Michael Taylor explains why he’s not worried about approaching the debt ceiling, even as...
United States debt certificates are issued to help the federal government meet its financial obligations.The impending “crisis” over the debt ceiling is really stupid.I’m not worried for two reasons: creative financial engineering in the form of a bond-math gimmick and the reality of what makes the world go ’round.
The current debt ceiling, set by Congress, is $31.4 trillion. Because we are close to reaching this limit, Treasury Secretary Janet Yellen said last week that her department will begin preparing to deal with the restriction. There’s nothing magical about 15 percent coupons or 30-year bonds. The Treasury could issue 30-year bonds with a 23 percent coupon, for example, for which the market would pay $4.6 billion per $1 billion face value today. They could issue 10-year bonds with a 17 percent coupon, for which the market would pay $2.93 billion at today’s rates.
A fiscally responsible course of action, for whomever is in charge of the House of Representatives, is to enact balanced budgets and fiscally positive legislation. Republicans claim to be the fiscally responsible party, which is, with all due respect, complete hogwash. It’s delusional madness unhinged from reality.
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