I know exactly what you meant. I was trying to push you further to see that the sneaking assumption in your position is unsupportable.
By changing the duration, the debt will be rolled over 2-5 years out.
No consequence in that.
This assumes at that time the Govt either is not in a position to pay down the debt,or chooses not to.
No consequence in that.
If interest rates rise between now and then, financing costs will be higher for the US Govt than if they had left the 20-30 maturity outstanding.
No consequence in that.
This is what I mean by 'bet on lower interest rates'.
But they aren't making any bet. That's why I was trying to say that manipulating the market won't manipulate what the market models. The tail does not wag the dog. That is, there is no consequence so there is no bet. It doesn't matter which of these alternatives are followed.
The nation ran a huge debt for half a century and it had no consequence. No, it did not cause interest rates to rise. If it did, then you must explain why interest rates fell precipitously across the decade of the '80s while the debt and deficit widened significantly. What debt does do is cause incompetent economists who completely dominate the scene to push wrong economic polices justified by appeals to the need to reduce the debt. We will be getting a stiff lessen in this stupidity soon enough when the Democrats use this excuse to implement wrong economic policy.
I don't give a hoot what MER says. Most of what we read is mere propaganda, with actual motivations well hidden. I care about what the short and long term implications of policy choices given various future scenarios.
Given that I was trashing their incompetence in economics we can't be far apart here.
If anything, MER is proposing what they think might be a wise move given their model of the future, but also with an eye on the potential transaction fees. Leaving things as they are should generate less transaction and less premium than stirring the pot.
I don't want to seem too argumentative, but you shouldn't claim that what motivates them and others is some clandestine profit motive. The MER economist who wrote that article is so far removed from firm profitability that there is no possibility of ulterior motive. In fact, doing so within the predominantly liberal setting of most brokerage firms would be as bad as a political scientist professor wearing a US flag pin. Besides, you should applause anyone who overtly expresses a profit motive. It means they aren't compromised by the deceit found in "my profit is good; your's is evil, so we will tax your's away and give it to poor people".
I'm not trying to be precise here, or even correct.
I know. Neither was I. You brought out a point that was subtle and I didn't do a very good job of explicating it. We are confined to brevity in this small box which requires that many details and arguments that would make things clear, must be omitted.
Just trying to ask the right questions, to propose possible alternatives, and encourage dialogue.
You have succeeded and I am grateful. Please continue. If you're here arguing with me, it puts you in a different class, since I challenge the best in the world especially those from academia to counter my arguments. |
