1. “The search for yield never ends” and is particularly
intense these days; 2. A shortage of safe assets;
3. The conjunction of (A) everyone’s burning desire to lend
money to the U.S. government and (B) the U.S. government’s curious lack of
interest in borrowing all that money; 4.The debt ceiling
“If I told you we could solve all of them in one fell swoop,
what would you say? Would you say “shut up about that fucking platinum coin“?
Ha of course you would. But it’s not that! It’s this, from pseudonymous1
blogger Sonic Charmer:"
‘Could the Treasury just get around the debt limit by
selling super-high-coupon bonds? (Say, 30% …) So they auction at a huge premium
and Treasury earns proceeds that are a multiple of face value. Face value = low
= stay under debt ceiling since it’s based on ‘money borrowed’ which is face
value (?), but proceeds = high = can pay the ‘bills we’ve racked up’ (spending
plans). Tune sizes/coupons/durations as required.’
"So: tentatively endorsed. Prove him (and now me!) wrong and
you win a prize, the prize being a catastrophic government default.,,,,,and now
for the objections….."
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