50

Year

Treasury Bonds?

Mnuchin to Wall Street: U.S. Is Serious About Ultra-Long Bonds

But it seems Mnuchin has different ideas. Since taking office as Treasury Secretary in February, he’s repeatedly indicated that ultra-long issuance was something the administration was looking at. Last month, he had his staff query bond dealers about how they might structure and price maturities beyond the current 30-year limit. And on Monday, Mnuchin provided the clearest signal yet, saying on Bloomberg TV that it “could absolutely make sense.” 

It’s not without precedent. In 1911, the U.S. sold 50-year bonds to fund the construction of the Panama Canal -- the most expensive construction project in American history at that time. Gary Cohn, Trump’s top economic adviser, talked up in an interview on CNBC the “enormous amount” of ultra-long bonds the government could issue to finance spending on infrastructure, an area of chronic under-investment for decades. 

“It’s a reasonable probability that the Treasury will issue these bonds,” said Scott Mather, chief investment officer for core strategies at Pimco, which oversees $1.5 trillion. The argument is that the U.S. “won’t have to pay much to gain more certainty and the ability to lock-in low rates for a long time.” 

Fisher, who is now a senior lecturer at Dartmouth College, says a good argument for the U.S. government to consider issuing ultra-long bonds is that it would help push financing needs past the droves of baby boomers who are currently retiring and drawing Social Security. 

“I had hoped to come back and eventually issue 60- or 100-year maturities, but we didn’t get around to it,” he said, referring to his tenure at the Treasury.

DYI:  With the Boomer generation tapping into Social Security and Medicare at an average rate of 10,000 per day ultra long term financing is highly probable especially since no one in Congress or the White House (past or present) has the stomach to reform these programs.

Social Security could have been modified years ago by simply moving up the retirement age one month – one year at a time.  By slowly increasing the retirement age the need for draconian measures (50⁺yr bonds) would be averted saving the social Security system billions of dollars.

 

Medicare is the biggest problem as the underlining health care costs are rising at a 9% to 10% rate devastating this program.  It is not due to an ageing population as Medicaid – those who are poor under the age of 65 – is rising at the same rate.  It is the Medical Industrial Complex who colludes in order to price fix and form monopolies (at least locally) to force continuous price increases. Enforcing 100⁺ plus year old laws – Robinson Patman, Clayton, and Sherman Antitrust Acts would drop this industry’s cost by 75% - that is NOT a typo.  Push through Congress allowing for reimportation of ethical drugs dropping newly developed drugs by 50% and generics by 70%-80% with older drugs that are still viable by 90⁺%!

The biggest infrastructure build out and repair is our national freeway system.  I’m not a fan of tax increases but I’m far less buoyant of increasing our national debt upon us currently and our future generations especially debts stretching out as long as 50 to 100 years.  With the choice between the two devils a tax increase wins.  A 10 cent per gallon increase would do the trick; at the 15 cent increase grant money on a dollar for dollar matching basis for State roads and selective mass transit is achievable.

All told most of our infrastructure is at the State level.  The most efficient method to achieve this goal is to reduce the size of the Federal government thus dropping the costs freeing up monies both private and government for these development projects at the State and local level.  There is some optimism as more and more of our citizens direr of Washington DC and push for more State rights.

DYI