Comments on: What Treasury’s thinking

By: DetroitDan

DetroitDan — Mon, 23 Aug 2010 02:33:32 +0000

Treasury doesn’t borrow, as implied by dllahr. Treasury bonds are not the same as corporate bonds. Econ 101 — if it were taught correctly.

On a related note, which is more ridiculous — the notion of a bond bubble, or the notion that we can’t have a double-dip because the yield curve is so steep?

By: FelixSalmon

FelixSalmon — Sat, 21 Aug 2010 16:09:23 +0000

Dan, Treasury’s view of its own debt is that the deficit needs to be brought down over the long term, but that’s doable. In the short to medium term, rates are low, so it actually makes sense to borrow at cheap rates now in order to get help the economy moving again and generating lots of tax revenue in the future.

By: DanHess

DanHess — Fri, 20 Aug 2010 21:01:47 +0000

@davidshor –

I never said anything about consumer borrowing or Corporate borrowing.

Treasury said they don’t worry about a bond bubble and apparently diverted the conversation to Corporates. Nobody is worried about Corporates.

Folks are worried about Sovereign debt. My question to Felix, which he still has not answered yet was, what does Treasury think or say about its own debt?

By: davidshor

davidshor — Fri, 20 Aug 2010 17:24:09 +0000

DanHess,

You’re confusing consumer borrowing with Corporate borrowing. The current trend among corporations is not to spend and borrow too much, but to hold enormous cash reserves. They don’t want to spend money expanding capacity until the economy recovers. But the problem is, their refusal to spend money is a major cause of the recession.

A “bond-bubble”, is where the market systemically under-prices bond yields, incentivising corporate borrowing and spending. I don’t think we’re in such a bubble. But if we were, it would be great! It would allow us to get out of our chicken and the egg problem.

By: DanHess

DanHess — Fri, 20 Aug 2010 04:28:44 +0000

@dllahr –

Your insult covers such luminaries as Warren Buffett, Bill Gross, Jeremy Grantham, John Paulson, Mohammad El Erian and many other thinkers much smarter than you, all of whom have questioned the sustainability of American borrowing.

By: dllahr

dllahr — Fri, 20 Aug 2010 03:29:50 +0000

“Nearly every American has fears about the sustainability of American debt and borrowing.”

No, wrong. Only the ones who don’t understand macro and haven’t studied the causes of deficits do. Those are the majority, but not “nearly every American” is that ignorant.

By: dedalus

dedalus — Fri, 20 Aug 2010 03:10:56 +0000

If “Treasury would very much like to make sure that house prices don’t fall any more than they have already”, then the Greenspan Put is still very much alive & well.

By: mhnec

mhnec — Thu, 19 Aug 2010 20:32:10 +0000

“And yes, Treasury would very much like to make sure that house prices don’t fall any more than they have already.”

Felix, is this goal really feasible? Housing inventory is again steadily increasing (http://tinyurl.com/23c2k9m) which should renew pressure on house prices.

What more can Treasury do to prevent further deterioration in house prices?

By: y2kurtus

y2kurtus — Thu, 19 Aug 2010 19:49:33 +0000

Felix… this was one of the best posts since your return from Alaska!

Thanks!

By: tinbox

tinbox — Thu, 19 Aug 2010 16:39:12 +0000

Can you even imagine a country where a government operates routinely on “deep background” and the people are well-served by that government–or that press?

I can’t. Tell me, what would that country be like?

By: DanHess

DanHess — Thu, 19 Aug 2010 15:55:20 +0000

“Treasury has no worries about bond bubbles” – holy global systemic instability, Batman!

Isn’t that treasury’s job number one, to worry about the soundness of the system? It is Geithner’s job to worry about bond bubbles, regardless of what the conclusion after analysis is.

Nearly every American has fears about the sustainability of American debt and borrowing. Isn’t it rather alarming that the man most responsible does not worry about it?

Did Geithner at least give a few reasons *why* he has no worries about bond bubbles?

By: Gotthardbahn

Gotthardbahn — Thu, 19 Aug 2010 15:46:37 +0000

Right on. As my late father would say, Tim Geithner is ‘someone who has been educated beyond his intelligence’. Perhaps Tim can take a really long nap, or an even longer vacation.

By: klhoughton

klhoughton — Thu, 19 Aug 2010 15:37:39 +0000

” I daresay [Geithner]’s actually getting some sleep these days, which has got to be a good thing.”

Absolutely, any hour he’s not working is another hour he doesn’t get to screw-up the economy more.