20 October 2017

Biggest Corruption

If you were a risk-averse member of the Billionaire's Boys Club, what would be your ultimate wet dream? Well??? By my lights, I'd say I would want Treasury instruments to be sold at interest rate value rather than auctioned at coupon value.

Translation: the way it currently works by 31 U.S.C. Subtitle III, Subchapters I & II, Treasury sets a return value, aka coupon, per some unit of instrument, say $100 per unit. Treasury then auctions those units. The resulting interest rate is the $100/X where X is the final auction price of the unit. If X is $1,000, then the interest rate is 10%. If X is $10,000, then it's 1%. For the last few years, X has been nudging much closer to 1% than 10%. That's driving the idle rich batshit.

Near as I can tell, nowhere in the statute is coupon/auction mandated as the method for selling instruments. Donald J. Quisling can/could direct Treasury to henceforth sell instruments with a fixed coupon (current practice) and fixed price (not auctioned to highest bidder), thus yielding the idle rich's 10% government debt. The fall out from this is clear. The secondary market for Treasuries would still be awash in moolah, and so would bid up the price of such instruments, thus giving the original buyers a massive capital gain windfall (which implies a change in tax law to remove holding periods for capital gains protection, naturally). The other, much worse side-effect is that US government debt just got lots more expensive. Yet another transfer of wealth from the many to the few.

Have a nice day.

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