off in the last few years.
Or, as Larry Summers has written, we could simply accelerate payments we know we’ll need to make anyway. We could move up maintenance projects, replace our military equipment or buy space we’re currently leasing. All of that would leave the government in a better fiscal position going forward, not to mention help the economy.
Failing to take advantage of record-low borrowing rates is little different from setting cash on fire. We know that we have to make investments over time, just paying for them now would save tens if not hundreds of billions of dollars in the future. And while I know we had a half-decent unemployment report today, it’s probably attributable to one-time factors, and even if it weren’t, we would need years of similar reports to get the country back even close to full employment. The demand needs exist and are not being met by the private sector. Government has the capacity. Investors are begging government to spend. The refusal boggles the mind.
9 Comments
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
Not surprising that folks are staying away from known Shylocks and other hoodlums.
I thought the plan was the de-industrialization of the West (industry being a working class guy’s notion of a working economy) causing the collapse of the middle class and a return to the halcyon days of feudalism. The academy was all for it. It was to be an “information age.”
Seems to be going good so far.
Not “borrow”! The global investors want the US/FED to PUT more money out there (because in theory there is no limit to this). Ultimately wheteher it benefits the 99% or not, the bulk of this new money ends up in their accounts given the current financial constructs in this and many other countries.
I wish progressives would stop using market fundamentalist tripe by using market price moves and trends as the ‘market’ telling us something, which is always what the particular commentator wants to hear. The ‘market’ isn’t begging the US to do anything.
Markets are always driven at the margin by greed and fear. Obviously with billion eager to ‘invest’ at a negative real rate there is a lot of fear. Either that or a dearth of safe options or simply an over abundance of money trapped in the ‘markets’ looking for a place to stay. ‘Investors’ want most of their money back. (a negative real interest rate means they will loose money on their ‘investment’.
Negative interest rates on the worlds benchmark financial security is the negation of markets. It means the market system is broken. The market system and capitalism is breaking down.
You can believe anything you want about what the ‘markets’ are “saying” if it makes you happy but the system is FUBAR.
If retail credit were accessible at a reasonable price ,people would glad to borrow Access to capital has not ,is not and will not avail itself because Bernanke is deploying the Philips curve to fight inflation via the trillions in welfare liquidity being pumped into capital markets .It should be obvious to a child that austerity is the G-20 class-warfare weapon of choice .Why would the power-elites want money ? They can keystroke infinite sums .They want hard assets via economic collapse .Mind -boggling ? Oh dear ,no wonder it’s so easy for the smart people to always win .
Why shouldn’t progressives use reasonable assessments of market desires to press for progressive policies? Most of my adult life, the market has been used as the economy and what it wants (either stock or bond) has been used to press for utterly disastrous conservative crap. Hell the last few years we have to worry about the markets being spooked by our deficits!!!!
With rates this low the obvious choice is to actually use that opportunity to improve the economy and the country – something we need to be doing anyhow. Once again if the markets are the boogey man, why don’t we use them to try to change the boogie.
Ben has a special technology, called the printing press, which (until just recently) he has been more than eager to run full bore.
With that said, why is it necessary for the US government to “borrow” anything from anyone? All that’s going to happen is that at some point in the near future other countries will stop accepting US dollars for their stuff. And then the US debt won’t be a problem because the money it’s owed in will be utterly worthless. That’s all.
Yes jgordon ,ultimately the entire debt will be monetized .and from a monopoly view that’s a good thing .Was that your point ? Read my above comment about using austerity to get static assets ,and then connect the dots .
Oh ,the other question .They borrow to keep the suckers believing in perceived paper value ,where the sharpies can sustain the myth that deficit reduction is vital ,and hence austerity is vital ,to ensure debt doesn’t crowd out scarce capital and bond vigilantes don’t turn us into Greece and other euro colonies that don’t have our reserve currency and geo-political might .It’s all churl munch for the masses .Anyone stupid enough to believe some fucking paper is more valuable than food staples ,gold ,great art ,infrastructure ,etc. ,can’t elicit very much sympathy .